Investing for beginners in Australia | CFS Colonial First State

Saving vs investing – what’s the difference?

Saving and investing may sound similar, but there’s an important difference that impacts your approach to both.

Saving

Saving is putting money aside somewhere stable — usually a bank account or term deposit. While savings can earn interest, inflation may reduce the purchasing power of your money over time.

Investing

Investing is putting money into ‘asset classes’ (more on that below) that aim to grow faster than cash over time. The trade-off is that the value rises and falls along the way. You take on some short-term movement in exchange for the potential for stronger long-term growth.

Neither is ‘better’. They're different tools for different jobs. 

What’s your goal and timeframe?

For money you may need soon – e.g. an emergency buffer, a holiday next year, a house deposit you're drawing on within two to three years – saving can help you reduce the risk of losing money in the short-term.

For goals five years or more away – e.g. long-term wealth accumulation, a child's education, semi-retirement – investing gives your money more time to grow and ride out the inevitable ups and downs. Time is what helps you manage short-term volatility.

Where super fits – you're already an investor

If you have superannuation, you're already an investor. Your super is probably invested in shares, property, bonds and other assets on your behalf. Investing outside super simply gives you money you can access before retirement. The two work together, and you can learn more about growing your super in our super section.

What you’re actually investing in – the asset classes

When you invest, your money goes into one or more ‘asset classes’.

The simplest way to think about asset classes is in two buckets: 

Growth assets aim for higher returns over the long term, but are more volatile in the short term.
Defensive assets generally offer steadier, lower returns with less risk of loss.

The table below shows common types of growth and defensive assets. The mix of these assets in a portfolio is one of the main drivers of how your investment is likely to perform.

Growth assets

Defensive assets

Growth assets

• Australian shares – part-ownership of Australian companies.
• Global shares – companies listed overseas
• Property – may include direct property investments (e.g. offices and shopping centres) and property trusts (REITs)
• Infrastructure – physical assets such as public transport, toll roads and public housing.

Defensive assets

• Cash – interest-bearing savings accounts, term deposits and cash funds.
• Fixed interest – loans to governments and companies that pay interest (bonds).

How can you invest in these asset classes?

Directly – For some asset classes, such as Australian and global shares, you can invest yourself through an online broker. While this approach offers the most control, it can also increases risk – especially for beginners who may only invest in one or two companies. If those companies struggle, so does your investment.
Single-sector managed funds or exchange-traded funds (ETFs) offer an easy way to invest in a particular asset class of your choice. This means a single purchase can give you diversification within that asset class, often at a low cost, in a portfolio you don’t need to manage yourself. Learn more about our ETF exposure series.
Ready-made or diversified portfolios spread your money across multiple asset classes in one go, with the mix managed for you. For beginners who don't want to pick individual investments, this can be a simple way to get a highly diversified portfolio from day one. Learn more about our ready-made portfolios.

Understand risk and your timeframe

You can't sensibly choose what to invest in until you've thought about how much risk suits you. This is a step beginners often skip, but it’s crucial to understanding how it impacts your potential returns.

What ‘risk’ really means when you invest

Risk, when investing, mostly means how much the value of your investments can go up and down. 

Generally, the more risk you’re willing to undertake, the higher the potential reward may be. However, higher returns come with a higher risk that the value of your investment may fall in the short term.

What it costs to invest

When you invest, some fees may apply. These fees help cover the cost of running and managing your investment, whether that's providing access to investment options, administering your account, or having investment professionals make decisions and manage portfolios on your behalf. 

While most people think about the potential returns with investing, it’s important to also keep an eye on your costs. Small differences in fees can make a significant difference to overall performance.

Fees you'll come across

Depending on the type of investment, you may pay:

brokerage (a fee per trade)
management or administration fees (an ongoing percentage of your balance), and/or
account or platform fees.

The right option isn't always the one with the lowest fee. It's important to understand what you're receiving in return, such as professional investment management, diversification, administration services and ongoing support.

Why fees matter more over time

Fees are part of investing, and they pay for the services used to manage and support your investment. However, because many fees are based on the value of your investment, the amount you pay can increase as your balance grows. 

Over the long term, even small differences in fees can affect your investment outcome. That's why it's important to consider both cost and value, focusing on the returns and benefits you receive after fees, rather than simply choosing the lowest-cost option.

Tax in plain English

The interest or dividends you earn on investments are generally taxable, and how they're taxed differs between investing inside super (a concessionally taxed environment) and outside it. 

Outside super investment earnings are taxed at your marginal tax rate.
Inside super investment earnings are taxed at up to 15%.

When you sell an investment, there are also implications from a capital gains tax (CGT) perspective.

If your sell price is higher than your buy price, the profit is taxable as capital gain. This profit is discounted by 50% if you held the asset for more than 12 months.
If your sell price is lower than your buy price, the loss can used to offset any current or future capital gains (pre-discount) in your tax return.

Tax is highly specific to your circumstances. We recommend you speak to a registered tax agent or licensed financial adviser.

More about CGT

From 1 July 2027, the 50% CGT discount will be replaced with CPI cost base indexation (for resident individuals, trusts and partnerships) and a minimum 30% tax (for resident individuals) on capital gains made on sale of CGT assets, subject to limited exemptions. These changes will apply to most CGT assets including property and shares. These changes do not apply to complying super funds (including SMSFs) which would continue to receive a 1/3 CGT discount for assets held longer than 12 months.

5 common beginner mistakes to avoid

1. Trying to get rich quick

There’s no reliable way to turn a small sum into a fortune in weeks, and anything promising that is a warning sign, not an opportunity. Investing builds wealth slowly, over long timeframes.

2. Trying to time the market

Waiting for the ‘perfect’ moment to invest, or panic-selling when markets fall, may mean missing out on periods of strong market growth. It's normal for investment values to fluctuate over time. While some investments may grow in value over the long term, outcomes vary and past performance is not a reliable indicator of future performance.

Maintaining a long timeframe and making regular contributions can help you work with the market, not against it.

3. Putting everything in one investment

Concentrating your money in a single share, sector or trend increases the risk and volatility of investment returns. Diversification, or spreading across many investments, can help you manage this risk and reduce the changes of negative returns over the long term.

4. Not paying down debts first

If you have credit card debt or a personal loan, you may be paying high interest rates on these balances. Whether it is preferable to repay debt or invest will depend on your circumstances – including applicable fees, interest rates, tax and access to emergency savings.  

5. Forgetting super is investing too

Many people start investing while ignoring the large, tax-effective investment they already have in super. Reviewing your super (e.g. your investment option and fees) and making additional contributions can help you grow wealth in a concessionally-taxed environment, provided you don’t need access to this money before retirement.

Start investing with CFS

CFS offers an easy way for beginners to start investing, with a minimum investment of just $1,000. You can open an account online in minutes by following the steps below.

Open an account

Provide your contact details, address, tax file number and identification. We’ll need to verify your identity as part of the process.

Choose your investments

Select a ready-made portfolio or build your own using 200+ investment options. Decide how much you’d like to invest in each option.

Fund your account

Make your initial investment via BPAY, EFT or direct debit. Add to your investment at any time or set up a regular investment plan.

Get started

Frequently asked questions

You can invest with CFS from just $1,000. We have a range of ready-made portfolios that offer broad diversification and our investment team handles asset allocation, manager selection and rebalancing.

A regular investment plan is a recurring direct debit from your bank account that buys additional units in your ready-made portfolio or managed fund. This helps boost your portfolio balance over time and averages out the buy price of your investment. CFS offers regular investment plans from as little as $100 per month.

Super is a tax-effective vehicle designed for retirement, but you generally can't access it until you meet a condition of release, such as when you retire. Investing outside super (e.g. in shares or managed funds) is more flexible for shorter- and medium-term goals. Many people do both. The right balance depends on when you'll need the money and your circumstances. This is general advice only.

All investing involves some risk, and the value of your investments can rise and fall. The aim isn't to avoid risk entirely but to take a level of risk that suits your goal and timeframe, and to spread your money across different investments rather than relying on one. Investing is generally better suited to longer timeframes, which gives your investments more time to ride out short-term ups and downs. Past performance is not a reliable indicator of future performance. This is general advice only.