Congratulations! You’ve just put away some hard-earned cash, and now you’re tossing up between spending big or putting your money to work. No doubt you’ve been tempted by those new shoes or that ritzy restaurant down the road, but before you decide what to buy, ask yourself the wiser question: how can I best invest my money?
When you get to a nice number, say $10,000 you might ask yourself: Do I have enough? What are my options? How much time do I need to see some returns?
Before you even answer those questions, give yourself a pat on the back; because the fact that you’re asking them means that you have already started on the journey towards building your wealth. Now, let’s look at those questions!
Is $10,000 a good amount to invest?
If you want to build your wealth, you have to start somewhere. Whether you have just a few hundred dollars or $10,000, you can start investing. Thanks to some bright minds in fintech space, the financial and logistical hurdles to investing are lower than ever before.
By taking advantage of effortless investment platforms like Stockspot’s automated investing accounts, and by using low-cost investment products like exchange traded funds (ETFs), you can easily and economically invest $10,000 right away.
But no matter how much you’re investing, make sure you have a buffer in case of hard times. Anything can happen tomorrow. You might need a reserve of cash to keep you going for at least six months if you fall ill, get injured, or lose your job.
“If you want to build your wealth, you have to start somewhere. Whether you have just a few hundred dollars or $10,000, you can start investing.
What investments can I make with $10,000?
You now know that $10,000 is a great amount to invest – but what should you invest in?
There is an enormous variety of financial investments you could consider. We call these financial investments asset classes. Asset classes are groups of investments that are similar. For example, they could be mining companies, or technology companies, or gold, shares, or banks.
They all have different levels of risk and return. They all behave distinctly in varying economic conditions. What is common amongst good investments is that, in the long run, they are likely to give you reliable returns on (and protection to) your initial investment.
That means you can rule out anything that isn’t likely to bring you a good return over the long-term; things like meme stocks or social media ponzi schemes. However intoxicating these things can be, they are not good investments, but rather speculative bets.
The asset classes that fit the definition of a good investment are shares, bonds, property, or term deposits. Other asset classes like commodities and currencies can be bought and sold for a profit. You might risk losing your initial investment (because of wild swings in their value). And be left without a reward (like dividends or distributions).
What is the best way to invest $10k in Australia?
If you’re thinking about investing in Australia, your friends and family will have almost certainly advised you to invest in property.
Property in Australia has a solid track record of growth in value (or capital gain). But before you sign the dotted line, you should think about the risks and downsides to property.
Firstly, and this is no secret, property in Australia is expensive. House deposits and other entry costs are high. There is a chance you won’t even be able to access an average priced home with your $10,000 of savings. And that’s before you have to pay the many taxes and costs associated with purchasing a property). If you’re not able to rent out your property, then you won’t be able to enjoy your returns for many years. Finally, when you buy a home, you won’t enjoy the protection of diversification.
Unlike a property, when you invest in shares you become a part-owner in a real business that can grow its revenue, profits, and capital. You don’t need huge sums of money to start investing in the stock market, and products like index-tracking ETFs offer a low-cost way to diversify your portfolio.
How can I invest $10k for a quick return?
No matter what hot tips your friends give you, and no matter what investing fads the newspapers are chattering about, do not get caught up in the hype about quick returns.
Building your wealth can’t be done overnight. Depending on your risk profile (which we can help you understand based on a few quick questions), you should aim to stay invested for at least three to seven years before you consider selling.
Because whether it’s property, shares, bonds or cash, you’re going to need time. Time to keep investing, time to reap the dividends, time to weather the storms, and time to see the value of your asset grow.