Australians are increasingly turning to market-linked investments in 2025, chasing higher yields amid persistently low interest rates and shifting economic conditions. From exchange-traded funds (ETFs) to managed funds and structured products, these investments offer the potential for growth that’s directly tied to the performance of financial markets. But with greater opportunity comes higher risk—and a raft of new regulatory changes to consider.
What Are Market-Linked Investments?
Market-linked investments are financial products whose returns are connected to the performance of specific asset classes, such as shares, bonds, or indices. Unlike fixed-rate term deposits or traditional savings accounts, the value of these investments can fluctuate daily based on market conditions.
- ETFs and Managed Funds: These popular options pool investor money to buy a diversified portfolio of assets, often tracking a stock market index or sector.
- Structured Products: These are custom investments offered by banks and financial institutions, often combining debt and equity elements with payoffs linked to market benchmarks.
- Superannuation Options: Many super funds now offer members the choice to allocate a portion of their retirement savings to market-linked options, increasing potential growth but also risk.
According to the ASX’s 2025 Investor Study, over 40% of new investors in Australia have chosen market-linked products in the past year, reflecting growing appetite for higher returns in a changing economy.
What’s Driving Their Popularity in 2025?
Several factors are fuelling the surge in market-linked investments this year:
- Persistently Low Interest Rates: The RBA has kept cash rates low, making traditional savings less attractive for wealth growth.
- Inflation Concerns: With inflation hovering near 3.2%, many Australians are seeking investments that can outpace rising costs of living.
- Superannuation Flexibility: Recent policy changes now allow greater member choice in super fund asset allocation, making market-linked strategies more accessible within retirement accounts.
- Tax Incentives: The 2025 Federal Budget introduced a modest reduction in capital gains tax for investments held over five years, incentivising long-term, market-linked strategies.
For example, 32-year-old Sarah from Brisbane switched her superannuation’s default option to a market-linked growth fund in January, citing a desire for higher long-term returns after seeing lacklustre performance in conservative settings.
Risks, Taxation, and Regulatory Updates
While the upside can be appealing, market-linked investments are not without their pitfalls. Here’s what to watch in 2025:
- Market Volatility: Sharp swings in global markets—driven by geopolitical tensions and shifting central bank policies—can quickly erode returns.
- Complexity: Structured products, in particular, can be difficult to understand, with terms and risks that aren’t always clear upfront.
- Regulatory Reforms: ASIC has tightened disclosure requirements on complex market-linked products this year, aiming to protect retail investors from hidden fees and mis-selling.
- Taxation Changes: The new long-term CGT discount applies only to select assets, and certain ETFs may face revised reporting requirements under updated ATO rules.
For instance, the collapse of a popular property-linked structured note in early 2025 highlighted the need for due diligence, as hundreds of investors faced unexpected losses when the underlying index dropped sharply.
How to Approach Market-Linked Investments in 2025
Australians considering market-linked products should keep these strategies in mind:
- Understand the Product: Read all documentation carefully and ensure you grasp how returns are calculated and what risks you’re exposed to.
- Diversify: Spread investments across different asset classes and regions to help cushion against market downturns.
- Keep an Eye on Fees: Compare management and performance fees, which can eat into returns—especially for actively managed or structured products.
- Stay Informed: Monitor regulatory updates and tax changes that could impact your portfolio’s performance or reporting requirements.
With the right approach, market-linked investments can be a powerful tool for building long-term wealth, but they demand careful consideration and ongoing attention.
