For decades, the great Australian dream for many of us has been to own our own home. But with the market now more unattainable than ever before, that dream is now looking further and further away. And for some, a complete impossibility.
But according to Nicole Heales, a Melbourne-based financial adviser specialising in helping women invest, housing isn’t everything. Here, we discuss three alternative ways to put your hard earned money to good investment use.
1. Managed funds (a short to medium term investment).
For many of us, the idea of managing direct shares can be scary. So scary, in fact, it’s all a bit too hard. This perception, Heales says, is one that’s commonly shared and not without reason.
For starters, you have to research the market, decide where to invest and check in on your shares every day to ensure they’re working their hardest for you. But if that sounds like your living nightmare, that’s where the managed fund comes in.
“Managed funds are really just a bundle of shares that somebody else manages for you,” Heales says.
“You buy a bundle of shares that a fund manager or an index fund manager takes care of for you and that takes away the paperwork and responsibility of the day-to-day management from you.”
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Other than having to do next to nothing, the other benefits of managed funds are that they cost a tiny amount for someone to manage (sometimes as little as 0.5 percent) and you can start small.
“Some people start with as little as $1,500 and gradually build that up to more over time,” Heales says, adding, “it’s a way to build wealth which is going to give you a high return.”
Importantly, you can access money from your managed fund at any point.
“It’s a really easy way to have your money working for you but also have access to it,” Heales says.
2. Investment bonds (a medium to long-term investment).
According to Heales, investment bonds are similar to managed funds in that they’re still a bundle of shares that someone else is managing for you, but there are a number of primary differences.
“Investment bonds are really good for long-term planning,” Heales says, not least because after 10 years they become capital gains tax free. “So, for example, if you’re 28 and think you would like to own a home by the time you’re 40 but will need 12 years to get there, this is a great option. You set them up as an ongoing investment strategy and just have that in the background working away for you.”