Investing is an important part of building a secure financial future. It may seem complex and confusing, but the financial planners at Intellichoice are dedicated in providing you with a clear direction to move towards to maximise your long-term wealth. Investments can essentially be classified into two asset classes - defensive and growth assets. Defensive assets include cash, fixed interest investments and some alternative investments. They are called defensive because there is a low risk of capital loss and a high proportion of their returns come from income, for example interest payments. Below are some examples of cash and fixed interest investments.

Cash

Cash, such as bank accounts and bank bills, are generally only considered appropriate as primary investments if your time frame is short (up to three years), or to accommodate the need for ease of access.

Fixed interest

Many investors believe the fixed interest sector consists solely of investing in bank term deposits. A bank term deposit is where funds are 'locked' in for a fixed period of time and earn a set return. However, fixed interest investments actually come in many forms including:

• Treasury notes – short term debt instruments issued by the government

• Debentures – interest bearing securities commonly issued by finance companies

• Fixed interest trusts – a unit trust that invests in a range of fixed interest securities. For example, mortgage trusts and bonds (government, semi-government and corporate).

Term deposits

• Term deposits are offered through banks, building societies, credit unions and other prudentially regulated institutions

• There are lower risks involved with term deposits because the institutions are specially regulated by APRA

• Generally pays a higher return than cash

• Offers investors a fixed return for a fixed period of time

• Term deposits are an ideal investment tool for investors who want certainty. It is ideal ofr investors who are looking for safety, security and a guaranteed investment return.

• Term deposits are simple, reliable and easy to understand

• Term deposits offer a regular income and provides the investor the option of taking interest on a monthly, quarterly, half yearly or annual basis

• Have guaranteed returns and are less risky than shares and property

Cash management trusts

• Cash management trusts are offered by licensed businesses through a product disclosure statement

• These trusts are not regulated by the APRA

• Risk and return will depend on what the cash management trust invests in

Government bonds

• Offered by governments on advertised terms and conditions

• Payment of interest and of capital at maturity are government guaranteed

• Australian Government bonds are highly secure and returns tend to set a benchmark for the market

Debentures and unsecured notes or unsecured deposit notes

• Offered by companies through a prospectus

• You are not guaranteed a fixed rate of interest or return of your capital

• The business might use your money to finance a wide range of activities, or it may on-lend your money to another business

Mortgage funds

• You invest money in a mortgage fund offered by fund managers through a product disclosure statement

• You might not be able to withdraw from the fund at short notice

• You're not guaranteed a fixed rate of interest or return of your capital

We recommend you speak with a certified financial planner on 1300 55 10 45, who can assist you in determining the appropriate mix of investments for your circumstances, time horizon and financial goals.