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Investing is essential for a secure financial future but has challenges and downsides. This blog serves as a beginner's investment guide, focusing on Australia's high-yield options like shares and property while shedding light on the potential risks.
 

Always seek the help of a professional financial advisor before making any investment decisions. Investing carries risk.

This blog serves only for educational purposes and doesn't substitute for any professional financial advice.

Let's get started!

1. What Is A Good Return On Investment (ROI) In Australia?

ROI, which stands for Return on Investment, is a way to determine how well an investment is doing. You calculate ROI = (Final Value of Investment – Initial Value of Investment) / Initial Value of Investment.

A good ROI depends on different things, like how much money you need. It helps your initial and ongoing investments grow enough to cover future expenses.

No specific "good" ROI fits everyone because people have different needs and goals. For example, a young person in Australia might want to take more risks with their investments to get a big ROI. But someone who's retired might prefer safer investments that give them a steady income for a comfortable retirement.

The type of investment you choose greatly determines how much you can earn. Riskier investments tend to have the potential for higher ROI.

Investments like government bonds are safer, so they usually don't make much money. On the other hand, smaller company stocks can be riskier but might offer higher returns to the people who invest in them.

2. Types Of Investments And Returns

There are two types of investments, growth and defensive investments:

Defensive Instruments

• Low-risk investments

• A great option to diversify your portfolio

• Used to meet short-term financial goals (around two years)

• They provide a steady source of income and protect the invested capital

(Past performance does not guarantee future results.)

Growth Investments

• High-risk investments but offer relatively high potential returns.

• Ideal for meeting long-term financial needs (5+ years)

• Good for growing capital and providing income in the form of dividends with shares and rental income in case of property investments

(Past performance does not guarantee future results.)

3. What Are Some Good Investment Options For Beginners?

The earlier young Australians start investing, the better their chances of achieving above-average returns later in life. Though returns are not guaranteed when investing, it may still help to build a sound financial future.
 

Now, let's look at some popular investment choices for young Australians:

4. How Can Young Investors Find The Best High Return Investment?

Evaluating and comparing different investment options based on associated risks, minimum investment requirement, investment period, annualised returns, government backing, etc., will help you make the right choice.

Here's a breakdown of the pros and cons of high-return investment options to guide your decision:

Value Stocks (Shares)

• Ideal for: When other stocks run-up in valuation, value stocks and value stock funds could be excellent options to put your investment dollars. They are worth considering if you are comfortable with the underlying volatility of the stock market. With a well-diversified portfolio of value stocks and a three to five-year investing horizon, you can ride out any down phases in the market and make good profits.

• Risks: Value stock funds or value stocks are safer than other stock funds due to their bargain price. However, being made up of stocks, they are more volatile than conservative investment options like short-term bonds. Furthermore, value stock funds do not have government backing, which makes them a little riskier than traditional savings accounts and government bonds.

• Rewards: While value stocks tend to perform better when interest rate increases, growth-based stocks become less alluring among investors. Additionally, most value stock funds pay a dividend or a bonus.

• Where to buy Stocks: The most straightforward way to purchase value stocks funds is through an online broker as either ETF or mutual fund.

Dividend Stocks

• Ideal for: Whether you are a first-time investor or a retiree, investing in dividend-paying companies with a strong track record of consistently increasing their dividends can help you generate high returns in the future. It suits older investors seeking higher stability or fixed regular income. With a dividend reinvestment plan, your long-term returns could mirror growth stocks that don't pay dividends.

• Risks: Though safer than growth or non-dividend stocks, dividend stocks also carry market risks. So, you should invest in only reputed companies with a solid history of dividend increments rather than the ones with the highest current yield. That could be a sign of upcoming trouble. Buying a dividend stock fund with a diversified range of assets can mitigate risks associated with an investment in a single company.

• Rewards: Your stock investment becomes safer with the inclusion of dividend-paying stocks. You gain through long-term market appreciation and earn cash in the short term.

• Where to buy Dividend Stocks: You can purchase dividend stocks as ETFs or mutual funds at any online broker that deals in them. Compared to mutual funds, ETFs are more beneficial as they are primarily commission-free and don't have a minimum purchase amount.

Exchange-Traded Funds (ETFs)

• Ideal for: Like index funds, ETFs are a good investment tool for investors with a long-time horizon. Unlike mutual funds, you don't need to meet the minimum investment requirements as an ETF share price may be lower than a mutual fund minimum.

• Moreover, their lower management fees compared to actively managed funds make them an attractive option for investment. If you are looking for a relatively low-cost product that exposes you to an array of stocks in a single transaction, then ETF is worth considering.

• Where to buy from: Like Index funds, you can buy ETFs directly from an online share trading platform or a broker.

Alternative Investments

• Ideal for: Alternative investment instruments like precious metals such as gold, silver, cryptocurrency, oil, etc., are suited for investors who wish to diversify away from conventional investments and hedge against inflation, uncertainty, and downturns in the bond and stock market.

• Where to buy Alternative Investments: Some online brokers allow investors to invest in specific alternative investments such as oil, private equity, and gold-focused ETFs. You can buy ETFs of a listed gold company or invest in gold futures or options contracts to gain exposure to gold using your usual brokerage account. You can also add alternate investments to your portfolio through private wealth management firms.

• Cryptocurrency is another alternate investment you can consider adding to your portfolio through ASX-listed ETFs like the BetaShares Crypto Innovators ETF (ASX: CRYP).

High-Yield Savings Accounts

• Ideal for: Savings accounts are perfect for short-term savings, emergency, or vacation funds. People new to saving and investing and seeking an option that offers more flexibility and higher interest rates can choose this option. It is a perfect investment instrument for risk-averse investors who require access to cash in the near future.

• Where To Open a Savings Account: Investment companies, online banks, and robo-advisors offer competitive rates on cash management accounts.

• Risks: As most banks are government-regulated, there are negligible chances of losing your deposits. Though high-yield savings accounts are highly safe investments, there are chances of losing purchasing power over time due to inflation.

• Rewards: Due to fewer overhead costs, you earn much higher interest rates at online banks than at traditional banks.

Certificates Of Deposit

• Ideal for: A certificate of deposit (CD) is an excellent choice for risk-averse investors who don't have immediate income requirements and will require funds at a fixed date in the future.With a CD, you can lock up your money for term lengths are one, three, and five years. Moreover, their higher payouts and safety make them a good investment tool.

• Risks: While CDs provide a safer investment choice, they entail reinvestment risk during falling interest rates. This means reinvesting the principal in new CDs with lower rates might not yield higher interest. Conversely, individuals who have already invested in a CD might not fully capitalize on the increased rates in times of rising rates. Also, inflation and taxes could substantially erode the buying power of your investment.

• Rewards: If you deposit your money in a CD, you receive interest at regular intervals and your original principal back with accrued interest on its maturity.

• Where to Buy CDs: Credit unions and online banks are the best places to find CDs in varying term lengths and account minimums.

Government Bonds

• Ideal for: These are well-suited for conservative investors who prefer less volatile investment options and may not have a long investment horizon to weather sudden/ severe market declines. The fixed income and lower volatility of government bonds make them ideal for retirees or investors nearing retirement.

• Where to Buy Government Bonds: You can buy individual bonds or bond funds from a broker, the investment bank, or the government.

Corporate Bonds

• Ideal for: Short-term corporate bonds are perfect for risk-averse investors who seek fixed-income security and a little more yield than government bonds. They are an excellent investment choice for investors seeking cash flow or those who wish to lessen their portfolio risk while earning a return.

• Risks: Due to higher yield, investors are exposed to higher risks than government bonds. Consider it only if you are comfortable taking on more risk in return. However, bonds issued by large and stable companies generally provide a lower yield. Investors should find the risk/return balance to know whether it works for them.

• Rewards: Investment-grade short-term bond funds mainly reward investors with higher returns than municipal or government bond funds. However, high returns come with added risk.

• Where to Buy Corporate Bonds: Investment brokers that allow you to trade ETFs or mutual funds also sell corporate bond funds to people.

Index Mutual Funds

• Ideal for: Index mutual funds are best suited for young investors with long timelines. Due to lower fund management fees, they are more affordable and less volatile than actively managed funds. Compared to conservative investments like bonds and traditional banking products, Index funds can offer higher returns if you allocate more of your portfolio toward higher-returning stock funds.

• Risks: As an index fund isn't government insured, you can lose money due to stock price fluctuations. However, due to being highly diversified and composed of the market's top companies, they are less riskier than stocks but more volatile than bonds. Considering the market risks, an index fund is an excellent choice for beginner investors who look for a diversified investment and can stay invested for a minimum of 3-5 years.

• Rewards: With immediate diversification, an index fund allows you to own a piece of several companies from every industry. This way, your investment becomes more resilient than other investments. With index funds investment, you can earn around 10 per cent annual interest while incurring low charges due to very low expense ratios.

• Where to buy Index Funds: You can buy Index funds directly from fund providers or a discount broker.

Real Estate

• Ideal for: Investment in real estate is perfect for investors who already have a healthy investment portfolio and wish to diversify it further. Being a highly illiquid investment, you should consider this option if you are willing to take more risks for higher returns. It may not suit investors with short-term investment horizons and may need to access it quickly.

• Risks: Publicly traded REITs fund prices fluctuate markedly. So, investors must be able to deal with the volatility and maintain a long-term focus.

• Rewards: The main reason behind the popularity of REIT index funds is that they pay out hefty dividends and grow over time. So, you earn through capital appreciation and a growing stream of dividends. A good REIT fund could make around 10 to 12% yearly returns with time.

• How To Invest in Real Estate: A common way to invest in real estate is through investment trusts or REITs. They own income-generating properties and offer consistent dividend payments

Besides, real estate crowdfunding platforms are also a popular way to invest in real estate. The platform pools investors' money and later invests in real estate projects.

You can buy certain REITs on the public stock market via an online stockbroker that enables you to trade ETFs or mutual funds, while others are only available through private markets.

Rental Housing

• Ideal for: Rental housing can be an excellent investment for long-term investors who can't deal with stock market fluctuations and wish to manage their properties and generate consistent cash flow. If you make smart property purchases, maintain them, and deal with tenants, then rental housing could work out well in the long term.

• Risks: You would prefer to avoid trading your assets in the stock market with a tap on your digital device. Also, you may require attending your property at irregular hours to deal with emergencies.

• Rewards: If you hold your property asset over time, steadily pay down debt, and increase your rents, you have higher chances to generate a robust cash flow till your retirement.

• Where to get them: You can contact a real estate broker to help you find rental housing or build a network to get better deals before hitting the real estate market.

5. How To Figure Out What Is The Most Profitable Investment In Australia?

Determining the most profitable investment in Australia involves thoroughly researching your investment options to maximise savings returns.

Before investing, consider these additional steps:

• Make an investment goal.

• How much do you want to invest? 

• For how long do you need to invest to receive the expected return?

• Learn about how the investment works, what type of return it generates (capital gain or income), how it generates a return, etc. 

• The risks associated with the investment

• The charges incurred to buy, hold and sell the investment.

• The tax and legal inferences of the investment

• Thoroughly read the product disclosure statement. 

6. What Are Considered Safe Investments With Highest Return?

The following are some investment options for people reluctant to take risks but want to earn high returns on their investments.

Remember, there is no such thing as a safe investment. Any investment can lead you to lose money. Always be careful and seek professional advice before making any decision.

• High-Yield Savings Accounts

• Money Market Accounts  

• Treasury Bonds

• Certificates of Deposit

• Treasury Inflation-Protected Securities

• Corporate Bonds

• Municipal Bonds

• S&P 500 Index Fund/ETF

• Dividend Stocks

7. How Can Beginners Invest In High-Return Investments In Australia?

Having chosen your investment, you must explore different investment methods. You can either do it on your own or seek a professional's assistance to do it for you. Deciding to handle buying and selling investments on your means you're in charge of all the choices.

But remember, this also means you'll need to know a lot about picking the right funds, spreading your investments, and keeping things on track over time.

If you Invest Directly, Consider The Following:

• Put in the time to research different investments and desired returns. 

• Determine how much money you have and whether it can meet initial investment requirements or minimum balance. 

• Set an investment timeline so that you can choose the right investment assets to fulfil your investment goals. 

• Determine your risk tolerance and spread your investment across different asset classes and assets within these classes to smooth out your investment returns.

• Figure out how much assistance you need. You can open a brokerage account or hire a low-cost automated robo-advisor service to build your investment portfolio. Some short-term investments, like savings accounts, can be opened at a bank.

• As a DIY investor, you must keep track of your fund's performance and make necessary modifications.

If You Seek Professional Assistance: Hire an experienced investment manager.

This mode of investing is beneficial, particularly when you plan to invest in a managed fund, mutual fund, exchange-traded fund (ETFs), listed investment company, etc.

They pool your money with other investors' money and then buy and sell investments on your behalf.

When you hire a professional, you get benefitted their expert skills, experience, and knowledge to make investment decisions.

However, in return, you may require paying them service fees, including entry and exit fees, management fees, and administration fees.

Hire a Financial Adviser

Consider approaching a financial adviser when you need an expert to set your financial goals, identify suitable investments, and understand your risk tolerance.

9. How Could You Get A 10% Return On Your Investment?

Below are some options that could yield a 10% return on your investment.

However, remember there is no guarantee of a 10% return. Only some options could achieve this with proper research and dedication.  Always seek independent financial advice before making any decision. Investing carries risk.
 

• Pay off high-interest debt.

• Do Swing Trading (Invest in stocks for a short period, such as 2-3 months)

• Invest in Real Estate (Your rentals could provide a 10% return on investment - no gurantee.)

• Make long-term investments in quality stocks in the form of a SIP (Systematic Investment Plan). Create a well-diversified investment portfolio that suits your financial position and risk tolerance ability, and make monthly contributions.

• Invest in cryptocurrencies like Bitcoin, which may be a potential method to get a high ROI. (Crypto assets are unregulated & highly speculative. No consumer protection. Capital at risk.)

• Invest in a Closed-End Mutual Fund listed on a stock market for trading. These funds combine assets in a portfolio and sell stock to people via an IPO. 

• Invest a modest part of your investment portfolio in valuable metals like Gold and Silver to hedge against inflation and earn a high rate of return. Approx. 10% return on your capital over time.

(Past performance does not guarantee future results.)

10. Frequntley Asked Questions (FAQs)

What Is A Good Monthly Return On Investment (ROI)?

A decent return rate is around 0.6% monthly or 7% yearly.

High returns savings instruments, term deposits, and govt-issued fixed interest investments like bonds might be less risky investments and provide an average monthly return. However, the return rate varies on assets.

Always seek independent financial advice before making any investment decisions. Investing comes with risk, and not everyone is making a return. Many people also lose money when investing.

(Past performance does not guarantee future results.)

Is 20% A Good Investment Return?

Yes, a 20% return is undoubtedly a significant return these days.

Can You Live off The Interest of $100,000?

To answer this question, you need to assess your financial needs.

Start by calculating your living costs and other expenses like medical, child education and marriage, travel and entertainment, housing, and retirement planning. You can compare it with your existing savings and income to determine how much you need to live a comfortable life ahead.

Once you know your monthly or yearly income goal, you can precisely estimate whether your existing wealth can sustain this for a prolonged period.

Based on the above calculation, you can determine whether the interest income received by investing $100,000 is adequate to sustain your living. You can amplify your returns by researching, finding high-return investment options, and creating a well-diversified portfolio.

What Is A Popular Way To Invest $10k In Australia?

Given the impact of inflation, $10K might not appear substantial. Nonetheless, you can explore potential investment avenues that have the potential to yield returns on your savings:
 

• Invest in High Yielding Savings Account or Certificate of Deposits

• Invest/Trade in Stocks and ETFs 

• Invest in Mutual funds

• Invest in Series I Savings Bonds

• Begin a home-based business that requires very little upfront capital. By doing this, you can build a steady source of income for the remainder of your life.

• Blogging is another way that can help you make additional money. The best part is that it doesn't require much capital. Start a blog on careers, finance, investments, real estate, technology, or anything that you like and know. By making sincere and consistent efforts, you can create a passive income for your life.

Always seek the help of a professional financial advisor before making any investment decision. Investing carries risk. The above are just some general options for educational purposes. All these options come with risk. This is not financial advice.

What Are Potential Investment Opportunities To Invest 100k In Australia?

You could consider the following four investment options if you have 100k spare in Australia:
 

1. Real estate

2. Cryptocurrencies like Bitcoins - (Crypto assets are unregulated & highly speculative. No consumer protection. Capital at risk.)

3. Gold (in the form of a physical asset, gold ETFs, and shares of gold mining companies)

4. Growth and dividend stocks

Always seek the help of a professional financial advisor before making any investment decision. Investing carries risk. The above are just some general options for educational purposes. All these options come with risk. This is not financial advice.

What Is A Common Way To Invest 250k In Australia?

With an investment capital of 250K, you have several options. Some of the asset classes include:

• Invest in long-term Crypto Projects to earn passive income - (Crypto assets are unregulated & highly speculative. No consumer protection. Capital at risk.)

• Invest in stocks that have a history of consistently paying and increasing dividends

• Invest in high-growth companies

• Create a diversified Real Estate Portfolio

• Invest in Index Funds

• Invest in your superannuation account. (excellent investment to grow your savings and solidify your financial position.

• IPOs – Invest in the Initial Public Offer of a Company before it gets listed on a Stock Exchange.

• Non-Fungible Token and Sell it On Open Marketplaces at higher-price

• Do Copy Trading by following the trades of a Successful Trader.

Always seek the help of a professional financial advisor before making any investment decision. Investing carries risk. The above are just some general options for educational purposes. All these options come with risk. This is not financial advice.

Where Could You Invest 500k In Australia?

Investment capital of 500K virtually opens the door to various investment options in Australia. However, it depends on your financial goals and the timeframe you expect to remain invested in making a return.

Some investment vehicles that could help you generate passive income are: real estate, Exchange Traded Funds (ETFs), mutual funds, stocks, small businesses, and gold investments.

You also have the option to diversify your portfolio with a mix of the following:

• Bonds: For example, a mix of treasury bonds, municipal bonds, and corporate bonds). Generates an average 10-year bond yield: of 6 to 6.5% 

• Real Estate: For example, crowd-funded real estate, commercial real estate, rental properties, and real estate investment trusts (REIT). Generates an Avg. annual return of 9 to 18 per cent

• High-Yield Savings Accounts: Some banks offer a 10 x interest rate compared to the national average interest.  

• Index Funds: Generates an average annual return of 8% to 10%

• Peer-To-Peer lending Investments: Little risker, but returns are substantial. Based on your risk tolerance, you can generate a fixed income from your savings. The investment return depends on the borrower's income, credit score, and other factors.

• Stocks: The average annual return for stocks has been 10.1% if you choose quality stocks with promising growth potential for the next ten years. 

• Small Businesses: Generates an average annual return of 10% to 25%

(Past performance does not guarantee future results.)

Always seek the help of a professional financial advisor before making any investment decision. Investing carries risk. The above are just some general options for educational purposes. All these options come with risk. This is not financial advice.

10. Conclusion

With multiple investment options, from safe lower-return assets to risky higher-return ones, investing can be a great way to build your wealth over time.

To get good returns, you don't have to have a large sum of money but a good knowledge of the basic concepts in finance and investment.

Further, a well-defined investment goal and strategy, including understanding the investment features and their pros and cons, is an advantage.

Besides your research, gaining insights and suggestions from investment experts and using financial tools can help you maximize your savings.

Useful Links to Explore:

• How To Become A Commodity Trader In Australia?
• How To Become A Day Trader In Australia?
• How To Invest Money In Australia?
• How To Buy Cryptocurrency In Australia?
• How To Buy Shares Online in Australia?
• How To Become A Forex Trader In Australia?
• How To Buy Index Funds And ETFs In Australia?
• The Benefits of a Professional Year Program (PYP)
• A Complete Guide to Study in Australia
• Types of Education in Australia
• What to Study in Australia?