Investing my superannuation

I will soon be retiring and will have a considerable amount of money to invest from my superannuation.  I would like to have investments that are both secure and give me a good income.  How can I tell whether an investment is good or bad?

Mr. L

Unfortunately all investments carry risks in one way or another.  Some of these risks are that your investments may lose value either temporarily or permanently, that they won’t give you the income that you expect, that you won’t be able to withdraw your money when you want to or that inflation will eat away at the value of your investments.

It is also true that the amount of investment return that is available varies widely.  In fact even similar types of investments have significant variations in their returns.

For example some interest producing investments such as some bank deposits offer very low rates of interest, while much higher rates of interest are available from some financiers and property developers.  Even though some high interest paying investments may appear to be secure by including words such as property backed, mortgage, debenture, guaranteed, etc in their promotional material, you must never forget the basic fact that the higher the interest rate the higher the risk. 

We only have to look back at names such Cambridge Credits, Estate Mortgage, Pyramid Building Society and most recently Westpoint Corporation, Basis Capital and Great Southern to see how many people lost large amounts of money investing in something that they thought was safe but in fact was very risky.

Because investment risk is a fact of life, the best approach is not to put all of your investment eggs in the one basket.  Ideally this means having a mix of property, share, interest and cash investments and using a number of different companies and financial institutions for your investments.

As it can be difficult obtaining and understanding research associated with the many different investments that are available, it is often beneficial to use the services of a financial planner.  However make sure that the financial planner you see is licensed by the Australian Securities and Investments Commission (ASIC), understands your needs and objectives and is able to offer you a range of investment alternatives.

The information in this article is of a general nature only and should not be acted upon without first seeking personal financial planning advice. This article was provided by independently owned AFS Licensee (No. 236855) Direct Advisers Pty. Limited. They may be contacted on 02 6583 7588 or enquiries@directadvisers.com.au for a free consultation or further information.