October 10, 2020

A pile of coins with other coins scattered on the ground against a blurred background

Having a GDP growth rate of 2.9%, Australia happens to be one of the most stable economies in the world. The country’s robust legal frameworks and high political stability have created a highly competitive investment environment that promises high returns and low risks for investors.

If you are considering venturing into the investment arena, then here is a guide to the benefits and risks of investing in Australia. We will also discuss some of the best ways to invest money in Australia. Let’s begin.


The Benefits and Risks of Investing in Australia

Australia offers a slew of advantages to young investors. Some of the biggest benefits of investing in Australia include:

  • Consistent economic growth and a stable political climate
  • Strong laws for corporate governance that protect an investor’s interests and ensure ethical business practices 
  • Proximity to other high-growth countries and abundance of natural resources
  • A skilled workforce with the 7th highest proportion of workers with tertiary qualifications
  • World-class infrastructure featuring multiple ports and efficient rail and road network to support commercial activity and trade

As all investments go, there are also some risks associated with investing in Australia. Here’s a brief overview of the risks you can expect while trying to figure out the best ways to invest money in Australia:

  • Over-reliance on Chinese demand for Australian commodities to sustain economic growth
  • Ongoing deficits in current accounts
  • Changes in tax policies can increase the cost of doing business and hurt investor returns
  • Fluctuation in commodity prices
  • Vulnerability to climate change and increased risk of natural disasters

What are The Best Ways to Invest Money in Australia?

As a young investor in Australia, you will have a host of smart investment options to choose from. The bigger question here is: Which investments promise stable returns and help you minimize risk?

To make things easier for you, we have compiled a list of some of the best ways to invest money in Australia.

Let’s take a look:

1.    Forex Trading

Forex (foreign exchange) trading is easily one of the most popular investment options available to young investors in the Australian market. For the uninitiated, the forex market is the most liquid financial market in the world.

Forex traders try and predict the appreciation and depreciation of different currencies. They earn profits by exchanging their local currency for another and selling it at a higher price to make a profit.

Most forex traders carry out multiple transactions every day. Professional traders can earn a return between 1 to 10% every month.

Bear in mind that the forex market is very volatile, and small price movements can have a significant impact on your returns. Make sure you find out as much as you can about international currencies before choosing this investment option. We also suggest getting advice from a financial advisor.

2.    Shares

Buying company stock continues to be one of the best ways to invest money in Australia. A share represents ownership in a company so when you buy shares, you are basically buying a small piece of that company. This would make you a shareholder.

Your returns will depend on the company you choose as well as your investment strategy.  

There are two ways to generate returns by buying shares: You can buy and hold shares and earn money in the form of dividends paid out by the company to its shareholders. Dividends are a portion of the company’s profits.

The second way is to buy shares at a certain price and then sell them when their value increases. Bear in mind that the opposite can also happen, i.e., if the share price falls, then the value of your investment will also decrease.

To avoid this, we suggest that you consult a financial advisor and set up a strategy when investing in shares to avoid extensive losses.

3.    Cryptocurrencies

Depiction of bitcoin as one of the best ways to invest money

If you are open to investing in newer assets such as virtual currency, you can also consider buying cryptocurrencies. The cryptocurrency market was previously dominated by Bitcoin, but there are plenty of other coins available now that Australian investors can buy.

Here are some options that you can consider:

  • Ethereum
  • Litecoin
  • Dash
  • Ripple
  • Monero

Among these, we suggest investing in coins such as Ripple and Ethereum. They are considerably cheaper and are likely to gain more momentum in the future. Unlike forex trading, you don’t want to buy and sell cryptocurrencies. Instead, we suggest you opt for the buy and hold strategy.  

1.    Managed Funds

If you happen to be risk-averse, then a managed fund is one of the best ways to invest money. Managed funds will stick to one asset class (for example, shares of an Australian company) or they will opt for diversification and invest in a combination of assets. 

You can pool your money into a fund alongside other investors and allow a fund manager to oversee how it is managed. The great thing about using a managed fund is that your risk is significantly reduced. If the fund generates any income, it will be distributed equally between all investors.

2.    Annuities

If you want to save up for retirement, then annuities are your friend. These are contracts with an insurance company that agree to provide you with a consistent stream of income in the future.

The biggest benefit of using this investment option is that it will provide you with income regardless of any highs and lows in financial markets.

You can purchase fixed-term annuities or lifetime annuities. The former will provide you with a series of regular payments spread over a certain period. In the case of the latter, the insurance company will pay for the remainder of your life.

The payments you receive will depend on your principal amount and other calculations.

In a Nutshell

An investor examining data for making an investment decision

There are a multitude of investment options available to young investors in Australia. If you are looking for a moderate risk-return tradeoff, then forex trading and buying shares is one of the best ways to invest money for you.

However, if you are on the conservative side, then we suggest you opt for annuities or managed funds. Cryptocurrencies also promise good returns, but we recommend this investment option to investors who aren’t trying to make a quick buck and are in it for the long haul instead.

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