Most people want to be financially secure, but they also want the ability to keep doing the things that are most important to them. To be financially secure, unless you are growing a successful business or have inherited the money needed, most people will need to invest. This article discusses the different types of investments, the importance of identifying your investment target, knowing what type of investor you are and where to invest. The most important thing with investing, however, is to start.

The investment options

Some say property is the only way to create wealth; others prefer buying shares or starting a business to sell. Some keep money in cash, fearing market crashes, while some turn to gold or cryptocurrencies, believing they’re the best.

The truth is that all these assets have a role to play, but to really build wealth you need to focus on shares, property or infrastructure. Some people may include cryptocurrencies but given my complete lack of understanding on how they can be used to build wealth (besides just hoping the price goes up), I don’t recommend them.

Identify your target

Before you start investing, you need to know your target. This will help determine what level of risk you need to take and what progress you need to make each year.

For example, if your target is to have a passive income in retirement of $150,000 each year, then you have two targets:

  1. $3.75 million in investment assets will give you an 85% chance of being able to spend the equivalent of $150,000 every year for the rest of your life without running out of money.
  2. Increasing this to $4.3 million will give you a 100% chance of spending $150,000 every year and never running out of money.
Invest while young

Note that we are looking at the worst-case scenario (i.e. running out of money). On the flip side, if you have $3.75 million invested, there is also a 70% chance that your wealth will be higher when you die than when you stop work. As such, I believe the lower number is an appropriate target.

What type of investor are you?

Secondly, it is important to understand what type of investor you are. There are broadly three types:

  • Conservative: Conservative investors prioritise low volatility and a steady income. They are generally willing to forego higher returns for this stability, and they typically prefer lower-risk investments such as bonds and cash, as well as dividend-paying blue-chip stocks.
  • Balanced: Balanced investors seek a balance between capital preservation and growth. They are willing to take on some risk for potential higher returns and are best to diversify their portfolio across different asset classes, including a mix of stocks and bonds.
  • Aggressive: Aggressive investors are comfortable with a higher level of risk and volatility in exchange for the potential higher returns. They have a significant portion of their portfolio in high-risk assets, such as growth stocks, property, and infrastructure.

Where do you invest?

Once you have identified your type of investor (and yes, you can be in more than one at the same time), you need to consider where to invest: shares, property, infrastructure, bonds, and cash.

Shares, property, and infrastructure are called high-growth assets. Long-term returns for these have historically been between 7 and 12 per cent. However, the downside is more volatility, and if you aren’t careful, there is a higher chance of losing your money.

Cash and bonds are called conservative assets. Historically they have given long-term returns of between 2 and 5%. The trade-off for accepting a lower return is you have a lower risk of losing your money.

Investing can seem like a lost cause, especially as you get older, and the target seems impossible. However, the worst thing you can do is not start. Putting it off will only make it harder.

If you want help to point you in the right direction, whether it’s starting to invest or restructuring or simplifying what you have already, book a chat via the button below or contact us on 02 6269 3339 or at

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About the Author
Phil Harvey is an independent financial adviser. In 2017, Phil set up his company, Construct Wealth, to help clients best manage their finances so they focus on what is important to them. He is a founding member of the Profession of Independent Financial Advisers.

General Advice Warning
This advice contains general information. It may not be suitable to you because it does not consider your personal circumstances. Phil Harvey and Construct Wealth are authorised representatives of Independent Financial Advisers Australia (AFSL 464629)