Editor’s note: The following article contains information only. It is not intended as general or personal advice. Your Money recommends seeking professional advice specific to your personal circumstances.
Between Australia’s upcoming federal election and predictions of continued global instability, 2019 is shaping up to be a rocky one for investors.
It follows what was a turbulent year for stock markets, with nearly every asset class failing to deliver in 2018 as the US-China trade war, interest rate hikes and political unrest weighed on confidence.
And with talk of recession now in the mix, is it time to buy up bonds or should we put our money into bricks and mortar investments such as property?
Three investment experts – Suburbanite principal Anna Porter, Money Talks host Peter Switzer and InvestSmart‘s Evan Lucas – joined Your Money Live to tackle what you should do under two different scenarios.
If you have $5,000 to invest
Saving up your first $5,000 is considered a landmark step for early-stage investors.
But before you buy into the next big company you see, you may want to consider the following advice from our commentators.
Market swings next year have the potential to deliver huge losses while fees taken from agents can smash returns, particularly of smaller investments.
Importantly, don’t view this as a quick-fix win. You’ll want to think of this as a long-term investment.
With that in mind, here are three ideas to consider if you have $5,000 to invest:
1. A top Australian companies ETF
The ASX 200 has delivered consecutive losses in recent weeks, but Peter Switzer thinks a recovery is in order in 2019.
He says an exchange-traded fund (ETF) comprised of the top 200 companies in Australia is the safest bet for a $5,000 investment.
“We’ve gone through a correction of the stock market that’s fallen at least 10 per cent, and I suspect Trump will eventually come up with some solution with China… a stock market recovery of sorts [will] happen,” he predicts.
“I would put my $5,000 into an ETF, which gives you the top 200 companies in Australia… I think it’s a pretty safe way [to invest].”
2. Fractional property investment
Some platforms such as BrickX and DomaCom allow you to buy a part or fractional share in real property, which also gives you a share in the rental income plus some capital gain if the property is sold.
That means you can now get into the property market on as little as a few thousand dollars.
“This is what I’m really excited about. In years gone by you really couldn’t get into the property market with $5,000, no matter how much you could leverage. The banks just wouldn’t do the deal,” says Anna Porter.
3. A diversified fund
With market volatility expected to increase in 2019, Lucas thinks investors need to take a more cautious approach.
A diversified fund holds securities across multiple asset classes, sectors and countries to help spread risk.
So if one sector, say technology, fails to perform during the year, other kinds of investments will offer support.
“[It’s] giving the ability to have a bit of a buffer to what is likely to be a volatile year. Let’s not cover that up … next year will be difficult. Equities, property etc. is going to see some pretty wild movements,” he says.
While he agrees investing in the top Australian companies is a good idea, investors should also look at getting some exposure to the global market as well as fixed income.
“You can now get products that wrap all this up at a very, very cost-effective rate,” he says.
If you have $50,000
Investing a bigger chunk of money means you’re better placed to take a few more risks.
But with the market remaining unpredictable, it’s still a long-term waiting game.
For punters that have $50,000 to play with, our experts named these three investments worth considering:
1. Buy a property
Australia’s property market may be going through a slowdown, however Porter says investors can make good returns in the long-run depending on location.
“My best pick would be to buy somewhere like Adelaide. I wouldn’t be investing for under $350,000, that’s your entry point for a good investment in Australia,” she explains.
“If you can use the rent to hold it comfortably, get you through two or three years, you can certainly see the gains in that capital upswing, and that’s where I’d be putting my money.”
2. A fund with global exposure
Buying Australian shares is thought to be the safer option for local investors, but having exposure to the global market is generally considered a better bet for higher capital returns.
According to Lucas, an investment of $50,000 is better placed for a fund with higher exposure to shares in Asian and US markets next year.
“I believe that the [global] markets will return and the US is expected to see a little bit of stronger return,” he says.
3. An ETF with Chinese exposure
Despite ongoing fallout from the US-China trade war, many analysts still have faith in the Chinese market.
Switzer believes trade war tensions will ease next year, making Chinese tech giants such as Tencent and Alibaba a solid investment moving forward.
“I’m going for an ETF that picks up the large-cap Chinese companies that give you the tech companies as well.” says Switzer.
Click the videos above to watch the full discussion.
Read more: 5 stocks for Aussies to watch over the next 12 months
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