What to Invest in 2023 Australia

What to Invest in 2023 Australia

Stepping into the world of financial investments can be an exhilarating, yet intimidating, experience for young Australians. Up until now, investing has likely been something you’ve heard about from friends and family, but never considered for yourself. But that doesn’t have to be the case, as the younger you begin investing, the greater your returns may be over your lifetime.

What to Invest in 2023 Australia

Our top investments to consider for Australians include:

1. Cryptocurrency
2. Equities
3. Managed/index funds
4. ETFs
5. Property

It may be possible to turn a small sum of spare cash into a sizeable nest egg of wealth, simply by investing your money in a way that suits your financial goals. So, if you’ve got cash to spare, and you’re looking for ways to make it grow, it may be worth considering investing.

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Also read What are the Top 10 Stocks to Buy Right Now in United States

1. Cryptocurrencies

When it comes to investment options for younger Australians, it’s safe to say that most of us have felt more pressure to invest in cryptocurrency than to do drugs. We’ve all heard the stories of friends of friends that put their money into Bitcoin, and other blockchain-based cryptocurrencies or altcoins, and saw their investments balloon into the six- or seven-figure return range. However, there are also plenty of stories of people eagerly investing in a hot new cryptocurrency, only to see the value stagnate or tank, or for the whole thing to disappear into thin digital air, leaving a lot of angry investors out of pocket.

So, is cryptocurrency an investment worth considering nowadays? The truth is a lot simpler than you’d think – if you are passionate about the technology, or if you do your research and believe there is opportunity for capital gain – it may be worth considering. A golden rule to consider is: only invest in things you understand. So, if it’s not clear how a particular cryptocurrency works, it may be worth avoiding that cryptocurrency as an investment option. If you’re still not sure, consider looking at what experts are suggesting about the crypto environment at the moment, including longtime investors and naysayers. As the technology is still relatively new, so are the regulations around it. Unfortunately, scams are a common occurrence, so it may be worth thoroughly vetting the cryptocurrency and the exchange you use to facilitate your investment. Kaspersky recommends the following tips to ensure you’re not being scammed:

• Avoiding anyone or anything that offers “guaranteed returns” or “free money”
• Avoiding pump and dump crypto schemes
• Avoiding crypto with a poor or non-existent whitepaper
• Avoiding crypto with excessive marketing – typically done to draw in as many customers in a short time frame to raise money quickly.
• Only download apps from official platforms

To get started with cryptocurrency, you’ll need to find an exchange and create an account, which often involves providing identification. We’ve come up with three steps to buy cryptocurrency in Australia, but you can always look into the whole crypto-craze yourself.

Also read What are best stocks to invest in Australia?

Minimum investment:

While individual units of cryptocurrency (e.g. one Bitcoin) can have high prices, you don’t need to buy whole units at a time. Instead, it’s possible to invest in fractions of cryptocurrency units, the size and price of which can vary by currency, as well as the trading platform you use. Keep in mind that as well as paying for the cryptocurrency itself, the exchange you use may also charge you fees. 

2. Equities

Equities (another name for shares, stocks, or securities) is what many people think of when you mention investing. Getting into equities trading can sound intimidating at first, especially if you’re not familiar with share markets. But nobody expects you to become Jordan Belfort overnight. It is okay to start small or stay at whatever investment level you’re comfortable with.

There are many ways to start investing in equities. If you want to choose which shares you buy and sell, an online broking service can facilitate your transactions for relatively low fees per transaction. A full-service stockbroker will likely charge you more, but may be able to provide personalised advice, which could be valuable if you’re not sure where to invest.

Minimum investment:

When buying equities, the “minimum marketable parcel” of shares is typically $500. If you want to buy equities in a company that’s worth $5 a share, you’ll need to buy a minimum of 100 shares. Even if you don’t have a whole lot of money saved up to invest, one possible option to get started is to consider microinvesting. This involves investing small sums, either frequently or infrequently, towards a portfolio of assets, typically through an app.

Also Read 10 Common Mistakes Every New Investor Need to Avoid

3. Managed/index funds

In a managed or index fund, many investors put their money into a shared pool, which is used to invest in a range of assets. The returns you enjoy will be based on the value of these assets, along with how much money you’ve put into the shared pool (your units in the fund). Some managed funds are active funds, where an investment manager will search for high value stocks and invest the pooled money on the group’s behalf (for example, Microequities Asset Management). You’ll need to put a lot of trust in your fund manager, so you’ll want to be confident in their skills. You may also need to pay fees for their services. Other managed funds are passive or index funds, which buy into a portfolio of assets. You’ll receive income based on the value of the fund’s investments, though you may not have as much flexibility around how your money is invested as with other investment options.

Minimum investment:

Individual managed/index funds have their own minimum investment requirements, which often range between $1000 and $5000.

Also read What Stocks Make You The Most Money Fast in United States

4.ETFs

ETFs, or Exchange Traded Funds, are almost a hybrid of equities and index funds. Much like a regular index fund, ETFs invest their wealth into a range of assets from a particular class (e.g. shares, currencies etc.). The difference is that rather than buying units in an ETF, like you would with an index or managed fund, you can buy shares in an ETF, just like buying equities on the stock exchange, and these can also be sold or traded if you choose.

Buying shares in an ETF is often quicker, less expensive and more flexible than buying units in a managed fund, and can offer a simpler way to invest in an index’s range of assets. You will need to pay brokerage fees when trading ETF shares through a broker or fund manager (such as BetaShares or Stockspot), just like when buying or selling regular equities.

Minimum investment:

Because ETFs are traded much like shares, they are also bought in minimum parcels of at least $500.

5. Property

For many young Australians, it’s hard to take property seriously as a viable investment opportunity due to the sheer price-point required for entry. So much has already been written about how difficult it can be for younger people to get a foot on the property ladder. Between six-figure deposit minimums, rising interest rates, and battling it out with upgraders and cashed-up boomers at the auction, purchasing property for an investment may not feel possible for you.

However, there are many government schemes available to assist first home buyers specifically in purchasing property with deposits as little as 5%, even 2% for single parents. Plus, you do not have to purchase your dream home as your first property. You don’t even need to buy a property in your own state or territory. In fact, you may not want to, given that property investment in more affordable, up-and-coming areas may be a better strategy for younger Australians anyways.

If you can just get past the first hurdle – perhaps by having your parents sign on a home loan as a guarantor in lieu of saving a huge deposit – there are two ways you can make money from a property investment

1. Earn income as a landlord by renting the place out
2. Wait for the property to increase in value, and sell it at a profit

While some investors “flip” properties by buying them, renovating them, then selling them quickly, property is more often treated as a longer-term investment, to earn money in rental yield and/or capital growth over time. It’s important to remember that there are no guarantees in property investment (or in any other type of investment, for that matter). A property located in a growing suburb could significantly increase in value over a relatively short time, though some investors find themselves stuck if they can’t attract tenants and the value of their property falls. You can compare home loans at RateCity and look for first home buyer loans or investment mortgages that suit your budget, or you can compare the mortgage offers available from specific lenders, such as UBank or Bank Australia.

Minimum investment:

Applying for a home loan requires saving a deposit. While most lenders prefer a deposit of at least 20% of the property’s value, you can still apply for home loans with a deposit as low as 5%. If you do not qualify for government assistance schemes, keep in mind that deposits of less than 20% also require paying for Lenders Mortgage Insurance (LMI), which can be expensive. One possible alternative to saving a six-figure deposit is to have a guarantor (usually a parent or other close relative) secure the deposit with equity in their own property. You’ll need to ensure you budget accordingly to meet your repayments so you do not risk the guarantor losing their property, or other security, if you were to default. Another potential lower-cost option to invest in property is using a service such as BrickX to purchase fractions (or “bricks”) of an investment property, and receive a corresponding fraction of the property’s rental income and/or capital growth if you choose to later sell. You may also be able to consider rent to own options such as OwnHome, though it’s important to check the fine print and get financial and legal advice first.