Different Types of Investments

Thinking about diving into the world of investing? It’s a great idea, and there are plenty of options to explore! Having a mix of investments, also known as a diverse portfolio, can help protect your money from the market's ups and downs. Here are four main types of investments, each with its own perks and risks:

-          Cash

-          Fixed Interest

-          Shares

-          Property

You can either invest directly in these or choose a managed fund, where a professional takes care of it for you.

Defensive Investments: Low Risk, Steady Income

Defensive investments are all about getting regular income without worrying too much about growing your money. They’re generally safer but may not keep up with inflation (when the cost of stuff rises). The two main defensive options are cash and fixed interest.

Cash investments include:

-          High-interest savings accounts

The good news? You earn steady interest. The downside? Inflation could slowly erode your money's buying power, even if the amount stays the same.

Fixed interest investments include:

-          Term deposits

-          Government bonds

-          Corporate bonds

A term deposit locks your money in for a while, earning interest (usually a bit more than a regular savings account). Bonds, on the other hand, are like loans to governments or companies. They pay you interest regularly, and at the end of the term, you get your original investment back. Bonds are generally low risk, but some types can lose value, so there's always a chance you could get back less than you invested.

Growth Investments: Bigger Rewards, Bigger Risks

Growth investments aim to increase in value over time, and sometimes even pay out income. They can be a bit more unpredictable, but if you’re in it for the long haul, they might offer higher returns than defensive investments. The main growth investments are shares and property.

Shares:

A share is basically a piece of ownership in a company. You buy and sell them on the stock exchange. The value of shares can go up, which means you could sell them for more than you paid. Plus, some shares pay out dividends, a portion of the company’s profit. But, shares can be a rollercoaster ride, prices go up and down. They’re best for long-term investors who can handle the bumps along the way.

Property:

Property comes in many shapes and sizes:

-          Houses and apartments (residential)

-          Offices and buildings (commercial)

-          Retail shops

-          Hotels

-          Warehouses (industrial)

Like shares, property can appreciate in value, and you might make a profit when you sell it later. However, property can be harder to sell quickly compared to other investments, and there’s no guarantee the value will increase. If you need quick access to your cash, property might not be the best fit.

So, whether you prefer the steady income of defensive investments or the exciting potential of growth options, there’s a little something for everyone. Just remember to keep an eye on your risk level, and always do your research!