CIPL | 25/02/2009 4:57:41 PM

Selecting your preferred investment type requires a number of things including: an understanding of risk and your own risk tolerance and a knowledge of the various types of investments.

You don’t need the knowledge of an expert to invest successfully. However it is important to be able to access reputable professional advice. You also need to understand the nature of your investments and whether or not the qualities of the investment suit you at your current life stage.

Investment types include shares, managed funds, property and fixed interest products. A common misconception is that Superannuation is an investment. Superannuation can be described as a vehicle which “contains” investments and can include those investment types mentioned above. If you are a member of an industry or a retail Superannuation fund your annual statement usually describes the investment types contained in your super fund account.

Each investment type has characteristics that will help you decide if that investment suits your needs. Volatility is a term used to describe the likelihood of an investment to either go up or down in value. Shares, sometimes called equities, and managed funds can be volatile so you need to establish if you are prepared to manage that risk. If you are selecting your investment types you also need to have a time horizon in mind that you are prepared to invest for.

Understanding equities requires some reading and research. Reading research articles and company prospectuses are good sources of information. You need to investigate the price of the asset, how the company is managed and you need to have a good understanding of the company’s activities.

With respect to the company’s financials – are they sound? What is their level of debt? What are the forecast figures for profit? Remember to investigate the assets of the company – are they quality assets, are they listed or unlisted and, if unlisted, how are they valued and when were they last valued?

Other investment types include managed funds, property and fixed interest investments. Asking similar questions will help you to evaluate the quality of these investments. Who are the senior people? What is their track record? What is the composition of the board? Are the board members there because of what they can contribute or are they there because they are part of the old boys’ network? Evaluating the answers to these questions can help you to determine where you can safely invest.

Of course seeing a Financial Advisor can also assist you to choose an investment that suits your individual circumstances. If you want to make a free appointment with a CIPL Advisor contact us.

The Investment Collective (AFSL 471728) is a non-aligned financial planning and investment firm specialising in providing tailored financial and investment advice for individuals and small business. Capricorn Investment Partners Limited's services include financial planning, share trading, portfolio management, insurance broking and self managed super fund administration. Additional information on services provided by The Investment Collective Limited can be found by following this link. Readers are reminded that this document has been prepared for general information purposes only, and any advice contained herein has been prepared without taking into account your financial objectives, situation or needs. Readers are advised to see their financial advisor prior to acting on any general advice.

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