Beyond headline rates: 3 considerations of smart investment

Weighing up the merits of different investment and savings products is rarely an apples-for-apples comparison. When deciding where to allocate your capital, it is easy to be swayed by surface features - like a high advertised interest rate or a fast-growing stock.

However, successful investing is about making your capital work for your specific goals and circumstances. Once you understand your personal investor profile, every decision ultimately comes down to balancing three key considerations: liquidity, volatility, and return.

Here is how to look beyond the surface and evaluate what is right for you.

Liquidity: How accessible does your capital need to be?

When investing a large sum of capital, the first question to ask is how long you can afford to be without it.

• Short-term needs: If there is a chance you may need your capital at short notice (for a house deposit, holiday, or emergency), products like bank savings accounts or specialist cash funds are designed for this immediate access.
• Medium-term certainty: Fixed-term products like term deposits offer a blend of liquidity and varied returns, though breaking them early for a withdrawal will often penalise your return rate.
• The liquidity trade-off: Listed shares and funds offer near-immediate liquidity but expose you to daily market fluctuations. On the other hand, unlisted commercial property funds are suited to investors looking for regular returns and long-term capital growth, but they typically do not offer immediate liquidity.

Volatility: Can you stomach the short-term swings?

Volatility describes the extent of price movements: how much, and how quickly, the value of an investment can rise or fall over time.

It is important to remember that volatility isn’t inherently negative. Higher-volatility investments often offer greater potential for long-term growth, provided you can tolerate the ups and downs along the way. Your tolerance should align with your investment horizon:

• Low volatility (e.g. term deposits): Your capital value remains steady, providing stability and guaranteed access at maturity. However, this comes at the cost of lower potential long-term returns. This is often preferred by those nearing retirement who need to protect their capital.
• Medium volatility (e.g. balanced funds): Value can move up and down depending on the underlying mix of shares, bonds, and property. You accept some fluctuation in pursuit of steadier long-term growth.
• High volatility (e.g. listed shares): Prices can move daily based on company performance, market sentiment, or global events. If you have a 20+ year horizon, you have time to recover from short-term swings to capture higher overall growth.

Return: What you actually keep after tax

Most investments are marketed with a "headline" rate of return. However, what matters is the real return—the amount that actually lands in your account after your personal tax rate and fund manager fees are applied.

For example, you might see a term deposit advertised at 4.00%.

If you earn between $78,000 and $180,000, your marginal tax rate of 33% reduces your real return to 2.68%.

If you earn over $180,000, your marginal tax rate of 39% reduces your real return to 2.44%.

This is where the tax structure of the investment product becomes critical. If you choose to invest in a Portfolio Investment Entity (PIE) product, your investment returns are taxed at your Prescribed Investor Rate (PIR), which is capped at a maximum of 28%.

This means that, depending on your income tier, a PIE fund with a headline rate of 4.90% can provide a significantly higher real return in your pocket than a term deposit with a similar or even higher advertised rate.

Applying the pillars to commercial property

With continuously growing investment options, commercial property can provide attractive returns and capital growth over the long term, serving as a highly effective wealth-generation tool.

However, investing wisely demands strategic thinking. Like any asset class, commercial property performance is influenced by external factors, including economic downturns affecting tenant demand, interest rate fluctuations impacting financing costs, and prolonged vacancies reducing rental income.

The key is aligning your choices with your personal investor profile. By understanding exactly how much liquidity you need, how much volatility you can stomach, and how to maximise your after-tax returns, you can build a portfolio designed to perform through any market cycle.

If you’d like to learn more about commercial property investing, download our free Commercial Property Investment Guide below.

This article is part of our Investor Education Series, designed to build understanding and confidence across your investment journey with PMG. Stay tuned for more topics soon.

Disclaimer: The information in this article is of a general nature and was current at May 2026. It is not intended to be regulated financial advice for the purpose of the Financial Markets Conduct Act 2013 and does not take your individual circumstances and financial situation into account. PMG does not provide financial advice. Please seek advice from a licensed financial advice provider before making any investment decisions.