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How Can I Invest Safely In The Stock Market?

Updated: Aug 16, 2022

Buying shares is where many investors decide to start their journey. With more than a third of Australians owning investments on the exchange, exploring wealth-building through the stock market is a wise choice. Smart investors can select from nearly 2,200 companies listed on the ASX, ranging from start-ups to well-established organisations across various sectors.

Buying shares — equities, securities, stocks — is not difficult under the guidance of a skilled broking professional. But choosing shares to buy is just one component of knowing how to invest safely in the stock market. Investors may prefer owning shares themselves or pooling their money with others through a managed fund known as a collective investment. Regardless of which path investors choose, learning how to invest in the stock market is one of the most efficient ways to build wealth.

Best low-risk stock investments

Some investors prefer options for the best low-risk stock investments when starting out. Making the best safe investments for your money can help build confidence in your wealth-building strategy. Talking with a finance broker or planner allows investors to choose the stocks that align with their interests and provide the least risk. Cash assets, including savings accounts and term depositions, are the safest form money can take, but they also generate the lowest returns. In 2020, the Reserve Bank of Australia (RBA) slashed interest rates to all-time lows, making cash investments even less appealing.

Investors looking for low-risk income may want to try the following options to boost their annual incomes.

  • ASX blue-chip dividends — These stable, high-yield ASX stocks can net tidy returns with minimal risk. Some of the top dividend options include the National Australian Bank Ltd, and Harvey Norman Ltd. Financial brokers can closely monitor the markets to avoid share price declines.

  • Corporate bonds — This fixed income asset includes a variety of investment options, including corporate bonds and term deposits. Corporate bonds can potentially earn higher returns than cash. They provide predictable income and capital preservation.

  • Dividend stocks — Safer than high-growth stocks, they pay cash dividends, which limits volatility. Dividend stocks can fluctuate with the market but will not fall far in a depressed market.

  • Fixed-term annuities — These secure investments provide guaranteed, regular income for the term of the investor’s choosing. They are not based on market performance and include flexible capital return options at maturity.

  • Listed investment trusts (LITs) — These closed-ended funds allow investors to buy and sell units on the exchange. They pay out any surplus income as trust distributions. Investors can be aggressive or conservative with LITs, depending on their investment goals.

These are just a few of the best low-risk stock investments. A financial advisor can discuss other possibilities after examining individual financial goals.

Golden rules of investing in stock markets

Experienced investors know that holding their nerve is often the key to long-term success on the stock market. It can be more difficult for new investors to ride out their anxiety when the market fluctuates. Following some golden rules of investing in stock markets can give investors the courage they need to succeed.

  • Buy and hold — Modifying an investment portfolio simply for the sake of making a change can affect wealth-building efforts. Investors are better served by buying quality investments and holding them until they have achieved their expected return.

  • Consider tax implications — Wealth builders must seek capital gains in preference to income to avoid getting penalised at tax time.

  • Diversify — This is most likely the number-one rule of stock market investment. Diversifying across asset classes, companies, geographical regions, and markets is the best way to protect against big losses.

  • Invest regularly — Investors who implement disciplined savings plans can use small investments made frequently to build up their wealth.

  • Review frequently — Having regular check-ups with a financial advisor to review investments and investment strategies can ensure wealth-building goals remain on track.

Once you build your wealth through the stock market, you will want to protect it. Estate planning is one of the most effective ways to protect your assets. Estate plans ensure all non-estate assets — superannuation, life insurance, company stocks — are handled accordingly. Our team of estate planning experts can assist with:

  • Binding nominations

  • Enduring power of attorney

  • Medical power of attorney

  • Testamentary trusts

  • Wills

Safe investments with high returns

Investors often wonder, ‘What is the safest way to invest in the stock market?’ They also may contemplate, ‘Is it possible to make safe investments with high returns?’ When you work with the financial experts at ActOn Wealth, we can help leverage the power of the stock market for wealth creation.

Australian equity mutual funds diversify traditional investment portfolios and return high-dividend yields. Some of the top-performing funds over the last calendar year include Hyperion Asset Management, Prime Value Asset Management, First Sentier Investors, and the T. Rowe Price Australian Equity Fund.

Our team guides investors towards safe investments with high returns, providing all the tools needed to manage their wealth. Before developing an investment strategy, our team conducts a risk profile to identify investment preferences that fit within an individual’s comfort zone. Contact us today to schedule a free consultation to review your wealth-creation goals.

Learn how to invest in the stock market

ActOn Wealth’s financial consulting experts know that investing can be confusing and intimidating. With endless options, it can be difficult to choose the best safe investments for your money. We help investors uncover safe investments with high returns, building an investment strategy that meets their individual investment goals. Our award-winning financial advice helps investors create and manage their wealth. Make an appointment to get started with your investment journey today.

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