Investing in gold, stocks and high yield real estate (A-REIT) is not such a complicated task in Australia. There are great investment options and also the best times to invest. But, before investing, you need to know the options and the risks that each one of them presents.
What is a REIT
This doubt is very common in the head of the novice investor. But, REITs are nothing more than companies that own real estate or otherwise finance income-generating real estate in a wide variety of real estate.
Generally speaking, most REITs tend to be publicly traded, like stocks, and for that reason are highly liquid, which is not the case with physical real estate investments. While REITs can generate steady income, there is little in the way of capital appreciation.
What are the categories of REITs
It is important to clarify that there are three types of REITs, among them are hybrid REITs, mortgage REITs and equity REITs.
Equity REITs
Those are the most common. They own and also manage income generating properties. Income is mainly generated by income from rents and not from the sale of properties.
Mortgage REITs
These are REITs that lend money to homeowners as well as real estate operators. In this modality, income is generated through what is called net interest margin. That is, this happens due to the spread between the interest they get on mortgage loans and also the cost of financing these loans.
Hybrid REITs
This modality is nothing more than a mix of mortgage classes and stock classes.
Advantages of investing in REITs
They are easy to buy and sell. They usually offer a stable cash flow, in addition to diversification and distribution of high dividends.
Disadvantages of investing in REITs
In terms of capital appreciation there are not many expectations. In addition, this investment is subject to market risks. That is, Dividends received are taxed as regular income. Another detail is the administration fee.
What is an Australian Real Estate Investment Trust (A-REIT)
In general terms, Australian Real Estate Investment Trusts (A-REITs) are real estate funds managed by a company that pool resources from different investors and acquire properties, and then lease those properties. Thus, most of the income comes from rent. Therefore, most of the profits are returned to investors through the distribution of dividends.
Additionally, A-REITs can generate income through asset capital growth, property-related fund management gains, and property development.
How many A-REITs currently exist in Australia
In Australia, there are currently 47 A-REITs, or Australian REITs, which are normally listed on the ASX.
The most popular investments in Australia
Forex
For young Australians, this has been one of the most popular opportunities. Through Forex it is possible to trade in the foreign exchange market. This is the largest and most liquid financial market.
In the Forex market, all currencies are traded. The investor profits by buying a currency at a lower price and selling that currency at a higher price. Forex is a bit complex. Therefore, it is indicated that a course prepared by professional trainers is taken.
Cryptocurrencies
Bitcoin, and a multitude of cryptocurrencies, has been the choice of many investors. Ethereum and Ripple cryptocurrencies, which have a lower cost, are among the darlings of young Australian investors.
Advantages of investing in cryptocurrencies
Variety of cryptocurrencies. Liquidity. Low initial investment. It is possible to make investments 100% online. Possibility of high valuation of cryptocurrency.
Disadvantages of investing in cryptocurrencies
It is not yet a payment alternative in all establishments. High volatility. Profit unpredictability.
P2P Lending
This type of lending, known as P2P, is a type of investment. This investment works in a way that matches investors and borrowers without the need to involve a financial institution. Therefore, the loan is carried out by an online loan platform. In this way, it is possible to state that the investor is acting as a bank for the client. The investor lends out a portion of his savings and receives interest on that loan.
Advantages of P2P lending
High profitability. Low investment. Unbureaucratized. Possibility of multiplying the capital. The investment can be made 100% online.
Disadvantages of P2P lending
High risk. Possibility of losing the invested capital. There may be delays in loan payments. You can take a beating.
Niche investments
This investment is aimed at niche technologies and start-ups. Therefore, there is a possibility of great return in the short and long term for investors. Generally, they are volatile investments, and therefore can grow quickly. However, due to volatility, it is necessary to analyze and choose a diversified group of niche investment opportunities, so that risks are mitigated.
Advantages of niche investments
Possibility of gain in the short, medium and long term. It is possible to diversify. You can start with a low investment.
Disadvantages of Niche Investing
High volatility. Risk of capital loss.
Invest in Commodities
One of the options for young Australians has been investing in commodities. Experts say this can be a great way to build long-term wealth. If an investor does some research and finds a rising superstar commodity, he or she can make big profits. Commodities are nothing more than raw materials, or agricultural products, whose values generally rotate through supply and demand. Overall, this oscillation happens on a global scale.
The investor has the option to choose between four major groups of commodities:
Metals – silver, copper, platinum or gold.
Energy – gas, gasoline and crude oil.
Livestock – pork belly, live cattle, fattening cattle and etc…
Agricultural – cocoa, corn, rice, sugar and others.
Australia’s most popular investments
Faced with the large number of investments that exist, sometimes it is even confusing to know which ones are really the best. For this reason, we have brought you the 6 best investments in Australia.
Titles
Government corporate bonds can be a great investment opportunity for young Australians. Acquiring a bond is the same as lending money to a government agency. In return, the government will pay interest on the loan, which is called the coupon rate. At the end of the period of the corporate government bond, the investor will receive the full value of the corrected bond. These bonds can be a good option, as they have a low risk of default.
Advantages of corporate and government bonds
It earns interest on the amount invested in the bond. Low risk. Less chance of default.
Disadvantages of corporate and government bonds
Low profit. In some cases it is necessary to hold the title until the maturity date.
Actions
It is possible to buy shares in Australian companies directly on the stock exchange. It is also possible to make this acquisition through retirement funds and managed funds. As the value of shares increases, invested capital grows with it. In addition, some companies listed on the stock exchange distribute dividends to shareholders.
Advantages of investing in stocks
Possibility of appreciation. There are dividend-paying stocks.
Disadvantages of investing in stocks
The value of shares may fall, and the investor’s capital will decrease. Risk of a poorly managed company going bankrupt. Payment of taxes on profit achieved.
Managed funds
These funds are aimed at investors who prefer to outsource the fund selection and management process. These are investors who don’t care so much which individual stocks or companies are listed in that investment fund. The fund manager decides which companies to invest in.
Advantages of investing in managed funds
The manager chooses the shares in which he will invest. The manager is responsible for analyzing the best investment opportunities. Diversified investment portfolio.
Disadvantages of investing in managed funds
Some managed funds charge high management fees. You cannot choose which stocks the fund will invest in.
ETFs
In this modality, the investor has access to funds (ETFs), traded on the stock exchange. They can offer access to a specific market segment as well as a particular asset class.
Advantages of investing in ETFs
Possibility of capital multiplication. Investment diversification.
Disadvantages of investing in ETFs
Volatility. The investor does not choose the asset class that makes up an ETF.
Property
Buying a property can be a great investment. However, it is necessary to buy in an area that is growing, so that in this way there are more possibilities for the property to appreciate.
Advantages of investing in a property
Possibility of appreciation of the property. The investor can get out of rent. It is possible to have an income by renting the property.
Disadvantages of investing in a property
Expenses for house maintenance. Tax payments. Lack of liquidity, if you need money, you may not be able to sell the property so quickly, which does not happen when investing in REITs, which, on the contrary, have high liquidity.
Retirement
Investment in retirement is a solution, in which the employer is obliged to contribute to the retirement fund that the employee appoints and pay 10% of the employee’s gross income. This is one of the most traditional ways to save for the future, and in the long run this investment can offer higher returns. In addition, there is the possibility of benefiting from a tax deduction for additional contributions that the investor makes.
Advantages of Investing in a Retirement
Capital accumulation. Recurring income guarantee in the future. Possibility of good income.
Disadvantages of Investing in a Retirement
Low profitability. Administration fee.
What are the 5 best ASX gold stocks of 2022
Currently, the value of gold is trading at a lower price than some financial market investors would like. However, there are still bold ASX stocks that performed better in 2022 and are making big leaps.
Southern Cross Gold
In 2022, the accumulated gain was 179.17%. The share price was at AU$0.67, and the market capitalization was AU$106.17 million.
Southern Cross Gold (ASX: SXG) is an Australian company specializing in the exploration of base metals and precious metals.
Santana Minerals
In 2022, this company had an accumulated gain of 105.88%. The share price was AU$0.70 and the market cap was AU$101.91. Santana Minerals is currently exploring for precious metals in New Zealand through the Bendigo-Ophir project.
Far east gold
This company had a cumulative gain of 70.13% in 2022. Its share was quoted at AU$0.765. Furthermore, the capitalization of the company was AU$110.07. It is worth highlighting that Far East Gold’s (ASX: FEG) main assets include at least six advanced copper projects as well as gold in Australia and Indonesia.
MetalsTech
MetalsTech accumulated an appreciation of 66.67% in 2022. In addition, its share was quoted at AU$ 0.648. Another detail is that its market capitalization was AU$ 80.49 million. MetalsTech (ASX:MTC), is focused on its Sturec underground gold mine, which has historically produced more than 1.5 million ounces of gold, in addition to producing 6.7 million ounces of silver. Currently, the company’s project is 100% located in Slovakia.
Meeka Metals
The valuation of Metais Meeka in 2022 was 57.14%. The share price closed the year 2022 at AU$0.066. Meeka Metals’ (ASX:MEK) portfolio is gold and rare earths. Also, everything is 100% owned by you. Projects are 100% located in Australia.
How to buy gold on ASX
The investor may select a single company or several, if he so prefers. Then just acquire the gold shares. To do this, just use trading applications with access to ASX shares. The investor can also count on the help of stock exchange brokers.
How to Buy Gold ETFs on the ASX
Investors wishing to gain broader exposure to this sector can resort to ETF funds, which are traded on the stock exchange. As the ASX houses numerous ETFs with a focus on gold, the investor will surely find a good option.
- Pysical Gold ETFs (ASX: GOLD) is an option that promises investors low-cost access to physical gold through the exchange. Even investors who prefer can exchange for physical gold.
- Perth Mint Gold (ASX?: PMGOLD), is a modality that tracks the international price of physical gold.
- The Van Eck Gold Miners ETF (ASX: GDX), tracks the NYSE Arca Gold Miners Index.
- What are the Australian ETFs that distribute the best dividends
This list shows the highest dividend Australian ETFs for 2022. It is important to remember that past performance is no guarantee of future performance.
The best dividend ETFs are:
- iShares S&P/ASX High Dividend Yield (IHD) ETF
- Russell High Dividend Australian Shares ETF (RDV)
- SPDR MSCI Australia Select High Dividend Yield Fund (SYI)
- Vanguard Australian Shares High Yield ETF (VHY)
- ETFS S&P/ASX 300 High Yield Plus ETF (ZYAU)
- VanEck Morningstar Australian Moat Income ETF (DVDY)
- The VHY is one of the largest dividend ETFs in the Australian market. The VHY dividend yield was 6%.
- SYI had a dividend yield of 7.8%. As for ZYAU, the dividend yield was 4.5%. DVDY presented 4.3% of dividends. RDV dividends were 6.5%. DIC dividends were 7.1%.
It is worth noting that the dividend yield is the 12-month yield, based on the EFT price as of September 30, 2022.
Investing in stocks for beginners
Those who want to invest in stocks, but still don’t know how, can find basic notions on how to invest in stocks here. First, it is important to say that investing in stocks is as if the investor were becoming a “partner” in the company. Therefore, as the company grows, the investor’s capital also grows. If by chance the company performs poorly and starts to lose money, the investor’s capital may decrease.
Even if the investor buys a small number of shares, he is becoming part of this company’s business. To buy and sell shares, the investor needs a broker or a stockbroker.
Can I make money from stocks?
The answer is yes, it is possible to make money from stocks. There are two ways this can happen. The first one is the share value of this company to go up. When this happens, the investor benefits from what is called “capital growth”. This means that the investor bought the stock at one price, and sold it at a higher price. The investor’s profit is the difference obtained between the purchase and sale of this share. Obviously, if the investor sells his shares for a lower price than he bought, he will be losing money.
The other way is to receive dividends from companies. Many companies listed on the stock exchange are known for their profit sharing. Thus, the investor receives an amount of dividends that is linked to the number of shares he owns in a given company. While companies don’t need to pay dividends, many companies see this as a way to give back to shareholders by distributing part of the profits.
The first steps to investing in stocks
First, you need to understand what is motivating you to invest in stocks, so that you can develop an intelligent investment strategy. Having a strategy can avoid irrational decisions on this journey.
Ask yourself how long you intend to invest your money in the stock market. What is the capital you have to invest. Do you intend to invest monthly?
How to learn to invest in stocks
It is very important to stay aware of the country’s economy, exchange rates, interest rates and government policy. Understanding the factors that are generally responsible for affecting the performance of companies can be an ally when deciding which stocks to invest in. In addition, there is very educational support material available at ASX. Just stay tuned in the education section on investments and stocks.
How much is needed to start investing in stocks
It is possible to find brokerages, in which with an amount of less than $ 500 you can already start investing. However, the ASX suggestion is that investors start with at least $2000. In addition, it is necessary to understand the costs involved in the stock market.
Starting to invest in stocks with little money
There is the possibility of investing in stocks with little money. However, when you have few resources, the brokerage fee can erode a good part of the capital. By way of comparison, when the investor decides to buy $500 worth of shares, but the brokerage is $20, this represents 4% of the capital will be paid as brokerage.
However, if the amount invested were $5000 and the brokerage $20, this cost would represent only 0.40% of the total amount. It’s okay to start investing with a smaller amount, but you need to be more patient to reach your goals.
How to choose which stocks to buy?
It is necessary to carefully analyze which shares will be purchased. MoneySmart suggests that beginning investors start with companies where they have industry knowledge. This could make it easier when choosing which company to invest in.
What to look for in companies listed on the stock exchange
It is always worth remembering that past performance is no guarantee of future performance. However, many investors use this parameter as a metric. However, MoneySmart recommends that investors ask the following questions:
Is this company offering services that will be in demand in the future? Is there real growth opportunity for this company? Who are this company’s main competitors, and do they have a stronger position? Analyzing a company’s annual report, or its half-yearly financial statements can be allies and help in this choice.
Cheap stocks are not always the best options
Many novice investors imagine that “cheap” shares are the ones with the greatest potential for capital multiplication. While stocks whose stock value is between $0.10 and $0.20 may seem like a great opportunity, it can actually be a huge pitfall if they have a shaky track record. Therefore, these companies can have enormous potential to wipe out invested capital.
Risk investments
It is important to remember that investing in stocks carries more risk than traditional investments such as government bonds and savings accounts. Therefore, you need to determine your risk appetite before venturing into the stock market. As it is a market with greater volatility than traditional investments, the possibility of capital appreciation and capital devaluation go hand in hand.