Investment options
Outline the range of investment options available including:
Appropriate domestic and international investment options available to people in
different situations, eg shares, property, term deposits, managed funds
The relationship between risk and return for a range of investment options, eg
managed funds, property, shares, superannuation
GENERAL SAVINGS ACCOUNT: a savings account is an account at a bank that is
designed for consumers to deposit money and earn interest
Term deposit: are a type of savings account that lets you invest funds for a specific term at
a fixed interest rate. Interest is calculated daily and paid at maturity (for terms up to 12
months), or monthly, quarterly, half-yearly or annually (for terms over 12 months)
How to make money?
● Interest: return earned on an investment. Interest is calculated based on the amount
of funds in the account. The greater the sum of the funds in the account, the more
interest is gained
Risk & return
● Low risk and low return
○ Income and defensive asset: the value does not change dramatically in the
short term
INVESTMENT PROPERTY: is real estate that’s brought with the aim of earning
financial returns such as rental yield of capital gains. The main goal of an investment
property is usually to grow wealth and generate a passive income
Types of investment property
● Residential: residential properties are used as homes. ie houses, apartments
● Commercial: commercial properties are used primarily for business purposes ie office
buildings, shopping malls
How to make money?
● Rental
● Capital gains: the increase in the value of a capital asset when it is sold
● Any profits made on investments:
○ Capital gain tax: e tax paid on profits from disposing of assets including
investments, such as property, shares and crypto assets
Risk & return
● Higher risk & higher return
○ Growth asset: the investments are volatile as the prices fluctuate in the short
term as they are higher risk
SHARES: a share represents a unit of ownership in a company
Types of shares:
● Public listed company: purchasing shares from the ASX
● Private listed companies: investing funds in exchange for equity from a company,
usually this is a significant ownership ie >10%
Eg restaurant, cafe, tech company etc
● How to make money from shares:
○ Increase in share prices: in order to make a profit from shares, an individual
needs to sell their shares when the price of a share has increased from the
purchase price
○ Dividends: payments are a portion of company profits paid out to
shareholders, usually twice a year
○ Key takeaways for successful investment: a diversified portfolio ->
mitigates risk
● Any profits made on investments:
○ Capital gain tax: e tax paid on profits from disposing of assets including
investments, such as property, shares and crypto assets
Risk & return
● Higher risk & higher return
❖ Growth asset: the investments are volatile as the prices fluctuate in the short
term as they are higher risk
DEBENTURES: a long term loan issued by a company to raise money. Thus the loan is
paid back over a long period of time at a fixed rate of interest. They include the amount lent,
the interest the company will pay and the period of time as well as security that will
guarantee the business investment even of the company defaults
Risk & return
● Low risk and low return
○ Income and defensive asset: the value does not change dramatically in the
short term
UNSECURED NOTES: similar to debentures except they are not secured of business’
assets and therefore are a higher risk
● Higher risk & higher return
○ Growth asset: the investments are volatile as the prices fluctuate in the short
term as they are higher risk
CRYPTOCURRENCY: assets designed to act as a medium of exchange, with transfers
enabled on blockchains. Cryptocurrencies have no intrinsic value and are only worth what
people are willing to pay for them eg BTC, ETC, Litecoin
Higher risk & higher return
● Growth asset: the investments are volatile as the prices fluctuate in the short term as
they are higher risk
MANAGED FUNDS: is a type of investment where your money is pooled together with
other investors. A fund manager then buoys and sells assets, such as cash, shares, bonds
and listed property trusts, on your behalf
Single asset managed funds
These managed funds invest in a single assets class ie shares, property or bonds
Mixed asset or multi-sector managed funds
These funds invest in a range of investments. They’re labelled based on the types of
investments that make up the majority of the fund portfolio
Higher risk & higher return
● Growth asset: the investments are volatile as the prices fluctuate in the short term as
they are higher risk
SUPERANNUATION: a long term investment that grows over time. The more an
individual contributes to their account whilst their work the more they will have saved for
retirement.
● An employer pays 11% per year to their employees fund.
● Employees can make additional voluntary super contributions through salary sacrifice
Risk & return
● Low risk and low return
○ Income and defensive asset: the value does not change dramatically in the
short term
Rate of return = Profit from investment X __________100__________
Original investment Period (years) of the investment
