Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our opinions or reviews. Learn how we make money.
Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.
What is an investment account and how can it make you money?
A quick and simple guide to investment accounts for beginners.
What is an investment account?
An investment account is a broad term applied to any kind of account that gives you a financial return. Investment accounts include share trading accounts, term deposits, deeming accounts and retirement accounts.
It’s important to note that various types of investment accounts present different risks and returns. Not all of them are suitable for you, depending on your investment strategy.
What are the different types of investment accounts?
Investment account is an umbrella term, which includes a number of different financial products. Common types of investment accounts are:
- Share trading investment accounts. Trade securities using a share-trading account. This type of account has features that appeal to traders, such as free brokerage. A share trading investment account can be tailored to suit your needs, for example, an investment account can easily be made into an investment loan if you need more capital.
- Margin loans. A margin loan gives you a line of credit to use to invest. Margin loans can be secured to a property or other asset such as a share portfolio. Margin loans can be used for certain investments but not others. You can use a margin loan to invest in common types of investment accounts like those discussed on this page.
- Term deposits. One of the safest ways to invest your money, a term deposit gives a higher return when you lock your money away for longer periods. There’s a penalty if you want to access your money before the term deposit matures and there are bonuses if you continue to invest your money once the first investment matures.
- Cash management accounts. A cash management account is also called a high-interest savings account. Like a term deposit, this investment account gives you a guaranteed return on your deposit. Unlike a term deposit, you can earn bonus interest for an introductory period or when you meet certain conditions, such as maintaining a minimum monthly deposit, and you can access your money when you want without penalty.
How do I compare investment accounts?
Consider these points when you compare investment accounts.
- Risk profile. Riskier investments give greater returns. Savings accounts and term deposits are among the safest types of investments, whereas share trading has the potential for big gains and losses. Everyone has a different risk appetite. There is a relationship between your risk appetite and investment goals.
- Your investment goals. Why are you investing? Is it to grow your retirement nest egg, are you saving for a deposit for a home or are you looking for a quick dollar? Access to capital and risk appetite are two important factors in deciding your investment goals and subsequently which investment account is right for you. For example, a high-interest saving account is a better investment account for someone saving for their first home than a share trading account. Share trading can lead to big gains, but the chance of losing everything probably won’t appeal to someone saving for their first home. Your investment goals dictate your investment strategy, which is a must-have for anyone comparing investment accounts.
- Your investment strategy. Considering your investment goals, which investment account or investment-account mix is suited to your needs. You can hedge your bets by choosing the right mix of investments. Your investment strategy also needs a time frame.
- The length of the investment. Are you investment goals short, medium or long term? Different investments have different investment cycles. You can invest in a term deposit for a set period, for example, while shares can be a little less black and white. Your goals and time frame to realise them should help you make a decision about the best investment account for you.
- Liquidity. Also compare different investment accounts based on how easily you can access your money. Savings accounts are among the most liquid type of investment account, you can get your money when you want it. Securities only become a liquid asset if you can find a buyer.
What are the pros and cons of using an investment account?
- Financial gain. Different investments and investment accounts have the potential for different gains. The potential for capital gains is tied to the risk of the investment.
- Choice. These types of accounts give you control over how you spend your money. Share trading accounts, retirement accounts and savings accounts are all different types of investment account.
- Risk. The risk of suffering a capital loss.
- Not for everyone. You need to have done your homework before you start investing and open an investment account.
What are the risks?
- How risky are you? The investment risk varies depending on the investment type. Term deposit and high-interest savings accounts are basically no-risk investment accounts, but the returns are low compared to the potential for capital gains from trading shares.
- Margin lending. A margin loan investment account can be a great way to get capital to invest; however, this is a risky way to access cash. If you suffer a loss, the lender can claim the asset you use as a security for the margin loan.
Frequently asked questions
How do I open an investment account?
You can apply for an investment account if you’re over 18 and if you’re applying in your own name or in the name of a trust. Each type of investment account has it’s own application requirements. Before you can open an investment account, you may need to have an account with the financial institutions, like a transaction account and a credit card or a home loan, for example. Some investment accounts have a minimum opening balance; you need to provide your address and information about any accounts you hold with the financial institution.
Can I open a joint investment account?
You can jointly open some investment accounts but it depends on the provider and type of account.
Can I have more than one investment account?
By holding a diverse spread of investments, you’re reducing your risk. You can have multiple savings accounts, share trading accounts or term deposits from the same or different financial institution at a time.
More guides on Finder
The rise of fin-fluencers: 44% of gen Z investors get money tips on social media
Social media is the number 1 source of investing advice among young adults in New Zealand, according to new research from Finder.
How to invest in the Porsche IPO from New Zealand
Everything we know about the upcoming Porsche IPO, plus information on how to buy in.
Share trading statistics New Zealand
Find out how Kiwis are investing their money, why they choose to invest and why many are still reluctant with our share trading statistics.
How to buy AMTD Digital (HKD) shares
Steps to owning and managing HKD/USD, with 24-hour and historical pricing before you buy.
The best stock trading apps in NZ (2022)
An overview of the best investing apps available in NZ, including pros, cons and fees.
Rockfort Markets share trading review
Your detailed review of share trading with Rockfort Markets, including fees, safety, and pros and cons.
5 of the best ways to invest money in New Zealand in 2022
What’s the best way to invest money in New Zealand? Find out about KiwiSaver, index funds, cryptocurrency and more in this guide.
BlackBull Markets share trading review
Your detailed review of share trading with BlackBull Markets, including brokerage fees, safety, pros and cons, and more.
Jarden Direct Share Trading review
Thinking of trading shares with Jarden Direct? Check out our review of Jarden Direct fees, safety, and pros and cons first.
Tiger Brokers share trading review
Your detailed review of online share trading with Tiger Brokers, including fees, markets, safety, pros and cons, and how to sign up.
Ask an Expert