We're now a week into the 2027 financial year, though it's much the same as FY26 so far. Investors may be asking themselves: where should I invest my money in FY27?
The attractiveness of some investments may have changed in the last few months following the Federal budget. Property investors who buy an established residential property can no longer benefit from negative gearing (the losses are carried forward until the property makes a profit), though buyers of new builds can still make use of negative gearing.
The outlook for sizeable capital gains for residential property looks challenging in the short to medium term.
In my view, there are three areas that still make a lot of sense for investors.
Image source: Getty Images
Commercial property
Residential properties may have been impacted, but commercial property looks as attractive as ever to me. Commercial properties are normally positively geared, which is great for investor cash flow.
However, I'm not looking to become a property manager. Instead, I believe that high-quality real estate investment trusts (REITs) are a great option to invest my money because I can buy a stake in a portfolio of properties in a single transaction.
Names like Centuria Industrial REIT (ASX: CIP), Dexus Industria REIT (ASX: DXI), Charter Hall Long WALE REIT (ASX: CLW) and Rural Funds Group (ASX: RFF) offer exposure to quality property portfolios and good distribution yields. As a bonus, they are all trading at large discounts to their last reported net tangible assets (NTA).
High-quality exchange-traded funds
Another area that I think is well worth investing in is exchange-traded funds (ETFs) and listed investment companies (LICs) because of the diversification and returns they can provide over the long-term.
I'd rather invest in international shares than local shares because I'm not sure that ASX blue-chip shares are going to grow earnings materially in the near-term. Major ASX bank shares face headwinds from the property taxation changes, as well as a challenge from Macquarie Group Ltd (ASX: MQG), while African iron ore from new projects could be a headwind for earnings from BHP Group Ltd (ASX: BHP) and Fortescue Ltd (ASX: FMG).
In my view, something like the Vanguard MSCI Index International Shares ETF (ASX: VGS) makes a lot of sense because it provides exposure to well over 1,000 shares from the global share market.
But, given the uncertainty of how various intriguing investment trends will play out – AI, data centres, private credit, the lack of fuel and other resources flowing out of the Middle East, and inflation – I think high-quality businesses are best-suited to these conditions.
Over the long-term, I believe ideas such as VanEck MSCI International Quality ETF (ASX: QUAL) and Betashares Global Quality Leaders ETF (ASX: QLTY) can outperform the wider global share market, so that could be a great place to invest my money.
ASX shares that can grow earnings
The final place that could be a good area to invest is good ASX shares with solid earnings growth potential.
There are plenty of businesses that could deliver pleasing returns over the long-term as they grow their earnings. The ASX is more than just the largest businesses.
I'm thinking of names like Temple & Webster Group Ltd (ASX: TPW), Breville Group Ltd (ASX: BRG), Sigma Healthcare Ltd (ASX: SIG), TechnologyOne Ltd (ASX: TNE), Siteminder Ltd (ASX: SDR), L1 Group Ltd (ASX: L1G), Lovisa Holdings Ltd (ASX: LOV), Wesfarmers Ltd (ASX: WES) and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).
These aren't the only names I'd buy to invest my money for my portfolio, there are plenty of exciting options!
