Best Way To Invest $10,000 In Australia (2024)

To invest is to take a risk. It’s unwise to invest if you have an immediate or alternative need for the money. To take stock of your financial position, ask yourself:

• Is there an important purchase or expense on the horizon, like a new car or braces for one of your kids?
• Do you have any high interest debts, like a credit card, that you’d be better off paying down first?
• Do you have enough emergency savings squared away to cover living expenses for a few months in case you lose your job, or are unable to work?

If investing still makes sense despite the risks, here are four key factors to get your head around:

1. Your goal and the timeframe you’re prepared to invest for in order to reach your goal.
2. The level of risk you can live with to chase potential returns. Higher returns tend to be coupled with higher risk.
3. The type, variety and liquidity of assets you’ll invest in, to reduce risk and ensure you can convert assets to cash when needed.
4. The cost of your investment approach, and the extent to which costs will cut into your earnings.

Accepted wisdom is that investing over the long-term gives you more scope to invest in riskier ‘growth’ assets like stocks—because you’re not as affected by short-term ups and downs in share prices.

Diversification is another core tenet of investing. Spreading your capital across different asset types reduces the risk you’ll lose it all if one part of the market performs badly.

Winner of the Financial Advice Association Australia’s Advisor of the Year award in 2023, and founder of financial planning firm Burcheart, Sacha Burchgart says everyone’s goals and financial situation are different.

“It’s best to understand what you want to achieve personally and work towards that,” she says.

Burchgart says seeking professional financial advice can be invaluable if you’re not confident about investing $10K.

“The cost of advice can be outweighed by the potential gains from a well-planned investment strategy.

“Keep in mind, a financial planner aims to understand you so they can not only grow your $10K but also provide tips on achieving your long-term financial goals.”

To illustrate investing fundamentals, here are three common options for investing $10K:

1. Add it to your superannuation

Superannuation is an effective long-term wealth accumulation strategy. With an industry super fund, your contributions are invested on your behalf by a professional fund manager based on the preferences you’ve selected. For example, a typical ‘balanced’ portfolio managed by a super fund might include a mix of shares, property, fixed interest and cash.

“It’s a disciplined approach that can provide a significant income during retirement, along with substantial tax benefits both now and in the future,” according to Burchgart.

“However, it’s crucial to remember that access to these funds is typically restricted until retirement age or upon meeting a condition of release.”

Non-concessional super contributions are tax-free up to a $110,000 cap. The preservation age for accessing super is between 55 to 60 years old—depending on when you were born.

Related: Guide To Making Super Contributions In Australia

2. Save for a house deposit

Holding and safely growing your $10,000 may be your objective if you’re saving for a home loan deposit or another major expense like starting a family. For shorter time frames, investing in defensive assets helps protect your capital—while making gains reliably.

Examples of defensive investments include:

• High interest savings accounts
• Term deposits
• Australian Government bonds
• Cash-based exchange-traded funds (ETFs)

A downside of term deposit and bonds is the requirement to commit your cash for a set period, meaning you can’t access it quickly if needed.

Burchgart warns that while ‘safer’ investments like term deposits or government bonds offer lower risk and a guaranteed return, they often yield lower returns compared to other investment options.

“In a low-interest-rate environment, the returns from these investments may not keep pace with inflation, potentially reducing the real value of your $10K over the short to medium term,” Burchgart says.

“Understanding the cyclical nature of investments and the importance of time in the market is crucial when planning your investments.”

3. Create an investment portfolio

Building your own portfolio of investments, outside of your super, gives you more control and the ability to cash out your assets when it suits you.

Burchgart says it can also be an effective strategy for adding an income stream. Keep in mind, income from your portfolio, such as interest and dividends, contributes to your marginal tax rate and selling any assets will trigger a reportable capital event (capital gain or capital loss).

“With $10,000, you can aim for a diversified portfolio across different asset classes to achieve diversification. These could include a mix of equities, bonds, and cash equivalents,” Burchgart says.

“Exchange-Traded Funds (ETFs) or managed funds in my opinion would be the best place to start, as they provide an effective way to achieve diversification as they spread investments across a broad range of assets.”

Read our list of the best ETFs for Australians in 2024, or learn more about popular bond ETFs.

Non-conventional asset classes are often called alternative investments. This can include private equity, peer-to-peer lending, real estate, derivatives, commodities like gold and silver, cryptocurrency and collectibles.

“When considering alternative assets, it’s crucial to understand that these can be volatile and high-risk investments,” Burchgart says.

Also, be sure to ignore the hype and improve your understanding before you invest.

“It’s important to conduct thorough research, understand the market dynamics, and consider how these fit within your overall investment strategy and risk tolerance.”