By Gillian Bullock

Asset classes are usually limited to shares, property, fixed interest and alternative assets, but when you drill down there are thousands of different options. At the very least, you should always make sure you understand what you are investing in. Take art – it may seem appealing, but if you don’t understand what you are buying then you should steer clear.

So what should you consider?

Shares

Despite the volatile sharemarket, the consensus remains that over a 10-year period shares will out perform all other asset classes. Share investment is for the medium to long term, so you should invest for at least five years. Col Lewis of ipac securities says that given shares are at a very low point right now, if you buy quality you should be on a winner. In addition he says with prices so low, dividend yields are looking attractive.

Hans Kunnen, head of investments market research at Colonial First State believes that resource and food stocks are the go. “Resource stocks still have a lot of legs with the China story,” says Kunnen. “Food stocks are also a good investment given the rising population and the decrease in arable land per capita. As income rises, food tastes change so stocks like Australian Wheat Board and fertiliser companies (are attractive).”

Blue chip stocks also remain top of the experts’ lists given the tax benefits of fully franked dividends.

Property

Owning your home is often seen as a dead investment. OK, any capital growth in the property is tax free, but if the money is just sitting there, it’s not working for you. But the good thing about building up equity in your home is that you can borrow against it to invest in assets that will deliver an income. Borrowing against your home is the cheapest form of finance, but make sure you only use these borrowed funds for non-depreciating assets.

Adam Coughlan of Australian Unity Investments says diversification is the name of the game when it comes to property so look at property funds or syndicates that hold a range of properties across Australia and in different sectors such as industrial, office or retail.

If you do consider direct property investment and it’s residential, then buy a new property so you can enjoy depreciation of 2.5 per cent a year over a 40-year period.