Money on offer – but it’s risky

Wise investments a way out in tough times

MAKING money has become harder in the cost-of-living crisis, and anyone wanting to beat inflation will have to accept more investment risk.

With wages growth of 3.3 per cent less than half the 7.8 per cent inflation rate, and deposit interest rates also well below inflation, traditional growth assets such as shares are a key target for longterm financial gains.

But investment specialists say they should only be bought by those who can stomach shortterm volatility and can diversify their money across many companies and countries.

Stockspot CEO Chris Brycki says higher interest rates have increased the need to invest, “otherwise the value of your money is going backwards”.

Mr Brycki said he believed emerging market shares offered the best investment opportunities in 2023 after “a poor past 11 years” in the shadow of the booming US stock market.

“Emerging markets like India and China tend to do well with higher inflation so could provide some inflation protection to portfolios going forward,” he said.

Investors can gain broad exposure to emerging markets companies through exchange traded funds (ETFS) that spread each dollar among different stocks. Mr Brycki said gold also had potential when there was higher inflation but weaker economic growth.

Shaw & Partners senior investment adviser Jed Richards said he liked US tech giants “that have been knocked around pretty savagely”.

“Big-name companies like Microsoft and Amazon are cheap again,” he said. Mr Richards also directs clients’ money into bank hybrids, a mixture of stock and fixedinterest investments that pay solid income returns.

“The banks are in a better position than they have been for a few years,” he said. “They make a higher margin on higher interest rates.”

Catapult Wealth director Tony Catt said he favoured technologyfocused ETFS for higher-growth investors.

He said when technology stocks imploded in the tech wreck in 1999 and 2000, “what didn’t go away was our use of technology”. “Google, Apple and Microsoft didn’t go away,” he said. “Robotics, AI and cybersecurity are not going away.”

Mr Catt said conservative investors could target the bond market, which in 2022 suffered its worst year in decades.

Ben Ford and his son, Drake, 9, have Stockspot investment portfolios focused on aggressive growth.

Mr Ford said his investments were diversified through ETFS containing Australian shares, international shares, gold and bonds, and it was “a no-brainer” to start his son young in the investing game.

“A diversified portfolio is risky,” he said.