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In a surprising trend, senior Australians are taking charge of their financial futures by embracing various investment opportunities, demonstrating resilience against geopolitical uncertainties and rising living costs.
According to recent reports, the Australian investment landscape is witnessing a notable surge in confidence among older investors, who are diversifying their portfolios beyond traditional options.
For senior Australians seeking secure investment avenues, some of the best options include superannuation, property, shares and forex trading with TradingView, and fixed-income investments.
The ASX Australian Investor Study reveals a remarkable 51 per cent of Australians, totalling 10.2 million people, now hold investments in addition to their homes and super funds. This marks a significant 13 per cent increase - equivalent to 1.2 million investors - since the last survey conducted in 2020.
Among these investors, 23 per cent are pre-retirees aged between 50 and 64, while 20 per cent are retirees aged 65 and above.
Notably, international and Australian shares have demonstrated an upward trend over the past 12 months, providing potential solid returns for investors with diversified portfolios.
One of the most appealing aspects of investing in superannuation for seniors is its tax-effective nature. Amid the current economic climate, financial experts urge investors not to overlook the importance of allocating attention to superannuation. They emphasise that even small investments today can profoundly affect securing a comfortable retirement.
With the current economic climate, it's easy for investing to slip from your to-do list, but that might be even more of a reason to pay it attention. A small investment now can profoundly affect how much you love your retirement.
As of 30 June, 2023, several balanced super funds have outperformed expectations based on their 1-year return percentages. High performers include ESSSuper Accum Basic Growth - with a remarkable 13.3 per cent return, Vision SS - Balanced Growth with 11.0 per cent, and Brighter Super Accum - Balanced with 10.6 per cent.
In addition to superannuation, the study highlights the appeal of investing in shares and forex for senior Australians. By purchasing a portion of ownership in a business, investors become shareholders and gain the right to receive dividend payments generated by the company. Although shares carry inherent risks, experts suggest carefully managing risk exposure can lead to a rewarding investment experience.
Real estate investment also emerges as an attractive option for senior Australians. While owning property involves significant financial responsibility, it offers prospects for long-term capital growth, rental income, and current tax benefits. Alternatively, indirect property investment through managed funds or real estate investment trusts (REITs) allows investors to gain exposure to the property market without the burden of direct ownership.
So why have more senior citizens decided to invest rather than save money? Several compelling reasons draw individuals towards investments, offering the potential for higher returns compared to traditional saving methods like deposit accounts. While CommBank points out that returns on investments can be significantly higher, it also acknowledges the inherent risk of potentially lower returns. However, investing for the long term is seen as a strategic approach to safeguard against fluctuations in returns.
Investing also provides a shield against inflation, which reached a record high of 6.1 per cent in Australia. In contrast, high-interest savings accounts only offered around 3 per cent return (as of October 2022), barely matching half of the inflation rate. By opting for investments, individuals stand a better chance of countering the impact of inflation with the potential for higher returns.
One of the most significant advantages of investing lies in compound interest, wherein any income or interest earned is reinvested and grows alongside the original capital. SuperGuide aptly explains this phenomenon, stating that investors receive interest not only on the principal investment but also on the interest accrued over time. This effect can be likened to a snowball, as the investment pool compounds and grows over time, most notably exemplified in superannuation.
Before investing, senior citizens should consider essential factors to ensure a secure financial foundation. Firstly, building an emergency savings buffer covering three to six months of living expenses is crucial. Such funds can be held in high-interest savings accounts, allowing quick access without penalties during emergencies.
High-interest debts, such as personal loans or credit card debt, demand attention before committing to investments. Prioritising repayment of high-interest debts over investing can result in substantial savings, enabling individuals to free themselves from costly interest charges.
Understanding the risks associated with different investment types is paramount. While the risk level varies across various investments, there is always a possibility of losing some or all of the invested capital. Potential returns may also fall short of expectations. As such, individuals should only invest money they are comfortable risking. Notably, investments in cryptocurrency - which remain unregulated in Australia and are known for their extreme volatility - warrant even more caution.