The first Tuesday of November is a day many Australians look forward to, as they place their bets on who will win The Race that Stops the Nation. In the spirit of the Melbourne Cup, AMP has looked at how you could otherwise invest your betting money.
AMP financial adviser Darren James said: “According to Teg Insights, Australians spend an average of $179 on Melbourne Cup day, with at least $88 being placed on bets.
“But, is this the best way for Australians to spend their hard-earned cash? As a nation, Australians lost almost $24 billion on all forms of gambling in 2016/17- that’s $1,251 per person over 18 years old.
“When betting, the odds of winning are stacked against you especially when it comes to the Melbourne Cup. There’s another race, with better odds that can help you grow your wealth.”
Here are AMP’s top tips on better ways to invest your betting money.
If you usually use the spare change rattling around the bottom of your bag or in your pocket to fund a punt on the Melbourne Cup, micro-investing might be your speed. It’s a way to get into investing without the need to expend a large amount of cash. Essentially, micro-investing apps like Raiz collect your spare change from your card transactions and invest it across a variety of stocks, shares and bonds.
Micro-investing may offer decent returns a relatively safe bet if you’re cash constrained and not a sophisticated investor.
The spread bet
Exchange-Traded Funds (ETFs) are a simple cost-effective way to invest across a broad range of investments such as shares, bonds or commodities. They essentially track an asset class rather than a single entity. It’s a similar philosophy to spread betting – and lowers the risk of your investment compared to buying individual shares.
Rapidly growing in Australia, ETFs require a minimum investment of a few hundred dollars but will generally provide solid returns. However, some ETFs are more complex and riskier than others so make sure you read the fine print and know what you’re backing before you invest.
Any share will do
If you’re a devoted reader of the Form Guide to find the horse you’ll back, investing in a company after doing extensive research could be a rewarding way to invest.
Returns can vary widely depending on what stock (or stocks if you want a few ‘horses’ to back) you select. Consider your own risk profile and how much money you have to invest as well as the past performance of the company combined with market forces and its growth prospects. Investing in shares can be risky and their value can be volatile. You need to be able to shut out the noise (as Shane Oliver says). If you are comfortable with potential day-to-day discomfort and to commit long term (and you make a smart choice!), you may see your wealth grow.
Master of Management
Investing in a managed fund is similar to finding a horse with an excellent trainer who’s in the know. With actively managed funds, you are paying for the investment skills of the fund manager. Actively managed funds are suitable for investors who want to concentrate on certain sections of the market – for example, a particular asset class such as infrastructure, property or global equities – or who want to diversify their investment with a mix of cash, shares or unlisted assets. It may also give you access to investments and further diversification that you wouldn’t be able to achieve on your own because you’re pooling your money with other investors (in this way it can also be like owning a part share in a racehorse).
Just like picking a horse with a good trainer, you should do a background check on your managed fund to understand their experience in the field, whether their investment philosophy is aligned with your own and your risk appetite, and past performance (noting that it’s not an indicator of future performance).
Slow and steady
The safest bet of all when it comes to investing – albeit with the lowest rate of return – is to put your money in a high-interest savings account. There are still some good deals out there even following the RBA’s interest rate cuts including the AMP Saver, which offers 2.36% introductory rate. A savings account also gives you ready access to your funds when you need them and is a good option for those looking to take less risk on their investments.