Saving a five figure sum usually takes a long time, and requires copious amounts of patience and discipline. In a world with low interest rates, a term deposit reaps returns for investors that are not much higher than the official cash rate. That makes other opportunities more enticing for investors who wish to seek higher returns on their savings. Here are three ways people can invest $10,000 that could result in a higher return than the standard term deposit.
Stock Market
Often seen as a risky investment, shares also have the reputation of outperforming other types of investments in the long term. However, history has also shown that some publicly listed companies – big or small – have failed and have taken their shareholders’ money down with them.
Despite the occasional bad story, most major companies on the stock market have been good to investors both in terms of strong growth and consistent dividends. Investors cannot obtain a huge share portfolio with $10,000, so it may be worthwhile investing in one or two Listed Investment Companies (LICs) as a start.
LICs are companies listed on the stock market that invest in other publicly listed companies. The most reputable LICs have teams of experienced and qualified investment analysts that are at the forefront of their company’s investment decisions, and most LICs also pay regular and consistent dividends.
Managed Funds
Like LICs, managed funds also put your investment money in the power of professionals who invest in a wide range of areas, including domestic and international shares, property and fixed interest investments. Funds pay their investors either quarterly, half-yearly or yearly (depending on the type of fund) via what is commonly known as a ‘distribution’, which consists of dividends, capital gains, interest and the like.
By investing in a managed fund, investors can invest small amounts of money over a diverse array of investments, which could increase the amount of income they obtain from their investment. However, investors should be aware of the fees each fund manager charges for each type of fund they offer as fees that are charged by some managers are high enough to cancel out the return on smaller investments.
Bonds
For those who are not comfortable in investing their savings in a managed fund or on the stock market, purchasing bonds may be a better alternative. A bond is a form of debt that an entity acquires from investors, usually so it can expand its operations.
As a way to compensate investors for their risk, companies or governments (depending on who the bond is from) pay investors higher rates of interest than banks, usually two per cent or more per annum. There are obvious risks when it comes to bonds, including the possibility of a company going out of business. Call our office if you’d like some further information.
If you would like to know more information please contact Emma Brooke 07 49725177
Sources
https://www.moneysmart.gov.au/media/132057/investing-in-corporate-bonds.pdf
https://www.moneysmart.gov.au/investing/managed-funds
https://barefootinvestor.com/where-invest-money-2012/
This information is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. Infocus Securities Australia Pty Ltd strongly suggests that no person should act specifically on the basis of the information contained herein but should seek appropriate professional advice based upon their own personal circumstances.