Are there investment ideas in Australia that are proven to work? The answer is yes.
Investing means consciously putting your money to work. If done well, you’ll enjoy bountiful returns. However, you could also lose your entire capital if the investment option you chose is a high-risk one.
Understanding the possibility of risks and returns on your investments enables you to consciously do your due diligence before deciding where to put your money.
There are many investment ideas you can consider, but this article has examined ten of them to give you insights and help you make a better decision.
Why Should You Invest?
Investing can play a crucial role in helping you achieve your financial goals and build wealth over time. With a solid investment plan, you can create multiple reliable sources of income, meet your retirement plans, and gain solid financial security.
Also, with the way inflation erodes the purchasing power of money, investing is a great way to preserve and grow your wealth. The ultimate goal of most investors is to attain financial independence and ensure their future, even after retirement, is secured.
While investing has a lot of financial benefits, you must also understand it comes with a certain amount of risk. You should also understand your risk tolerance level and do your due diligence on every investment before committing your resources.
10 Best Investment Ideas You Should Consider
Here are ten great investment ideas you should consider, as they’ve proven to work over time:
1. Short-Term Certificates of Deposit
If you have short-term financial goals and need to preserve capital, a certificate of deposit (CD) with a maturity date that aligns with your goal may be a suitable option.
Certificates of deposits are among the safest and most stable forms of investment, especially when issued by FCS-insured banks. Most CDs offer a fixed interest rate for a specified term, making the potential returns quite predictable.
While CDs don’t offer the high returns obtainable in other investment options like stocks and real estate, they’ve proven to be good investment options for conservative and short-term investors.
2. High-Yield Savings Accounts
Keeping your money in a high-yield savings account promises some good returns, as most offer as much as 5-7% interest on your savings. They’re also considered safe investments that have worked for many due to their low risks.
Savings in traditional savings accounts are prone to loss of value due to inflation. That’s why high-yield savings accounts are suitable for investors looking to keep their money safe for a short while, as they offer high-interest rates to cover inflation.
High-yield savings accounts work for risk-averse investors who are comfortable with a little return as opposed to huge returns with high risk on the capital. They’re also ideal investment options for people who need access to their cash in the near future.
3. Exchange Traded Funds (ETFs)
ETFs are viable options if you’re looking to build a diversified but low-cost investment portfolio. Like mutual funds, an ETF is a pooled investment security with multiple underlying assets. It’s one of the best investment ideas you can think of in Australia.
Therefore, they lower your risk exposure and ensure profitable returns, as the failure of an individual asset doesn’t affect others in the portfolio.
Some Australian ETFs pay as much as 6% interest, making them good investment options for risk-averse investors.
4. Dividend Stocks
Over time, dividend stocks have proven to be the best stock investment option for investors looking to earn regular income while potentially benefiting from the long-term appreciation of their capital.
Investments in individual stocks, whether they pay dividends or not, carry the major risks among all stock investment options. However, if you do your due diligence and put your funds in companies with a reputable history of paying incremental dividends over a long-term period, you will surely get good returns.
According to the Market Index, the Australian share market has returned an average of 13.2% annually since 1900. While this shows how viable the market is, you still need to do extensive research to ensure you’re putting your funds in the right stocks.
5. Bonds
Bonds are low-risk investments that provide fixed-interest payments. They’re favorite assets for most smart investors, as they add stability to their diversified portfolios.
Common types of bonds you can invest in are government, municipal, and corporate bonds.
Government bonds are considered the safest as they have no default risk. However, due to the low interest rates they offer, their returns can be reduced by inflation.
6. Real Estate
Real estate is one of the most popular and profitable investment options for people seeking high returns on their money.
Population growth and migration are the major reasons real estate investments are almost always profitable. For example, Australia’s population has increased by more than 30% in the last two decades, with over 3 million people being permanent immigrants.
You can own residential or commercial properties and receive rentals, or buy and flip for higher returns. Alternatively, you can buy real estate investment trusts (REITs) through major stock exchanges and earn good interest returns.
7. Mutual Funds
Mutual funds are similar to ETFs, pooled funds invested in a diversified portfolio. Most mutual funds’ portfolios contain stocks, bonds, cash, money market funds, and other investments.
Investments in mutual funds are great for investors who don’t want to take high risks by investing in individual stocks and high-yield bonds. With a well-diversified mutual fund portfolio, the risks involved become greatly reduced. This is possible because a failure in one asset doesn’t affect the rest.
8. Index Funds
Like mutual funds and ETFs, index funds are another type of stock investment that spreads your funds across multiple financial assets. They aim to replicate the performance of a specific market index, such as the S&P 500 in the United States or the S&P/ASX 200 in Australia.
The S&P/ASX 200 is a collection of the 200 biggest companies in the Australian securities exchange market. Investing in S&P/ASX is like betting on the future of Australia. This is because the performance of these companies determines, to a great extent, the country’s economy.
Index funds are known for their low fees, as they’re not actively managed like mutual funds. This enables them to provide slightly higher returns than mutual funds.
9. Precious Metals
Gold, silver, platinum, and other precious metals are safe-haven assets. They’ve proven to retain or gain value during market downturns, making them great for preserving wealth.
If you’re new to investing and are looking for a low-risk investment option with a high return and a high level of liquidity, then precious metals are a good shot. You can invest in physical precious metals or their ETFs, which are sold on stock exchanges.
According to Statista, the average annual return on gold from 1971 to 2022 is 7.78%. In 2020, when most economic activities were halted, and stock prices fell to over 12%, gold had a return of 25%. That goes to show how valuable investing in gold (and other precious metals) can be during economic downturns.
10. Commodities
Investments in commodities are also viable options for growing wealth. According to Statista, the average return on commodities from 1971 to 2022 is 8.3%, which is higher than the return on gold.
However, commodity returns are highly volatile and only suitable when you’ve done extensive research. You must be ready to tolerate a higher risk level than that of stocks.
Conclusion
You can adopt many wonderful investment ideas to grow your wealth and attain the desired level of financial independence. This might mean taking high-risk investments like stocks, real estate, and commodities or going safe with low-risk investments like precious metals, mutual funds, bonds, and certificates of deposit.
Hopefully, this article has given you insights on where you can put your funds for profitable returns.
