Years ago the time-honoured way of investing was t o simply have a savings account in a bank. These days, if you want a retirement income you have to invest in a more aggressive manner. There are various asset classes that can be considered for this investment strategy. Fixed interest investments or securities can make some capital growth and profits when they are traded in the latter case.

Equities (shares) have the potential for good capital growth over a term of 3-6 years. Tax imputation is also available. That is, if the company has paid tax on their profit that is then paid to you as a dividend, you will be entitled to a tax credit.

Property investments can be real estate or listed property trusts (LPT). Real estate includes residential (houses) retail (e.g. shopping complexes, industrial (factories etc) and others. LPTs are bought sold and traded via the stock exchange.

Multi-sector funds are good because they allow you to invest across a wide sector of asset classes, including internationally. Each multi sector fund has a specific focus i.e. income or capital growth.

Managed funds are often preferred by the small investor as a way of investing without all the trouble of doing it. Numerous investors provide a pool of finance and a person hired for the job, or more often an investment company manages the investment. Many banks provide managed investments.

A structured investment is an investment product that is structured differently from any other type of investment. You would think from the name that it was a single, definite package of investment, but this is not so. Structured investment can be made up from any number of investment types. For instance it can be derived from a single security or a whole basket of them; it can include commodities, indices, options, foreign currencies or debt issuance. Some structured investments have a feature of principal guarantee if kept till it matures in however many years that takes. If this is the case, then the investment company simply buys a product that is sure to return the investor’s principal on maturity, then uses the rest of the money to purchase other assets.

If this seems a rather poor return, remember that you accept low returns for low risk and if your principal is guaranteed, then you must expect low returns. Structured products can be an alternative to other forms of investment and do actually utilize current market trends while minimising risk. Banks or their affiliates most often issue structured investment. They have a specific time frame for maturity and they contain two elements, viz, a derivative and a note. This means the investor gets paid interest at a set rate at certain times throughout the lifetime of the investment, and another payment at maturity.

Structured products are offered with the potential to give maximum returns, which is why investors are in many cases willing to accept the lower interest rates. The value of this trade-off is somewhat debatable; however, some companies have added more features to the original structured investment. This sweetens the pill a little more and interest is reviving. However, banks have also used these features to hide the amount of profit they are getting from investors - or if not hide, then to make it more difficult for the investor to find out. So what are the actual benefits to the investors? There is the protection of their principal, of course - that’s of major interest. Then there are those enhanced returns and reduced risks. Last but not least, there is tax-efficient access to an investment that is fully taxable.

Managed funds are when a lot of small investors pool their money and are then able to invest in a greater variety of investment options. Most of the hard work and decision-making is done by the manager/s of the fund - usually a board. Of course, they are trained in the art of investing, so you can be reasonably sure of making a decent profit. It is possible to start investing in a managed fund and access diversity with a smaller amount of money than would otherwise be the case. A managed fund investment causes less stress for those investors whose time and/or ability are limited. The fund manager does all the hard work and spends all the time needed to make sure the investment is successful.

No investment is 100% safe, but with a managed fund, wide diversification is possible due to the large amount of money involved. Good diversification mean less risk and better returns over-all. Managed funds in Australia consist of Australian and international equities, cash, fixed interest and property. Some managed funds focus on only one asset class - with wide diversity within that class - while others diversify more widely with investments throughout many or all the classes. These are called multi-sector or balanced funds.

When an investor puts his money into a managed fund, he is issued with units, all at a specific price. This price may increase or decrease, depending on what the share market in those sectors is doing and depending on what the value of the underlying investment is. The issue price of a unit is what it costs the investor to buy, while the value of the unit when you withdraw or sell assets is called the withdrawal price. The difference between the two prices is called the buy-sell spread. Of course, it costs money to both buy and sell units in a managed fund and the price must reflect this cost, or others in the fund would be disadvantaged. Typically, banks and other lending institutions offer managed funds.

Traditionally, banks offered very small rates of interest on their savings account, but of latter years they’ve been forced to become more competitive. This is due to the many alternatives that have sprung up with non-bank institutions and Internet only banks. Internet-only banks typically offer the highest interest rates and no fees - or very low fees. You do have to have another bank account to link to them, since there is no other way of accessing your money. There is no bank building to go to. All deposits and withdrawals are done over the Internet or by telephone. It takes about two days for the transfer, which is good for those who struggle with saving. It means there is that wait before they can access their money and thus they have time to think about spending it, instead of spending impulsively.

Traditional banks now also offer Internet-only savings accounts. They work the same way as above, but there are still the bricks and mortar banks from which you can access personal help or advice when needed. An electronic account in a traditional bank may not offer quite the same high interest rates as an Internet-only bank, but some people like the security that a real time bank can afford. Some electronic accounts offer even higher interest for those months when no transactions are made.

Cash management accounts usually offer better interest rates than a general savings account. They make it easy to access your money on a daily basis if this is what you need to do. Many have tiered interest rates - they give more interest for the larger balance, but really low interest for a low balance. Many other savings and transaction accounts also have a tiered interest rate structure. This is fine if you know your balance is going to be high most of the time.