Notes on Investing

Investing involves using savings or extra money to increase its value, with varying returns and risks.
Informed choices, realistic affordability, planning, and accurate record-keeping are crucial for sound investments.
This topic explores decisions and planning for making sound investments in today’s financial environments.
Key Focus Areas:
- Exploring investment options and analyzing data for informed decisions.
- Examining the role and responsibilities of the financial services industry.

Investment occurs when money is spent to gain a profitable return.
Businesses invest to increase profit levels through:
- New machinery and technologies.
- Factories and product initiatives.
- People (entrepreneurs).
- Other firms.
- Workforce training programs.
Individuals invest savings to achieve future goals, classified as:
- Short term (1–3 years).
- Medium term (4–6 years).
- Long term (over 7 years).
Examples of individual investment goals:
- Extra income and future security.
- Major purchases.
- Funding holidays or a child’s education.
- Ensuring a comfortable retirement.
- Investing in their own education for higher-paying jobs.
Governments invest in:
- Education.
- Roads.
- Railways.
- Justice systems.
- Defense forces.
Government investment aims to ensure national competitiveness and improve living standards, not to directly create profit.

Investments are financed mainly through personal savings or borrowing.
Saving for Investments:
- Advantage: No interest payments on loans.
- Disadvantage: Takes time to save sufficient funds.
- May incur extra costs, like renting while saving for a house.
- Steps to start saving:
  - Writing out financial goals.
  - Preparing a weekly budget.
  - Tracking income and expenditure, comparing it to budget.
  - Transferring surplus funds to a high-yield investment account.
Borrowing to Invest:
- Ensure affordability of repayments.
- Shop for suitable loans.
- Compare loan features.
- Personal loans: secured or unsecured.
- Home loans: fixed or variable interest rates.
Fixed Interest Rate:
- Remains constant for the loan period.
- Provides financial control due to consistent repayments.
- May incur penalty fees for early payoff.
Variable Interest Rate:
- Fluctuates with the financial market.
- Subject to market volatility.
- Influenced by the Reserve Bank of Australia.

Purpose: To determine investable funds by tracking income and expenses.
Khanh Nguyen’s Example:
1. Starting balance listed at the beginning of the week.
2. All income listed and totaled.
3. Expenses listed and totaled.
4. Calculation: Total income minus total expenses equals the balance available to invest.
5. The balance transfers to the next week as the new starting balance.
6. Process continues to track money flow and available investment funds.
Superannuation as an Investment
- Superannuation is a compulsory investment.
- Funded by employer contributions (percentage of wage).
- Functions as a savings account for retirement.
- Individuals can choose to invest additional income into their superannuation account.