What is investing?

What is investing?

Investing means allocating resources, such as money, time or effort, to gain some sort of profit or advantage.

In other words, the goal of investing is to get out more than you put in. 

The problem, though, is that while you might know in advance how much you’re planning to invest, you often don’t know what sort of return you’ll get (if any).

So investing and risk go hand in hand. That’s why, before you make a financial investment, you should do your research and seek professional advice.

In Australia, there are four main asset classes, or categories of investment:

• Cash (e.g. savings accounts, term deposits)
• Fixed income (e.g. government bonds, mortgage securities)
• Property (e.g. residential or commercial investment property)
• Shares or equities (shares in Australian and/or international companies)

Each asset class comes with a different level of risk and potential return.

What is share investing?

A share is a unit of ownership in a company. So if you own shares in a company, you’re a part-owner of that company.

When people talk about share investing, they mean buying shares in companies that are publicly listed on a stock exchange, such as the ASX (Australian Securities Exchange) or Chi-X Australia.

There are more than 2,000 public companies in Australia, such as BHP, Telstra, Woolworthsand Wesfarmers. And there are tens of thousands more around the world, including Apple, Tesla, Alibaba, Samsung and Volkswagen.

So if you bought shares in, say, Tesla, you’d become a part-owner, just like Elon Musk. (However, he’d own more shares and therefore more of the company than you.)

When you buy shares in a company:

• The value of your investment rises and falls in tandem with the share price.
• You can receive dividend payments (if the board decides to pay a dividend).
• You can cast votes at annual general meetings.

Four different investment options

Superhero is an online platform that allows you to buy shares listed on the ASX or Chi-X via your desktop or mobile. You can invest in four different types of securities:

• Individual companies. These include companies such as BHP, Telstra, Woolworths and Wesfarmers.
• Exchange-traded funds. ETFs are funds that own a basket of securities, such as shares, bonds or commodities. So when you buy a unit in one ETF, you’re actually investing in multiple assets.
• Listed investment companies. LICs are publicly listed companies that own a basket of investments. Again, buying one unit gives you access to multiple investments.
• Real estate investment trusts. REITs are trusts that own, operate or finance income-producing properties, such as apartment buildings, cell towers, data centres, hotels, medical facilities, offices, retail centres and warehouses. So when you invest in one REIT, you’re simultaneously investing in multiple properties.