Sunday, 27 January 2013

Investment planning - product selection

Once you’ve determined your target asset allocation, it’s time to decide which specific products to invest in.

Key considerations include:
  • Which products to invest in within each asset class
  • Diversification
  • Whether to use managed funds or go direct
  • Whether to use a full service financial advisor, specialist advisors, or do-it-yourself (DIY)
Which products to invest in within each asset class

Each of the asset classes I discussed yesterday has a whole smorgasbord of options to invest in.

Cash investment options include:
  • Savings and cheque accounts
  • Term deposits
  • Cash management trusts
Fixed interest investment options include:
  • Government bonds
  • Corporate bonds
  • Debentures
  • Hybrid securities
Property investment options include:
  • Residential property
  • Industrial property
  • Commercial property
  • Listed property vehicles (e.g., REITs)
Equities investment options include:
  • Australian equities
  • International equities
Basically, any of the above products could be Australian or international.

Some of the products require large lump sums to invest in (e.g., government bonds, commercial property), so to access these products you may need to invest via a managed fund, exchange traded fund (ETF) or listed investment company (LIC).  I’ll talk about these more a bit later.