Friday, July 25, 2014

What investment is right for you?

Everyone is divided on where to invest their money.  Some like to take out mortgages and invest in property while others prefer to cambell on the stock exchange.  Others would rather invest in term deposits, managed funds or simply a high interest bearing savings account.  Then there are those like Sex and the City character Carrie Bradshaw who like to have their money where they can see it.  Carrie Bradshaw of course invested a deposit on an apartment in shoes according to Miranda in season 5.  So in this post I'm going to go into a little detail of the pros and cons of each.

Everyone loves property.  Owning property is, for many, 'the dream'.  Everyone apparently wants a quarter acre section in the suburbs.  There is an enormous cost in investing in property given mortgage establishment fees and interest rates.  According to an Australian study published today in the Sydney Morning Herald most people prefer to gamble and opt for floating interest rates.  Although interest rates have been at a record low in recent years there is always the risk of them increasing astronomically and not being able to afford the mortgage repayments.  Then of course there is the issue that property is hugely over valued and although the market's doing well at present, it may come tumbling down.  My other problems with property are that you done know what it's worth day to day, can't access the money and you have to get into debt to obtain it.  The only valid argument for purchasing property is that once you have it your rent/mortgage repayments generally won't increase outside of interest rate changes.

These normally have a minimum amount to invest, like all possible investments.  The good thing about term deposits is you know exactly how much your money will be worth at maturity and given banks' security in Australia and New Zealand this is a wide investment.

These are good for those who like someone else to manage their money and investments for them.  If you prefer having control of your investments then managed funds are not for you.  Managed funds are however good for people who aren't financially savvy and according to an article published on this week the majority of Aussies aren't, so this may be the safest investment option.

You only need a small amount, $500 to invest in the sharemarket so most people could easily invest.  You have to be a gambler and willing to accept that your investment may go up and down.  It goes without saying that you buy low and sell high.  When you invest in the sharemarket you have to be willing to research companies and monitor investment trends. The other great aspect of the sharemarket  is you know what your money is worth on a daily basis and you can access the funds within three days if you need to.  If you play your cards right you can use your profit to invest in other companies to boost your wealth.

I have one of these and I love it.  You'd be amazed how fast your money can add up when you put coins in at the end of the day.  I have one of those currency time you get in cheap nick nack stores.  The downside though is you can't see the exact amount but your money isn't subject to market pressures so the value doesn't change.  What you put in is exactly what you get out.  You could withdraw the money if you bought a tin opener and opened it but that defeats the purpose.  You can access the money any time if you really need to.

The main point is everyone has a different investment personality and what you invest in depends very much on that.

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