Best Way To Invest $50,000 In Australia (2024)

Karen Eley, a certified money coach and founder of Women Talking Finance, says before deciding on an investment, you should consider the following factors:

• how much risk are you prepared to take (i.e. low, medium or high level).
• what is the timeframe you’re willing to remain invested for without having to withdraw from it (most investment assets have a minimum ideal number of years for being invested).
• what are your goals for investing (i.e. creating a passive income, or longer term capital appreciation, or a combination of both).

Investors need to consider their personal financial situation, their capacity to take risks and the right mix of investments for them before making any decision.

Similarly, they need to be realistic about the returns on investment over the desired time frame, which can vary widely based on timing and investment type.

Some investors will look at a target return that is linked to inflation, for example 3% plus CPI, whereas others may have a return based on historic average returns of that asset class. For example Australian equities has a long-term compound return over the past 30 yrs of 9.1% annually.

“The rate of return an investor should target will be correlated with the level of risk they are prepared to take. Benchmarking a return target is important to ensure your investment is performing in line with its peers,” Eley said.

Planning, research and diversification are the keys to successful investing because they help you find investments that best fit your risk tolerance and investment time frame.

It is important to do due diligence and research before investing your money. This can either be in the form of research from a reputable non-biased source, or by using an investment professional such as a financial advisor, property specialist or broker.

Investment professionals can be helpful, especially for investors who are not financially savvy, by helping them put the right strategies in place so that they reach their financial goals sooner, and also by guiding them through market turbulence to ensure they stick to their long-term goals.

Different investors will have different goals, risk appetite and timeframes, so it’s difficult to generalise a set of investment choices. However, here are 5 options for investing $50,000 in Australia based on common financial goals:

1. 1. Invest into your superannuation fund. Superannuation is one of the largest investments you will ever have, so it’s worth making extra contributions. Not only does this boost your retirement savings, you can also save on tax, and any investment returns you receive benefit from compounding too. Although these funds can’t be accessed until you meet preservation rules and are retired, investing in super does have significant tax benefits, Eley says.
   2. Investing in an Exchange Traded Fund (ETF). ETFs are passive investment products which aim to track a particular asset or market index. But they can be a good investment option because they allow investors to diversify among several companies and asset classes, which could otherwise be difficult to achieve when you’re investing $50,000. Many ETFs also have low fees.
   3. Buy an investment property. Depending on your lending capacity and other circ*mstances, you may be able to use the $50,000 as a deposit on an investment property, Eley says. This will however be dependent on whether the rental income and your loan serviceability can cover the mortgage repayments on the investment loan.
   4. Invest in annuities. Investing in an annuity may be a good option for investors close to retirement who are concerned about market fluctuations, since these offer a more conservative and less volatile return. Annuities provide a guaranteed income regardless of market volatility in the form of a series of regular payments either over a set number of years (fixed-term), or for the remainder of your life (lifetime annuity).
   5. Invest in managed funds. Managed funds provide the benefit of pooling your assets with other investors in a way that gives you the ability to access investments types and levels of diversification that aren’t usually available to an individual. Again, these investments can provide access to several different investment types such as shares, property and alternatives, like infrastructure assets or ethical companies, while also providing investors with diversification.

While the process of lump-sum investing may be different to incremental investing, as is the case with all investment decisions, you do need to keep in mind the inherent risk in putting money in the market.

While some growth assets offer high risk, even relatively safe investments like term deposits or government bonds come with the risk of missing out on better returns elsewhere, or not having access to the money when needed.

“Ensure you understand the costs to invest as well as the risk of potential losses,” Eley says.

“Make sure you also have access to cash or liquid assets in the case of emergency or unforeseen events. You don’t want to be in the situation where you need to sell your investments at short notice. This may lead to losses or high exit costs.”