February 20th, 2013 | Financial Planning, Investment Advice, Self Managed Superannuation

How hard is your money working for you?  Are you a saver or an investor?  Why is it better to be an investor rather than a saver?

These days simply putting money in the bank is not enough to accumulate sufficient funds to cover your living expenses or save for your retirement.  Wise investing is the key to wealth accumulation – property and share investments are good areas to start building your wealth.

Saving is simply putting aside some of your disposable income for a short-term goal, say a holiday or a car.  Saving requires a conservative approach, taking very little risk with your money.  A bank account or a cash management trust is usually adequate for you to reach your savings goal.

Investing, on the other hand, means putting your money to work, and so you need to adopt a longer investment timeframe and a measured degree of risk.  While a bank account may be suitable for short-term goals, history shows us it would have been totally inadequate to meet any long-term goals such as providing for children’s education, an investment property or funding your  retirement.  Why?  Simply because the returns on your money would have been too low, especially when you take into account inflation and tax.  For example, if you are in the top tax bracket and you earn 5% interest on your money, then after tax your real return is only 2.5%.  If inflation is 3.5% then the buying power of your money has gone backwards 1%.

To drive your money further, you need to invest in growth assets, such as shares and property.  These assets have provided better long-term returns and, when used wisely, can save tax.  Tax shares and property investments are more favorable than interest income, enabling you to compound your  investments exponentially.

Which investment strategy is right for me?

Over the last five years cash and bonds have provided higher returns than residential property and shares.  However, past returns are not a good guide to future returns and this is particularly likely to be the case for cash and bonds, given the fall in interest rates and yields.  Shares and property are likely to be a better option for investors (depending of course on their individual risk tolerance) as global recovery supports growth assets and low yields hamper the returns from bonds and cash.

Self Managed Super Funds (SMSFs) are a great way to boost and control your own super investments for retirement.  With a SMSF, you manage the fund and decide how to invest.  You have a wider choice of investments than in retail or industry superannuation fund options.  The fees are generally lower, and the flexible nature of SMSFs allow you to benefit from the significant tax advantages that superannuation provides.

How do I get started?

Most successful wealth creators know how to save, but in order to be in a good position to invest, you must first be in control of your cash flow, otherwise you have nothing to invest.  Meet with your financial planner to help you choose the right investment strategy and get the right advice.

Quinn Financial Planning has the expertise to help you build your wealth.  For more advice on the best investment strategy for you, contact Peter Quinn here at Quinns by submitting an online enquiry or calling us on +612 9580 9166 to book an appointment.

Here at The Quinn Group our experienced team of Financial Planners, Accountants and Lawyers can provide you with the total solution and help build your wealth. For more advice on the best investment strategy for you, and to get the best chance at the lifestyle you want, contact Peter Quinn by submitting an online enquiry or calling us on +61 2 9580 9166 to book an obligation free appointment.