What are the best ways to invest my savings?


Many small business owners often begin looking at ways to invest their savings as a means of protecting their assets and growing their wealth. However, finding the right investment strategy for your unique requirements can depend on a variety of factors.

Common considerations include current asset and liability positions, long-term objectives, your income tax standing, any liquidity requirements and the level of risk that you are willing to absorb. Speaking to a professional advisor can help you better assess these factors and tailor a wealth management approach that meets your current and future needs.

Meanwhile, here are some of the options available to people who have begun to accrue savings and are wondering how they can put this money to good use. While not all of these investment choices will be appropriate for your situation, they should offer you a starting point from which to begin forming an effective strategy.

Pay off debt

Australia's interest rate levels are at historic lows of 2 per cent, with two reductions of 0.25 percentage points so far in 2015. Saving in a low interest rate environment is often not an optimal use of your money, and now may be the time to consider paying down debts.

You may have outstanding personal or business loans, as well as a mortgage. It can prove beneficial to increase payments on these debts while their interest rates are low and your cash is failing to accumulate solid returns in savings accounts.

Build a diversified shares portfolio

If you are interested in growing your wealth, investing your savings in a shares portfolio is a popular approach. Shares offer higher potential returns than other investment classes, although they also bring increased risk.

You will need to gauge your appetite to risk and ensure your portfolio is appropriately balanced. Diversifying ensures your wealth is spread across a variety of different holdings, meaning that if one asset class suffers a significant decline, it will not disproportionately affect your portfolio.

Cash and bonds

Anyone who is more concerned with wealth preservation than growth may instead prefer to invest in cash or bonds. These are considered low-risk investments, but they also do not offer the same returns as shares.

Investors can place some of their money in fixed interest options such as cash or bonds, while also pursuing a shares portfolio. Again, the split between high- and low-risk investments will typically depend on your risk profile.

Property investment

Australia's real estate market continues to boom, with the latest statistics from CoreLogic RP Data showing house prices in Sydney and Melbourne are particularly impressive. The two capital cities have seen values rise 16.72 and 14.22 per cent respectively year on year.

Buying property provides an opportunity for capital growth and rental income. Furthermore, real estate is a tangible investment; in other words, you have a physical asset rather than numbers on a computer. Even if the market dips, you can expect property to increase in value over the long term.

Debt recycling

A debt recycling strategy enables investors to replace their non-deductible home loan debt for deductible investment debt. The aim is to pay off a mortgage quicker, maximise tax efficiency and grow your wealth.

Debt recycling can provide an alternative to superannuation investment, although, unlike your super, you can access the funds at any time. This can enhance your investment flexibility and give you greater opportunities to expand your assets more quickly.

Precious metals

Some people prefer to have a proportion of their savings invested in physical precious metals, such as gold and silver bullion or coins. As finite resources, the value of these metals often remains consistent, as opposed to cash, which is eroded by inflation.

Gold and silver can provide an effective hedge against financial market collapses, but the returns are often low and investors must consider storage options. Alternatively, you can choose exchange-traded funds, enabling you to purchase and sell gold without investing in physical bullion.

Self-managed super funds (SMSFs)

An SMSF can allow you to have more control over your retirement fund, meaning you may pick and choose your own investment strategy. Figures from the Australian Taxation Office show SMSFs are becoming more popular in the country, with approximately 557,000 in operation as of June this year.

Whether an SMSF is suitable for your financial situation will depend on how much money and time you have to start your own fund. You will typically need at least $200,000, access to the right investment advice and the skills necessary to ensure the SMSF runs smoothly.

The above investment options are just a few of the ways you could invest your savings. Whether your aim is to reduce debt, grow your wealth or simply have more control over your how your money is spent, discussing your needs with an experienced financial professional is always recommended.