Lexi Webster
Investing a sum of $100,000 Australian can be done in a variety of ways, each with its own risks and potential returns. Some common options include investing in shares, property, exchange-traded funds (ETFs), government bonds, or term deposits. The best approach will depend on several factors, such as your age, financial situation, and long-term goals. For example, younger investors may favour a growth-focused portfolio with a higher allocation to stocks, while older investors may prefer more conservative options like term deposits or government bonds.
| Characteristics | Values |
|---|---|
| Lump sum investment | $100,000 |
| Investment options | Shares, ETFs, Term deposits, Government bonds, Property, Business, Art, International stocks, Foreign currency, futures, High-interest savings accounts |
| Risk factors | Risk of missing out on better returns, Cash availability, Age, financial situation, Investment goals, Current interest rates, Inflation, Tax, Market performance, Diversification |
| Investment strategy | Long-term, Short-term, Conservative, Growth-focused, Balanced portfolio, Diversified portfolio, Capital appreciation, taxable losses, Asset classes, price-to-earnings discount, international stock ETFs |
| Investor profile | Younger investors, Taxable investors, Investors with financial goals, Investors with immediate financial needs |
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What You'll Learn
Shares and ETFs
Firstly, it is important to understand the difference between shares and ETFs. Shares are a portion of ownership in a company, while ETFs, or exchange-traded funds, are a type of investment fund that holds multiple assets, such as stocks, bonds, and commodities. ETFs are known for being a convenient, low-cost way to diversify your portfolio and reduce risk, as they are not tied to the performance of a single stock.
When investing in shares, you can choose to invest in Australian shares, international shares, or a mix of both. According to Forbes, a balanced portfolio for $100,000 could include 25% Australian shares and 25% international shares. This allows for a diverse range of investments and exposure to different markets.
ETFs are a popular choice for investors, as they offer a simple and cost-effective way to invest in a variety of assets. There are several ETFs available that track the Australian stock market, such as the MSCI Australia index and the S&P/ASX 200 index. The S&P/ASX 200 index, for example, has averaged an 8% return per year over the last decade. When creating an ETF portfolio, you can choose to invest in a mix of Australian and international equities, as well as bonds, to generate dividends and provide longevity through capital gains.
It is also worth noting that some platforms, such as Vanguard, offer access to a range of managed funds, including Australian and international shares, for a low initial investment of $1,000. These platforms often have ultra-low fees, making them an attractive option for investors.
Overall, shares and ETFs offer a great opportunity to diversify your portfolio, reduce risk, and maximise returns when investing $100,000 in Australia.
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Property
If you're looking to invest $100,000 in Australia, there are several options to consider, including property, superannuation, and peer-to-peer lending. Each option has its own benefits, returns, and associated risks, so it's important to carefully consider your financial goals and risk tolerance before making any decisions.
Direct Residential Property
Directly purchasing a residential property is a traditional and reliable way to grow your wealth. With a $100,000 budget, you may want to focus on specific regions or property types that offer lower entry costs and high growth potential. Areas like Safety Beach and Valley Heights in New South Wales are known for their affordability and steady property value growth. Historically, residential properties in Australia have delivered an average annual return of 6.4%, with a 5-year cumulative return of 34% assuming consistent market performance.
Real Estate Investment Trusts (REITs)
REITs are a diversified and liquid option for those seeking higher returns. They allow you to invest in a portfolio of properties, reducing the risk associated with single-property investments. REITs have offered impressive returns, with some delivering 19.3% over the last 5 years, outperforming residential property investments.
Fractional Property Platforms
Fractional property platforms, such as BrickX and DomaCom, offer the advantage of diversifying your property investment with smaller amounts of money. These platforms enable you to own a portion of a property, providing moderate returns and reducing the risk associated with sole ownership.
Commercial Real Estate
Commercial real estate is another option to consider with a $100,000 investment. Many developments collect funding from multiple investors, and your money could be the floor investment needed to get involved. Commercial properties are desirable assets, often performing well and providing stable leases.
While investing in property with $100,000 can open doors, it's important to remember that property investments require time and ongoing financial management. You should also be prepared for potential renovation or maintenance costs and understand that selling property quickly can result in high transaction costs.
Additionally, as part of a broader investment strategy, you may consider investing in real estate stocks, exchange-traded funds (ETFs), or mutual funds, which can provide exposure to the property market without the need to directly purchase a physical property.
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High-interest savings accounts
Savings accounts are designed to earn you interest while limiting withdrawals, and, unlike a transaction account, they usually don’t allow for cash withdrawals or direct spending through the account. The main types of interest that may apply to a high-interest rate savings account are the standard variable interest rate and the bonus rate. The standard variable interest rate is usually relatively low and depends on the balance of the account. The bonus rate kicks in if you meet the eligibility criteria, and this rate is also usually variable, meaning your bank could change it at any time. Some accounts also offer extra interest (at a fixed rate) for the first few months only, as an incentive to get savers to sign up.
To earn the highest interest rate on a savings account, you may need to deposit a minimum amount each month, have a linked transaction account, and make no withdrawals (or ensure the balance grows each month). There may also be a maximum balance that the highest interest rate can be earned on. For example, Police Bank and Border Bank offer a top rate of 5.00% p.a. on balances of $30,000 (max of $10k each on up to three accounts). This option is for 18-29-year-olds only. The top ongoing rate available to a broader audience is on Australian Unity's Freedom Saver account, which offers 4.85% p.a. on balances up to $250k. Money in a high-interest savings account is guaranteed by the Australian Government’s Financial Claim Scheme, up to a value of $250,000 per person per bank.
Some high-interest savings accounts that are available include:
- Capital One 360 Performance Savings: This account has an impressive interest rate, offers in-person banking, and has no maintenance fees or minimum balance requirements.
- EverBank: This account has high yields and low fees, and you can earn 4.30% on all balances. There is no minimum balance requirement or monthly maintenance fee, and you will have access to more than 100,000 fee-free ATMs.
- Varo savings account: This account is best for new savers who are looking to build up an emergency fund. To earn 2.50% APY, customers must receive total direct deposits of $1,000 or more within each qualifying period and have a positive balance in both savings and checking accounts at the end of the calendar month. All balances above $5,000 earn an APY of 5.00%. There are no fees associated with the account, and Varo doesn’t allow for overdrafts or wire transfers.
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International stocks
When investing a sum as large as $100,000, it is important to consider your financial goals and risk tolerance. If you are a retiree, you may want to invest in a growth portfolio that combines Australian and international equities to generate dividends and provide longevity through capital gains.
A growth-focused portfolio of 70/30, 80/20 or higher can align with a long-term strategy, but it depends on your unique risk profile. A younger investor, for example, may prefer to invest their $100,000 in a diversified portfolio of exchange-traded funds (ETFs) that focus on international stocks.
According to Bloomberg Intelligence ETF research associate Andre Yapp, a taxable investor with a 60/40-type portfolio should consider putting 48% in public equities, 20% in private assets, and 32% in public bonds. Within equities, Yapp suggests investing 38% in US large-caps, 7% to 8% in international stocks, and the rest in emerging markets outside of China.
If you are interested in investing in US large-cap stocks, you should be aware that they are relatively expensive at 21x earnings, while international stocks trade at only 13x earnings. This price-to-earnings discount is the largest it has been in the past 20 years, making international stocks an attractive option for investors.
When investing in international stocks, it is important to research the market trends and understand how individual stocks are performing. You should also keep track of financial news and events that could impact your investments.
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Private equity
When considering investing in private equity, it is important to remember that your current age, financial situation, and risk tolerance should all be taken into account. A financial planner can help you determine if private equity is a suitable investment for you and assist in constructing a diversified portfolio.
If you are a young person who has inherited $100,000, you may prefer to invest for the long term so that your money grows over time while remaining accessible for future goals. In this case, a growth-focused portfolio with a higher allocation to growth assets, such as Australian and international shares, may be suitable.
Additionally, when investing a large sum of money, it is crucial to consider not only your immediate financial needs but also your long-term goals and the level of risk you are comfortable with. Seeking professional advice can help you make informed decisions about investing your money in private equity or other asset classes that align with your financial objectives.
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Frequently asked questions
You could consider investing in a home in a high-end neighbourhood in a country with an upward trajectory, such as Greece. You could also consider purchasing a small unit as an investment property, or buying into an existing business.
You could put your money in a high-interest savings account, which is low-risk and can still offer attractive returns. You could also consider investing in government bonds or term deposits, though you may miss out on better returns made elsewhere.
You could invest in Australian or international shares, though this is a risky option as your investment can go down in value. You could also consider exchange-traded funds (ETFs), which can give you exposure to private equity.
