Investing is essential to enjoy a comfortable financial future. But only a few of us know where to invest our hard-earned money to meet our short and long-term financial goals.
This blog is a go-to guide for all planning to begin their investment journey.
Explore various investment options and the return you might get with each one. This knowledge will help you with the right investment decision to meet your financial goals.
The most popular investment option is buying shares. If you still need an online trading account, we recommend the best broker for Australia and worldwide, eToro - You can create an eToro trading account HERE.
1. Types Of Investments And Returns
There are two types of investments, growth and defensive investments:
A great option to diversify your portfolio
Used to meet short-term financial goals (around two years)
They provide a steady source of income and protect the invested capital
|Defensive Investments||Examples||Level of Risks, ROI, and Investing Period|
|Cash||Bank accounts, term deposits, and high-interest savings accounts||3% per year over the last 10 years; very low risk; short term, 0–3 years.|
|Fixed interest||Government bonds, debentures corporate bonds, and capital notes.||An average return of 3-4% per year over the last 10 years; low risk; short term, 1–3 years.|
High-risk investments but offer relatively high potential returns.
Ideal for meeting long-term financial needs (5+ years)
Good for growing capital and providing income in the form of dividends with shares and rental income in case of property investments
|Growth Investments||Examples||Level of Risks, ROI, and Investing Period|
|Property||Investment in housing and commercial property to grow your capital from appreciation in property value and rental income.||6.3% per year return over the last 10 years; Carries medium to high risk; long-term horizon for at least 5 years.|
|Shares||Investing in shares of a company. Earn via dividends and the share price increase.||An average of 6.5% return per year on Australian Shares; high risk; the long-term horizon of at least 5 years.|
2. What Are The Best Investments For Beginners?
It is good to start investing early because the sooner you start, the greater your returns may be over your life term.
Here are the ten best investments for young Australians new to investing:
|Type Of Investment||Min. Investment Amount|
|Cryptocurrency (Popular trading platform: eToro - Our Recommendation). Others: Swyftx, Coinjar, Digital Surge, CoinSport)||You can buy a fraction of cryptocurrency units whose size and price differ based on the currency and the brokerage house you use.|
|Managed/index funds||Each managed/index funds have its minimum investment requirements, that range between $1000 and $5000.|
|ETFs||As they are bought like shares, the minimum parcels of ETF is at least $500.|
|Equities||There is no minimum price for shares. You can buy them from 1 cent to $1000.|
|Property||Most lenders prefer a minimum deposit of 20% of the property’s value. However, you can still apply for a home loan with a lower deposit.|
|Savings accounts||Savings accounts don’t require a minimum balance. A few may need a $1 deposit as an account activation fee. Some may require making regular minimum deposits monthly to have a higher ROI.|
|Term deposits||A minimum term deposit is $5,000, though some providers allow deposits as low as $1,000.|
|P2P lending||It depends on the business that facilitates the loan. In the case of the Plenti Lending Platform, it is $10.|
|Superannuation||If you are employed, then a certain percentage of your salary gets automatically deposited into your superannuation.|
|Gold||Gold bullion depositories like Perth Mint or ABC Bullion offer saving plans that require investing as little as $50 each month in gold or silver.|
3. What Is A Good Return On Investment In Australia?
Return on investment or ROI = (Ending value of investment – Initial value of investment) / Initial value of an investment
A good ROI depends on various factors, one of them being your financial needs. It enables a person's initial and ongoing investments to grow enough to pay for upcoming expenditures.
There is no specific good ROI, as everyone's financial needs and goals differ. A young Aussie may look for high-risk and high-rewarding investment options to get a high ROI. Retired people might seek low-risk instruments that generate adequate recurring income to help them live a comfortable retirement.
The investment you choose determines the rate of return to a large extent. The riskier an investment is, the higher the potential ROI. As Government bonds involve low risks, they usually give mediocre returns. On the other hand, small-cap stocks tend to be risky and offer high returns to their investors.
4. What Is A Good Monthly Return On Investment?
A decent return rate is around 0.6% monthly or 7% yearly.
High returns savings instruments, term deposits, and govt-issued fixed interest investments like bonds are less risky investments and provide an average monthly return. However, the return rate varies on assets.
5. How To Figure Out What Is The Most Profitable Investment In Australia?
You first research your investment options to make the most profit with your savings.
Here are a few more things you need to do before you invest:
Make an investment goal.
How much do you want to invest?
For how long do you need to invest to receive the expected return?
Learn about how the investment works, what type of return it generates (capital gain or income), how it generates a return, etc.
The risks associated with the investment
The charges incurred to buy, hold and sell the investment.
The tax and legal inferences of the investment
Thoroughly read the product disclosure statement.
6. Which Investments Give The Highest Returns?
You can consider any of the four different high-return investments in Australia:
The performance of these assets can vary considerably over time, with the one with a greater level of risk generally performing better over the long term compared to those with a lower risk level.
For example, equities are vulnerable to sudden price fluctuations resulting in unpredicted investment losses or gains. As per the Vanguard Index Report, Australian shares give an average gross return of 9.8% per annum over 30 years to June 2022.
According to the Vanguard Index Report, Australian listed properties gave an average gross return of 9.3%per annum over 30 years to June 2022.
Fixed-income assets like government and corporate bonds provide a stable and reliable return. As per the Vanguard Index report, Australian bonds gave 6% annual gross returns over 30 years.
Though the returns can be low, including this 'defensive' asset as part of your investment portfolio can help you to counterbalance any losses incurred in the stock market.
Savings accounts and term deposits are highly liquid asset classes converting quickly to cash but offer the lowest returns. As per the Vanguard Index Report, savings accounts have given 4.4% gross annual returns per annum for over 30 years.
However, a high-yield and safe investment option in this asset class is a High Yield Savings account that gives a 2% or more interest rate than a regular savings account.
7. What Is The Safest Investment With The Highest Return?
Following are the good investment options for people who are reluctant to take risks but expect to earn high returns on their investments.
Money Market Accounts
Certificates of Deposit
Treasury Inflation-Protected Securities
S&P 500 Index Fund/ETF
8. What Is The Best Way To Invest $10k In Australia?
Do you have 10K in your bank account and looking for ways to grow it into something much bigger? With inflation, $10K may not seem like a lot of money. Still, you can try some investment options to generate decent returns on your savings:
Invest in High Yielding Savings Account or Certificate of Deposits
Invest in Mutual funds
Invest in Series I Savings Bonds
Begin a home-based business that requires very little upfront capital. By doing this, you can build a steady source of income for the remainder of your life.
Blogging is another way that can help you make additional money. The best part is that it doesn't require much capital. Start a blog on careers, finance, investments, real estate, technology, or anything that you like and know. By making sincere and consistent efforts, you can create a passive income for your life.
9. Where Should I Invest 100k In Australia?
You might consider the following four investment opportunities, which are the best way to invest 100k in Australia:
Cryptocurrencies like Bitcoins
Buy growth and dividend stocks
10. What Is The Best Way To Invest 250k In Australia In 2022?
With an investment capital of 250K, you have several options. Some of the best asset classes include:
Invest in long-term Crypto Projects to earn passive income
Invest in stocks that have a history of consistently paying and increasing dividends
Invest in high-growth companies
Create a diversified Real Estate Portfolio
Invest in Index Funds
Invest in a Tax-Efficient Retirement Account like 401 (k)s and IRAs (excellent investment to grow your savings and solidify your financial position.
IPOs – Invest in the Initial Public Offer of a Company before it gets listed on a Stock Exchange.
Buy a Non-Fungible Token and Sell it On Open Marketplaces at higher-price
11. What Is The Best Way To Invest 500k In Australia?
Investment capital of 500K virtually opens the door to various investment options in Australia. However, the best depends on your financial goals and the timeframe you expect to remain invested in making a return.
Some of our top picks that can help you generate passive income are real estate, Exchange Traded Funds, mutual funds, stocks, small businesses, and gold investments.
You may also consider diversifying your portfolio with a mix of the following:
Bonds: For example, a mix of treasury bonds, municipal bonds, and corporate bonds). Generates an average 10-year bond yield: of 6 to 6.5%
Real estate: For example, crowd-funded real estate, commercial real estate, rental properties, and real estate investment trusts (REIT). Generates an Avg. annual return of 9 to 18 per cent
Index funds: Generates an average annual return of 8% to 10%
Peer-to-peer lending investments: Little risker, but returns are substantial. Based on your risk tolerance, you can generate a fixed income from your savings. The investment return depends on the borrower's income, credit score, and other factors.
Stocks: The average annual return for stocks has been 10.1% if you choose quality stocks with promising growth potential for the next ten years.
Small businesses: Generates an average annual return of 10% to 25%
12. Where Can I Put My Money To Earn The Most Interest?
Do you want to know the best place to invest money right now? Here is a list of safe investments with high returns in Australia that you can consider for your long-term and short-term goals.
Open your new savings account and invest your savings in it for a certain period. Some banks offer bonuses to new customers that can boost your savings balance quickly.
Certificate of Deposits
Invest in CDs for 1-year or more to get higher interest than a conventional savings account. Throughout the CD term, you will earn a constant rate of interest that is beneficial if the interest rate reduces during the tenure.
High-Interest Savings Account
Switch your existing bank account to a high-interest savings account in an online bank to increase your annual earnings. As these banks eliminate the need for brick-and-mortar branches and the associated costs, you can enjoy higher interest rates.
Rewards Checking Account
Banks and credit unions offer a rewarding checking account with a higher interest rate when you meet the requirements.
If you are comfortable parking your money for a longer time, then government bonds are a good option for investment. Backed by government assurance, it is a safer investment instrument that can considerably improve the yield on your savings.
You can choose from any of the above options based on your investment horizon and risk tolerance to maximize your savings.
13. How Do You Get A 10% Return On Investment?
Below are some excellent methods that can offer a guaranteed 10% return on investment:
Pay off high-interest debt.
Do Swing Trading (Invest in stocks for a short period, such as 2-3 months)
Invest in Real Estate (Your rentals can provide a 10% return on investment.)
Make long-term investments in quality stocks in the form of a SIP (Systematic Investment Plan). Create a well-diversified investment portfolio that suits your financial position and risk tolerance ability, and make monthly contributions.
Invest in cryptocurrencies like Bitcoin, which may be a clever method to get the highest ROI.
Invest in a Closed-End Mutual Fund listed on a stock market for trading. These funds combine assets in a portfolio and sell stock to people via an IPO.
Invest a modest part of your investment portfolio in valuable metals like Gold and Silver to hedge against inflation and earn a high rate of return. Approx. 10% return on your capital over time.
14. Is 20% A Good Investment Return?
Yes, a 20% return is undoubtedly a significant return these days.
15. Where Can I get a 20% Return?
You can achieve it within a year or less by investing in volatile investments like stocks. However, suppose you have a long enough timeline. In that case, you can earn a 20% return in a relatively safer way, including buying real estate with no loan.
Considering the average appreciation in the value of your investment property, you can get a 15-17% return on it.
16. Is 30% a Good Return on Investment?
Yes. A return of 30% is excellent and also realizable. You can consistently earn 30% ROI on your investments by investing in high-growth stocks rather than lower-return assets.
Invest in monopoly and sector-leader stocks that have the potential to generate multi-bagger returns or shares that can be more advantageous after any government or economic policy.
Additionally, you can invest in real estate for its property appreciation and tax benefits. When reinvesting your cash flow, you could generate a 30% return on your investment.
17. Can I Live off The Interest of $100000?
To answer this question, you need to assess your financial needs.
Start by calculating your living costs and other expenses like medical, child education and marriage, travel and entertainment, housing, and retirement planning. You can compare it with your existing savings and income to determine how much you need to live a comfortable life ahead.
Once you know your monthly or yearly income goal, you can precisely estimate whether your existing wealth can sustain this for a prolonged period.
Based on the above calculation, you can determine whether the interest income received by investing $100,000 is adequate to sustain your living. You can amplify your returns by researching, finding high-return investment options, and creating a well-diversified portfolio.
With multiple investment options, from safe lower-return assets to risky higher-return ones, investing can be a great way to build your wealth over time.
To get good returns, you don't have to have a large sum of money but a good knowledge of the basic concepts in finance and investment. Further, a well-defined investment goal and strategy, including understanding the investment features and their pros and cons, is an advantage.
Besides your research, gaining insights and suggestions from investment experts and using financial tools can help you maximize your savings.
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