Long-term investments are gaining popularity among Australians seeking steady returns and financial security over time. With economic shifts, rising interest rates, and evolving investor behaviour, the long-term investment landscape in 2025 offers a broad range of options suited to various risk appetites and financial goals.
Whether you’re building wealth for retirement, funding a major future expense, or simply diversifying your portfolio, understanding the best long-term investment options is essential.
What is a Long-Term Investment?
A long-term investment typically involves committing capital for a period of five years or more with the goal of generating sustainable returns over time. Unlike short-term trading, which focuses on quick profits, long-term investment plans prioritise stability, growth, and/or income generation over extended horizons.
Economic uncertainty, growing financial literacy, and the pursuit of passive income have led Australians to explore long-term savings accounts, government-backed securities, and asset-backed lending options. Moreover, recent volatility in equity markets has encouraged investors to shift towards more resilient, income-generating opportunities, favouring private credit..
Benefits of Long-Term Investments
- Liquidity and Flexibility
While most long-term investments are illiquid by nature, many options, such as private credit funds, can offer better liquidity than the underlying asset. Illustratively, while a private credit fund finances loans with terms of 12 – 36 months, investors may be offered quarterly liquidity..
- Lower Risk Exposure
With a longer investment horizon, investors can look through and beyond short-term volatility, unaffected by the impact of near-term market fluctuations.
- Opportunity to Capitalise on Market Trends
Long-term strategies can benefit from macroeconomic cycles, allowing investors to profit from structural growth in specific sectors like infrastructure, renewable energy, and private credit.
Risks of Long-Term Investments
- Market Volatility and Timing Risks
Even with a long horizon, market timing can affect your entry and exit. Economic shocks or sector-specific downturns can impact performance if they occur at the time of exit.
- Inflation Impact on Returns
Inflation erodes purchasing power over time. Ensuring your investment yields real (inflation-adjusted) returns is essential.
- Tax Implications in Australia
Capital gains tax (CGT), dividend taxation, and income tax may reduce your effective returns. Understanding the tax treatment of each asset class is vital.
Factors to Consider Before Selecting a Long-Term Investment
- Investment Goals and Timeline
Clearly understanding and identifying your investment objectives is essential—whether you’re aiming for retirement income, saving for a future property purchase, or seeking to preserve wealth. Your chosen investment should match your target timeframe, allowing enough time to weather market fluctuations and compound returns effectively.
- Risk Tolerance and Return Expectations
Understanding your ability to handle market ups and downs is key to selecting suitable assets. Investors with a higher risk tolerance may pursue growth-focused strategies, while conservative investors might favour fixed-income or asset-backed instruments offering steady but relatively lower returns.
- Access to Capital and Exit Strategy
Some investment classes, such as term deposits or private credit, may restrict access to funds for several weeks or months. It’s important to assess whether you may need early access to capital and have a contingency plan should an urgent need for capital emerge.
Types of Long-Term Investments
- High-Interest Savings Accounts
High-interest savings accounts offer a secure place to store funds while earning interest over time. They work by paying a variable interest rate, often calculated daily and paid monthly. These accounts are ideal for risk-averse investors prioritising liquidity. Pros include safety and easy access, while cons involve relatively low returns and rates that may not keep up with inflation, reducing long-term purchasing power.
- Term Deposits
Term deposits lock in a fixed interest rate over a specified period, typically ranging from six months to five years. Withdrawing funds before maturity often results in interest penalties or fees. They are ideal for investors with defined savings goals and low-risk tolerance. While returns are predictable, the lack of flexibility and lower yields compared to more aggressive assets may not suit all long-term strategies. In addition, in a rising interest rate environment, investors risk holding an asset that is delivering below-market returns.
- Long-Term Government Bonds
Government bonds are long-term securities that pay semi-annual interest. Investors can buy them via the ASX or through the AOFM’s tenders. Bonds are popular for their stability and are backed by the government, making them low-risk. However, returns are modest and sensitive to interest rate changes, making them better suited to more conservative, income-focused portfolios.
- Money Market Funds
Money market funds invest in short-term, high-quality debt instruments like government securities and corporate paper. They aim to preserve capital while offering modest returns. Institutions like AMP, Perpetual, and the Australian Money Market offer such products. They provide slightly higher yields with reasonable liquidity than term deposits and savings accounts. However, they are not at risk.
The best long-term investments in Australia for 2025 range from low-risk savings accounts to higher-yielding instruments like private credit strategies. Each comes with its own balance of risk, return, and liquidity.
Private credit solutions like the Rixon Income Fund are ideal for sophisticated investors seeking consistent monthly income with strong asset backing. It represents a compelling option in the long-term investment landscape with a history of stable performance and a target net monthly return of 10–12%, and quarterly liquidity.
To know more, contact us today.
