There are many proven strategies you could use to invest $10,000 over time, and once you learn how to let it work for you, the possibilities are endless.
But before that $10,000 burns a hole in your pocket, think about your goals and timeframe. Knowing your situation will help you to make more informed decisions when it comes to deciding where to invest.
For instance, obsessing over your investments isn’t healthy so considering the amount of risk you’re comfortable taking on, is important. If you’re a worrier, less-risky investments may help you sleep better at night.
Likewise, if you’re going to need the money in the short-term, you may want to avoid putting it somewhere that's too risky. Riskier investments tend to have more ups and downs so you need time on your side to ride them out.
Long and short-term investment vehicles such as super and Exchange Traded Funds (ETFs), may provide good options to invest your $10,000 depending on your situation.
While the thought of locking your cash away until retirement may sound like a ridiculous idea, it could be well worth it - and potentially one of the best ways to invest $10,000.
Securing your money in long-term investments like super, is a great way to build wealth. This is mainly due to the power of compounding interest - earning a return on a return every year.
By making extra payments into your super, in addition to what your employer is already contributing on your behalf, could benefit you significantly over the long-term.
To see how much you could earn by investing all or some of your $10,000 in super, use this calcutator.
Investing in the stock market requires a certain level of expertise and interest so if this doesn’t sound like you, you may prefer to invest via an ETF.
These give you diversity and the benefit of a portfolio professionally managed by investment experts. You also don’t need a large up-front investment.
In Australia, ETFs are passively managed investments, meaning they track an asset or market index (such as the S&P/ASX 200), and usually have lower fees than traditional managed funds.1
This sort of investment does carry some risk however. For instance, volatility in the market may affect your investment performance. If you have investments in currency, they will be affected by fluctuations in exchange rates. There’s also tax and other associated costs to consider which will affect your return.2
Investing your $10,000 in a high interest savings account, or using it to reduce your debt, may save you money over the long-term.
It may not be as exciting as going on a Caribbean cruise, but paying down your debt could be one of the best ways to invest your $10,000, and potentially a better option than investing for growth.
Debt is a drain on your income, so the sooner you get rid of it, the faster you can start growing your wealth.
For example, if you had a balance of $1,000 on your credit card with an interest rate of 14 per cent, and only made monthly payments of $50, it would take you just under 2 years to pay off your balance. You’d also be charged $145 in interest. It therefore doesn’t make much sense to just leave the debt there.
Paying off a chunk of the mortgage early, could also save you thousands of dollars in interest repayments over the life of the loan. Depending on your loan agreement however, there may be penalties enforced for paying it off too early, so it’s important to check with this your broker.
Improving the value of your existing assets, such as your home, could be another great way to invest your $10,000.
Your home may be one of your largest investments so if it’s in need of some repair, certain updates may help to improve its value.
It’s definitely worth speaking with a licensed real estate expert though before you make any decisions, as you want to be sure your renovation ideas will actually add value.
Also, be mindful of making major changes if they mean you’ll have to go outside your $10,000 budget. Sometimes small updates such as the addition of granite countertops, a fresh lick of paint, or updating your home’s kerb appeal, have the biggest pay off.
1. ASIC Money Smart: https://www.moneysmart.gov.au/investing/managed-funds/exchange-traded-funds-etfs
2. The educational guide to Australian Exchange Traded Funds (ETFs) p.7
The article was prepared by BT Financial Group, a division of Westpac Banking Corporation ABN 33 007 457 141, AFSL and Australian Credit Licence 233714, and is current as at 14 January 2019. This article provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
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