Smart Investing for Aussie Beginners

Investing can be one of the best ways to grow your wealth over time. However, getting started with investing can seem like a daunting prospect, particularly for beginners. In this blog post, we will be looking at some of the different investment options available and how you can get started with investing, so you can set yourself up for a solid financial future.

What is investing?

Investing means that you put money into a particular asset with the expectation that you will earn a profit or generate income on this over time. An example could be investing in shares or bonds, which will provide you with a financial return in the form of dividends or interest. Another could be investing in property, with the hope that the property will appreciate (go up) in value so that you see a financial return in this way.

There are a number of benefits to investing that make it a favourable option for people looking to grow their wealth – many of which make it a better option than other approaches to growing your wealth, like putting your money in a savings account. For one thing, investing allows you to grow your money more quickly than it would with traditional savings accounts.

Investing can also be a great option if you are looking to achieve financial freedom by creating passive income streams. This is because the more you invest, the more passive income you can generate (for example, through rent paid on your investment property or dividends paid out on shares). Having these passive income streams will also mean you are not reliant on one income source – for example, your salary or pension. It can also be a great option if you do not think you will have enough superannuation to fund your retirement. Making good investments will ensure you are able to maintain your lifestyle and enjoy a comfortable retirement, even once you stop working.

The other main advantage is that investments tend to be less impacted by inflation than other options for growing your wealth. As of March 2025, Australia’s annual inflation rate is reported to be 2.4%. Despite this, many investment options continue to do well even in periods of rising inflation.

What are the different investment options?

The term “investing” can be used to refer to a number of different assets that you may decide to put your money into. In Australia, some of the main investment options include things like:

Regulatory action is underway:

• Shares: When you invest in shares, you are effectively purchasing an ownership stake in a particular company. You can do this through the Australian Securities Exchange (ASX), which is Australia’s main stock exchange. Usually, you will receive a financial return in the form of dividends (which represents a portion of the company’s profits).

  The main advantage with this type of investment is that it comes with the potential for high returns, particularly as companies and their profits grow. Shares are also easy to buy and sell, making this investment type easier to manage than other types of investments. The main drawback is that shares can be impacted by market volatility, and there is the risk you may lose your principal investment if the company or stock market does not perform as you had hoped. You may be able to mitigate some of this risk by investing in exchange-traded funds (EFTs) or index funds, which are bundles of stocks (like the ASX 200) that allow you to diversify your risk compared to if you were to invest in individual stocks.

• Bonds: When you invest in bonds, you essentially loan your money to either the government or a corporation. In exchange, you will be paid back the principal amount of money you invested plus interest over time. You can buy and sell government bonds on the Australian Securities Exchange (ASX), though generally corporate bonds are bought and sold “over the counter” (meaning they are traded directly between you and the other party, rather than through a centralised exchange platform).

  The advantage of investing in bonds is that they are typically less risky to invest in than stocks. You can also generate a steady income from them, as you will be receiving periodic interest payments. However, the drawback is that returns from bonds are usually lower. Some types of bonds (such as corporate bonds) may also be riskier than others (such as government bonds). Changing interest rates may also impact the return you receive on your investment, which is another drawback.

• Superannuation (also known as “super”): In Australia, all employers are required to make mandatory contributions into their employees’ superannuation funds. Currently, the mandatory contribution rate for super is 11.5%. On top of this, you may make additional voluntary contributions into your super fund to boost your balance and ensure you have enough saved for a comfortable retirement. You may like to ensure your super is invested in a diversified fund that is suitable for your risk appetite, particularly if you are looking to retire soon.

  Investing in your super can have a number of benefits, including that it can be used to reduce your tax liability and lead to strong long-term growth. The main drawback, though, is you will not be able to access the money invested in your super until you reach retirement age, which is currently 67 in Australia.

• Property: Investing in property is another popular investment option in Australia. When you invest in property, there are two main ways in which you can generate a return on your investment: through rental income and through capital growth (where your property’s value and potential sale price increases over time). You may choose to invest in property directly, by purchasing a property and renting it out. Alternatively, you may invest in a real estate investment trust (REIT), which allows you to invest in property without actually owning the property in question.

  Investing in property is a good investment option as it allows you to generate a steady cash flow through rent. There is also a good chance that your investment will appreciate (go up) in value. There may also be tax benefits that you can take advantage of, such as negative gearing, which can help to reduce your overall tax liability. However, investing in property can also have its disadvantages – for example, that you will require significant capital to purchase a property if you decide to go the direct investment route. You will also need to pay ongoing management fees if you are renting the property out, which is another expense you will need to factor in that may cut into your potential returns. Property can also be harder to sell quickly compared to other investment options, such as shares.

• Managed funds: Another popular investment option in Australia is to invest in a managed investment fund. Managed funds are where multiple investors pool their money to invest in assets like bonds, shares, or properties. These investments are selected and handled by professional fund managers, which can help to take a lot of the guesswork out of managing your investment.

  Professional management is one of the biggest advantages of investing in a managed investment fund. Diversification is another, as these funds allow investors to invest their money into various different types of assets, rather than putting all their money into one investment type (for example, investing all their money in shares). The main drawback is that managed funds come with management fees, which can eat into your overall returns. You will also have less control over the individual investments that you make, compared to if you were to invest directly or manage your own investments.

Building a smart investment strategy

As you can see, there are a number of different investment options – each of which come with their own advantages and drawbacks. It is important that you think about your own financial goals and preferences, and ideally consult with a financial adviser to decide on the investment option that is best for you.

There are a few other key things that you should take into account to ensure you are making smart investment decisions. For one thing, you need to ensure you have a clear picture of your current financial situation. You will want to think about what your financial goals are, as this will determine what the best investment option is for you. For example, are you investing for a short-term goal (like buying a home) or long-term goal (like retirement or aged care)? Your goals will influence the type of investments you choose and your risk tolerance. Your investment strategy is likely to look very different if you are using it to work towards a short-term financial goal, compared to a long-term goal. 

You will also want to think about your current financial situation, as this will help you work out how much money you can afford to invest, and your current debts and liabilities, as you should pay off your current debts (particularly high-interest ones like credit card balances) before you think about investing. 

You will also want to think about what your appetite for risk looks like. This basically means how tolerant you are to risk, or how much risk you are willing to accept when it comes to your investment. For example, some people have a high risk appetite, meaning they’re prepared to lose more if they are likely to make back a lot more money. Others may have a low risk appetite, meaning they are not willing to lose much or any money at all. 

The important thing to understand is that all investments come with some level of risk. With that being said, whilst higher returns typically come with higher risk, taking on too much risk can be detrimental, particularly if you are close to retirement. Generally speaking, it is advisable to diversify your portfolio, which means investing in different asset classes rather than putting all your money into one asset class (for example, only stocks or only property). This helps to reduce risk and also protects against market volatility.

Some other tips for building a smart investment strategy include:

• Being consistent with your investing. This means making regular contributions to help your investments grow. One strategy that works well for many people who are just getting started with investing is to invest a fixed amount regularly. For example, you might decide to invest $100 a week or $500 a month, or whatever amount of money works for you and your current financial situation.

• Being patient. Investing can be a long-term game, and it may be some time before you start seeing a return on your investment. Avoid chasing quick wins, and remember: sustainable wealth is something that is built over time so be patient with your investments as they grow.

• Avoid common pitfalls. For example, many investors make the mistake of forgetting to factor in investment fees (such as brokerage and management fees) which then end up eating into their returns, so make sure that you are mindful of any costs that come with the investments you are making. Also, avoid “get rich quick schemes” (investments that guarantee significant returns in a short timeframe), as these are often either high-risk or may even be scams.

Remember, smart investing is all about taking small, consistent steps toward achieving your financial goals. With patience, discipline, and a strong investment strategy, there are plenty of options for you to grow your wealth through smart investments – even as a complete beginner!

_{This article contains general information about Investing. It does not consider an individual’s personal circumstances and therefore before relying on any content, you should ensure that you have obtained individual personal advice from a licenced Financial Adviser.}

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