10 Top Investments
For Young Australians
Your 20s and 30s can be one of the funnest periods of your life. You’ve graduated high school and university, you’ve got your first professional job and are earning money, and you have the independence to do what you want, when you want.
With that said, most people in their 20s and 30s don’t yet have a mortgage, a spouse or children to care for and during these younger years. At this point in their lives when they don’t have to worry too much about responsibilities, it’s important to lay the groundwork for a successful and financially stable future.
There are a number of ways to do this but financial discipline and well-educated investment ideas for young Australians are some of the best ways to get ahead early. Investing at an early age can be one of the smartest life decisions you make – and you can still have fun while you do it.
One of the most popular investment opportunities for young Australians is trading on the foreign exchange market, the largest and most liquid financial market. This is where all the world’s currencies are traded on a decentralised market. This is one unique aspect of forex trading because it means that all currency trading is conducted electronically with transactions taking place via computer networks between traders.
To put it simply, forex trading involves exchanging your currency for a foreign one then selling it for a profit. Forex traders grow their profits by purchasing a currency at a low point, monitoring it and eventually selling it when its price has increased. All trades in the forex market essentially involve betting on the value of one currency against another.
The forex market runs 24 hours day, five and a half days a week. This means as a trader you can go online and trade whenever you want, wherever you want. However, it is important to understand how the market works and the processes involved when it comes to trading. One of the best ways to understand the intricacies of Forex trading is to take a course run by professional coaches.Learn to Trade can get you on the right track with a free Forex training workshop.
Cryptocurrencies have been one of the most talked about topics in the media over the past year. Only a few years ago, the cryptocurrency realm was almost exclusively dominated b y Bitcoin but with the crypto explosion towards the end of 2016 and the beginning of 2017, there have been countless other altcoins developed.
Some of the best investments for young Australians, in regards to cryptocurrencies, are lower cost coins like Ethereum and Ripple, which are both poised to be a major player in the future of currency. But keep in mind that investing in these coins will also see major price fluctuations, so don’t be too hasty when selling and buying, you’ll need to sit and watch the price movements more than anything.
Finally, as cryptocurrencies are treated like almost any other currency, you can invest in them on most forex websites.
Although Bitcoin is still the most well know coin, there are still a number of other coins to build your investment portfolio with. A few of the current leading coins are:
3. P2P Lending
P2P lending, or peer to peer lending, is an investment that works by matching investors and borrowers without the middleman of a financial institution. Instead the lending is done on an online lending platform. The easiest way to describe P2P lending is that you’re acting as a bank for a customer. You loan a portion of your savings and you earn interest on that loan.
This allows the investor to decide how much they are willing to lend and also means that in some cases you can choose who to lend to, to mitigate issues that come from high risk borrowers. Often times you will also be able to select the loan term that works out best for you, depending on when you need your investment back, though typically the lending platform will decide the loan term.
When you’ve loaned your investment amount, the platform you’ve chosen will typically relay the repayments to you at intervals determined by you. Another option is having no repayments and a lump sum to be transferred at the end of the loan period, with the interest included.
If you’re concerned about the risk of borrowers not being able to repay the amount, then you’ll need to check with the platform you’re choosing and their requirements for borrowers. Typically the platform won’t allow too high risk borrowers, although those that do will feature higher interest rates to counteract some of the risks.
4. Niche Investments
Investments in niche technologies and startup companies can generate great short and long-term returns for investors as they are volatile and can grow quickly. Though, if you choose a diverse group of niche investment opportunities you can reduce the risk of losses being too damaging in the event one of your investments failing as the other investments will prop it up.
Niche exchange-traded funds, when used properly, will help add much-needed diversity to an investment portfolio as they are far more diverse than the stock of a single company. Grouping together the stocks of a few different innovative and disruptive companies will greatly add to the growth of your portfolio, though young investors should make sure that these niche EFTs don’t take up a large chunk of their investments.
If you’re interested in niche investing, be sure to bundle up a number of niche stocks, or speak with broker firms who may have already packaged niche company stocks into a group for you. This is a great way to implement a diversification strategy to your existing investment portfolio.
This investment choice is typically a little more difficult for young Australians as the housing market is hard to break into and not as affordable as many overseas markets. However, for those who have exerted great financial discipline and save enough money, investing in property can be a viable option.
As Australia’s property market is in an ever-so-slight downturn, it’s the perfect time for young Australian investors to try and get into the market. Make sure you consult with professionals, do your research and shop around relentlessly for a competitive loan, as all of these things will help you get the best returns on your investment.
One of your first steps will need to be making a checklist of all the requirements you’ll need for your investment in order for it to be successful. This checklist can contain things like the local markets growth prospects, the future sale value of the home, what needs to be done to the home in order for it to increase in value and more. You should speak with professional consultants for this stage too, to make sure that you’re getting the best chance of success.
Finding a competitive loan in Australia for a home shouldn’t be too difficult as the market is heavily saturated and filled with great deals and interest rates, so make sure to shop around for low-interest rates and low fees.
A number of locations across Australia are still experiencing major growth in the housing market and offer great investments for young Australians who want to step into the housing market for to add to their investment portfolio.
In order to ensure you’re making a good financial decision, you should consult with a few different professionals, like:
– Property manager
– Mortgage broker
– Buyer’s agent
– Financial planner
These professionals will ensure that your new home is in a high growth area, and is also within your borrowing capacity, and is therefore unlikely to too badly disrupt your daily life when it comes to bills and repayments.
6. Investing in Commodities
Commodity investments for young Australians are a great way to build wealth in the long term, especially if you do your research and can find an up and coming superstar commodity. In short, commodities are usually raw materials or agricultural products and their values revolve around supply and demand, typically on a global scale.
There a number of exchanges around the world you can use to invest in commodities, like the London Metal Exchange and the ASX.
There are four major commodity groups that you can choose to invest in, and these are:
Metals – gold, platinum, copper or silver
Energy – gas, crude oil and gasoline
Livestock – feeder cattle, live cattle, pork bellies, etc
Agricultural – sugar, rice, corn, cocoa and more
Usually, metals have been seen as a reliable and offer great returns during peak development times and when country’s link to share their resources, like Australia and China have done. Precious metals like gold are also great investment opportunities for young Australians as they protect against inflation.
Some commodity types are emerging as the world moves towards different technologies for everyday life. Chemical elements like lithium and cobalt are expected to balloon in price in the future as electric cars become the new norm, and companies like Transparency Market Research are predicting growth in the lithium market to exceed $77 billion by 2024.
Iron, nickel, silver, copper and lead are all poised to be major performers in the future and will also make great long-term investment commodities.
Another great investment opportunity for young Australian investors are corporate and government bonds. A bond is simply a loan that is given by investors to a company, and in return, the company or government body will provide the investors with interest on the loan, called the coupon rate. At the end of the loan period, called the maturity date, the bond will be returned to the investors.
Government and corporate bonds are typically utilised so that a party can raise funds for a venture, and they don’t wish to get a bank loan. Typically bonds are fairly stable investments and exist for fairly long periods, 7 to 10 years and offer the full amount of the loan and the interest back to the investor at the maturity date.
These investments stand out as good options for young people as there is a lower chance of defaulting on the company’s part, and younger investors have more time to build up their portfolios, so a decade-long investment isn’t going to waste too much time.
8. Repaying Credit Debt
This investment isn’t a typical one but can still save hundreds or even thousands of dollars. The moment you pay off your credit card debts your interest and required repayments disappear and you’re left with 0% owing. From a typical credit card, this is a 12% return on your investment, far higher than anything you’ll typically find on the stock market.
So if you do find yourself with some spare income, definitely take the initiative to use it to remove your credit card debts. The faster you pay them off, the less money you’ll lose to interest, and the more you can put towards investing in something that will grow in the long term, like compounding savings accounts or the stock market.
Those who are struggling to pay off their credit card debts will find it’s hindering future investments, so your best option is to simply sit down and take some time to devise a plan and re-budget your lifestyle with a prime focus around getting rid of your high-interest credit card debts. Once you have developed a plan, it should become far easier and more efficient to remove it and look towards investing in better things with long-term returns.
9. Investing in Stocks
This is where being a young investor comes in the handiest. Investing in stocks is a great idea for almost anybody but as a young Australian investor you’ll have far more time to let your investments grow into something huge. Your first investment doesn’t have to be very large either, you can start off with just a few hundred dollars and each week or month add $100 to your initial investment. This way you won’t be investing more than you can afford to lose and your growth potential will be huge over a few years.
As an example, if your initial investment was just $100 and from then you invested an additional $100 each month in a stock or commodity with an 8% return you could be looking at over $104,000 by the time you’re 45, and that’s at the low end. Investing $250 to $300 a month, if you can afford it, is going to offer returns that are hard to find anywhere else.
To prepare for your investment in stocks though, there are a few things you need to do to make sure you give yourself the best chance at being successful as possible.
If you’ve chosen to invest in stocks, your first step is to make sure you can afford the investments. Set aside money for emergencies, make sure you have enough income to cover all living costs and then begin investing your leftover income into the stock market. Don’t throw down everything you have, because it’s a recipe for disaster if the market falls.
Growth doesn’t happen overnight
You’ll also need to get into a realistic and patient mindset. Good things come to those who wait, and this is especially true within the stock market. In order to see major returns, you’ll need to be ready to wait around 5 to 7 years. So don’t get put off or unmotivated if you don’t see big gains in a few months.
Do You Research
Finally, an investment won’t be that great if you don’t do much research beforehand. Choosing a perfect stock takes time and a lot of research but a good place to start is looking at your favourite brands and up and coming killer businesses. Think Apple, Nike and Microsoft as well as Snapchat and Spotify as your most stable options.
10. Compound Savings Accounts
This opportunity is possibly one of the best investments for young Australians. You have more time than anybody else and it’s a simple way to grow your wealth by not really doing anything at all.
Opening a compound interest bank account will mean that the amount in the account will continue to grow larger and larger with each coming year without you needing to do anything particularly difficult at all.
If you choose to invest $300 every month from when you turn 20 and continue doing so until you’re 60, you’ll have over $1 million if your account added just 8% in interest in the time. If you’re 30 and do the same, you’ll be looking at $440,000 in the bank by the time you’re 60, so by starting 10 years later, you’ve lost more than $550,000. So it’s best to start as early as you can.
Compound savings accounts are one of your best options for creating a financially stable future for yourself. But remember it takes commitment and motivation, and if you don’t stick to it, or start early, it’s money and time lost you’ll never be able to get back.