Small Investment Opportunities in Australia

small investment ideas australiaA considerable number of Australians don’t get involved in investing, largely due to the presumption that this financial venture can be quite costly.

The truth, however, is that there are a number of small investment opportunities in Australia.

Regardless of your current financial situation, you should be able to capitalise on any additional money that you may have. To learn more about these small investment opportunities, see below:

How Much Should You Invest

Now, one of your first questions might be regarding just how much money you should invest.

The answer depends on your current financial situation – you should invest as much as you can afford. So, once you have taken care of your monthly essential bills and paid off your debt, the remaining amount can be put towards your investments.

That being said, there is often a minimum acceptable amount for investments in Australia.

With any investment, there are often start-up and ongoing costs.

These include deposits, brokerage fees, and much more. So, for you to be able to actually make a profit, the amount you invest will need to be higher than all of these costs. So, if you are planning on investing, try to save up at least $500.

You will then have enough capital to make adequate investments and reap financial benefits as well.

Types of Small Investments to Make in Australia

In this section, you will be able to get a picture of all the small investments you can make as an Australian, and have an idea of just how much money you will need for that particular option.

Here are the top 5 small investment ideas in Australia:

1. Stocks

You will be able to get started in the Australian stock market with around $500 in your account. As mentioned before, you shouldn’t try to buy shares for less than this amount as the brokerage fees will negate any profits that you are able to make. Still, you can’t actually go to any broker and hope to buy shares with $500.

What you need, in this instance, is a discount online broker.

These online firms have very low brokerage fees as they offer limited services. Essentially, their main purpose is to place the trades for you and little else. Often, such brokers are best suited to investors who have a little more experience under their belts.

Nonetheless, if you are willing to do your own research and make an effort at educating yourself, you can manage this yourself. Here is our article on how to get into the australian stock market.

Of course, investing in independent stocks, especially with low capital, can be a rather daunting process. In case you are looking for a slightly more profitable avenue, you may want to think about Exchange Traded Funds or ETFs.

2. Dividend Reinvestment Plans

These plans are often known as DRIPs and provide you with a low-fee opportunity to invest in shares and stock in certain companies. Now, it should be noted that not every company has such a plan. The ones that do, however, allow you to automatically reinvest any dividends that you earn to buy more shares from the same organisation.

The reason that this can work for smaller investors is because companies will often offer these in their plans at a discounted share price. Furthermore, by opting for this route, you get to forego any broker’s commissions which will only add to your typical investing costs.

3. ETFs

There are ETFs that allow you to join for as little as $500 while some of the more profitable ones may require up to $1000. Nevertheless, you still get a rather low entry point while also being able to enjoy a number of advantages. The top benefit of ETFs is that you only indirectly have ownership of a particular asset. This is because your investment is pooled with others in the fund and a manager will determine how to direct that money. At the same time, you can easily diversify your portfolio with this option, without having to make any financial moves yourself. In this way, you can protect yourself against a certain level of risk.

Now, with ETFs, it is important to pick the right one, as you will need to beware of transaction fees and other costs associated with this type of investment. So, make it a point to go for one that you can afford, even if you are only choosing to invest between $500 and $1000.

4. REIT

Most investors would love to invest in property. Unfortunately, you often need a considerable amount of money to get involved in the real estate sector. However, this doesn’t have to be something that you have to avoid anymore. This is due to Real Estate Investment Trusts (REIT) where your money is pooled together with other investors. The total is then used to purchase various properties that you can’t afford by yourself.

While real estate can cost you hundreds of thousands of dollars, a REIT typically has a minimum investment of just $500. What’s more, many of the profits of the REIT are paid out as dividends which means that you have a fairly regular income to look forward to. Of course, it is important to understand all aspects of the REIT so you can be certain that you are making the right decision.

5. Opportunities for Up To $3000

Let’s imagine that you can afford to invest between $2500 and $3000 dollars – what are your opportunities then? In this instance, it is largely about how much risk that you are willing to incur when investing your money.

If you want to limit risk as much as possible, then a certificate of deposit (CD), may be a good option for you. This is a promissory note provided to you by a bank. Now, this type of investment is unlikely to yield you high profits as the associated interest rates are rather low. The advantage, however, is that you will not need to be concerned with any kind of loss.

In the event that you are willing to take a chance, there is peer-to-peer lending. As the name suggests, it involves you offering a loan to another individual, on an online platform.

There is a rather handsome interest rate attached to the money that you provide, ensuring that you get a good return on your investment.

Now, as you can imagine, you may stand to lose a lot of money should the borrower default on the loan. This is especially true if you provide an unsecured loan.

It is important that when opting for this opportunity, you only work with a platform that has an Australian financial services license. The platform should also be registered with the Australian Securities and Investment Commission (ASIC) to truly be a reputable P2P lending platform.

Choosing the Right Broker

With many kinds of investments, you are going to require a broker to be able to place trades. Now, when you have only a limited amount of money to invest with, you need to be careful about the broker that you settle on.

This is because, as mentioned above, there can be quite a few costs associated with investing.

Most of these expenses will involve your broker. For instance, they will set the minimum deposit that you can place in your account at any given time, regardless of whether you are trading or not.

Also, it is the broker who will determine just how little you can invest in any trade. Last but not least, it is these individuals who will tell you how much each transaction will cost, every time you buy or sell shares or similar types of investments.

Since you will be investing between $500 and $3000, you should look for what is known as online discount brokers.

These individuals offer incredibly lower prices, making them excellent entry points for virtually any Australian investor. You should, however, understand that these type of brokers will only be involved in placing trades. The rest of the work – including the research – will have to be undertaken by you.

Becoming Successful While Investing with a Smaller Amount

In this section, you will learn some helpful tips and tricks to help turn your initial capital into a much healthier amount:

  • Start Now: when you don’t have a lot of money to spare, it can be tempting to stave off investing until you have accumulated more. Or, you may be reluctant to spend the little extra money that you do have on investments. Well, if you are serious about having enough money to retire with, then it is imperative to begin right away. You are never too young or too old to begin investing. The earlier that you begin, the more profit you will be able to accumulate over the years.
  • Focus on What You Can Afford: it can be tempting to get involved with full-service brokers who can make investing a lot easier. Or, you may want to buy shares from ASX50 companies to reduce risk. Despite being great opportunities, these aren’t necessarily the best options for a small-time investor, at least not in the beginning. This is because you will end up spending a lot of money with very little payoff. So, for the time being, stick with what is within your reach, even if it may not feel like a glamorous choice.
  • Aim for 10 Percent: this article has largely dealt with how you can invest with as little as $500 if this is all that you can afford. The truth is, if you want to make a real impact with your investments, you should try to invest at least 10 percent of your monthly income. Now, this isn’t always possible for first-time investors but it is certainly something that you should strive towards. Try to curb unnecessary spending or find a way to reduce expenses in your life so that you are able to invest this amount without any problem.
  • Reinvest Your Profits: just because you choose not to partake in a DRIP, doesn’t mean that you have to avoid reinvestment. Instead, if you are getting paid dividends on an investment, try to reinvest at least a small portion of that back into the company. If this doesn’t feel like the right financial move, consider using your dividends to invest in another company or sector altogether. Remember, when you invest with a little money, there is a limit on how much you can earn – either in dividends or sales. Nonetheless, the more money you are able to invest, the greater the amount that you can get in return.
  • Understand Terms and Conditions: when investing with a smaller amount, you may find that you don’t have a great deal of financial guidance. This is why it is imperative that you learn as much as you can about any investment that you are about to make. So, whether you are looking to buy shares or invest in an ETF, make certain that you know exactly what you are getting into. You should be aware of all the current and future costs and expenses involved in this endeavor as well. At the same time, have a proper understanding of the risk involved with that particular form of investment.

As you can see, there is no shortage of options if you want to make a small investment in Australia.

With the right information at your fingertips, you can make financial decisions that are suitable for your current situation that will yield impressive results.

The main thing to do, regardless of what income bracket you fall into, is to start making investments now.

How to Get Into the Stock Market as an Australian

how to get into asxGetting into the stock market as an Australian can certainly be an overwhelming decision to make. Many ask: How can I get into the Stock Market as an Australian investor?

The Australian Stock Market is also called ASX or Australian Securities Exchange or simply Australian Stock Exchange.

After all, you probably aren’t aware of too many individuals who have followed this particular financial path.

This is because around 75 percent of the Australian population has never invested in shares. However, if this is something that you are considering, then you have come to the right place. Below, you will find out all that you need to know about getting involved in the stock market, in Australia:

Understanding the Australian Stock Market

Now, the first thing you will need to do before getting into the stock market is to understand how the Australian operation works. To do this, you need to have a better grasp of the major stock exchange platforms. You will quickly realise that it is the Australian Securities Exchange (ASX) is the country’s primary market operator. You can see the markets live here.

It is presumed that over a million trades take place on this exchange every day and that it has a daily turnover of about $5.6 billion. ASX has over 2,200 listed companies on its exchange and it is regularly considered to be amongst the top exchanges in the world.

For the longest time, ASX was the sole player in the Australian stock market but this changed when Chi-X was introduced in 2008. This is an alternative, regulated exchange that offers slightly different services from ASX. Chi-X allows investors the opportunity to buy and sell shares from all of the companies that are listed on the ASX. In addition to this, you can also trade in their own Warrants markets.

However, the caveat is that you can trade with other ASX listed products such as ASX Warrants, XTBs, and ETFs. With Chi-X, the largest daily traded value is over $3.4 billion. It is estimated that around 500,000 trades take place on the exchange on a daily basis.

If this seems to complicated for you, here are a few more investment ideas.

How To Pick an Australian Trading Broker

You can’t get into the stock market as an Australian, unless you have a broker who can place the trades for you.

In Australia, you have two main options when trying to pick a broker – a full-service broker and non-advisory broker.

As the name suggests, full-service brokers are an all-inclusive package. For one thing, they assist you with a detailed financial plan, depending on your current circumstances.

They will also offer advice when you buy or sell securities. Furthermore, they will provide the necessary recommendations and share research that is relevant to your situation. There is a minimum deposit requirement on every broker.

Due to all of the services provided by such brokers, the cost involved is a great deal higher as well.

So, you can expect to pay a higher brokerage fee, around $120 or more, for each transaction.

This avenue is most suitable for investors who are new to the stock market and want to gradually improve their trading capabilities. While full-service brokers can be expensive, they also offer guidance for those who don’t have any previous experience.

Which Trading Broker to Choose?

Non-advisory brokers are simply used to place your trades on the exchange.

Therefore, they don’t offer you any other advantages and will not offer you any advice regarding any trades that you make with them. Since these brokers offer minimal services, their brokerage fee is much lower as well. For instance, here, you can expect to pay around $20 per transaction.

This option works for individuals who have already amassed a considerable amount of knowledge and experience in the stock market and don’t require any assistance. These days, most of the non-advisory brokers can be found online.

If you want to ensure that you are dealing with a regulated broker, then you should check that they are a ‘Participant’ of either ASX or Chi-X. You will then be able to be certain that the broker is regulated by these exchanges and sometimes, the Australian Securities and Investments Commission.

When trying to find an Australian broker, it is important to understand the distinction between a direct broker and the businesses that may be offering to buy or sell shares on your behalf. Understand, there are some agencies that will provide you with advice on how to place trades and will also give you the opportunity to place trades through them. However, if they aren’t a participant in a licensed market, then they can’t make direct trades. Instead, they have to contact a Participant and place your trade with them.

Australian Stock Market – Choosing Your Sectors

Another point that you will need to consider before buying or selling shares on an exchange is which sectors and companies to be involved in. To start with, let’s first discuss the sectors that are available for you to invest in. Currently, the ASX consists of 10 sectors that have been collected from 24 Industry Groups, 68 Industry Sub Groups, and 147 Sub Industry Groups.

In Australia, the sectors are

  • Consumer Discretionary,
  • Energy,
  • Financials,
  • Health Care,
  • Industrials,
  • Information Technology,
  • Materials,
  • Consumer Staples,
  • Telecommunication,
  • and Utilities.

When deciding which sectors to become involved in, it is best to stick to those that you are more familiar with and thus, will have an easier time understanding.

The reason that sectors can be so vital to your trading plan is because they can make it easier for you to become a successful investor. In short, one of the more effective trading methods involves identifying the market trend, figuring out what sectors are performing best, and then determining which stocks to invest in.

Pick The Best Sectors

Identifying the top-performing sectors is a rather straightforward process and can be done with the help of technical analysis.

In fact, selecting the best performing sector is virtually identical to figuring out which stocks are doing well. Of course, there are also a number of financial agencies and sources that will provide you with this information as well.

Over the last few years, the top performing sectors in Australia have been Energy, IT, Materials, Health Care, Consumer Staples, Consumer Discretionary, Property, and Industrials in that order. The ones that are performing the worst are Financials, Utilities, and Telecommunication, respectively.

The key thing to keep in mind when selecting sectors is the importance of diversifying your portfolio.

Here, to reduce the risk involved in the buying and selling of shares, you spread your capital across two or more sectors.

This way, should one sector be negatively impacted, you can still rely on the investments that you have made elsewhere.

Choosing Australian Company Shares to Buy or Sell

brokerOnce you have determined the sectors that you want to focus on, it is time to narrow the search down to the companies that you want to buy shares and stock in. To make the right decision, there are several factors that you will have to think about. This includes the interest rates in Australia, exchange rates, current, and future government policies, and investor sentiment. You should also consider how foreign markets and economies can also affect various businesses.

The two types of companies you will find in the stock market are referred to as blue-chip companies and speculative companies. The blue-chip companies are those that have already been well-established in the marketplace. They consistently perform well and tend to have less risk associated with them. Now, it is relatively simple to identify these companies. You can check the S&P/ASX 50 and S&P/ASX100 to see what the top 50 and top 100 companies in the country are.

The problem, of course, is that these companies’ share prices aren’t attainable for many people, especially those just entering the stock market. Since there is so much faith in the performance of these companies, they are quite sought after. If this isn’t an option for you, then you may want to think about trying your luck with speculative companies.

Speculative Companies on The Australian Stock Exchange

speculative tradersThe speculative companies are those that haven’t been around for too long or who don’t have consistent financial performances to back them up. The main draw with these companies is that the share prices are more affordable and that there is always a chance of handsome returns. This, of course, is accompanied by a rather high level of risk as well.

Among the points to consider when choosing a company to buy shares from, you should think about the potential profit you acquire. This is because there are some companies that offer dividends while others simply provide you with the chance to buy their stock. There are others, still, that offer both opportunities.

You will notice that companies that feature higher up on the ASX list often provide investors with higher dividends. If you are someone who wants a regular income, buying shares and stock in these companies may pay off. Smaller companies are more likely to focus on the growth of the organisation and thus, will invest the profits in their own business. In such instances, you will not be paid dividends.

Education in the Australian Stock Market

Just because you have done your research doesn’t necessarily mean that you are ready to start buying or selling shares yet. There is still a lot of information and techniques that you need to be aware of. Especially if you decide to go with a non-advisory broker.

Fortunately, ASX has a large number of sources that you can check out if you are a beginner or simply eager to learn more. The main website offers everything from online courses to teaching you about brokers. In the online courses, you can learn how to buy and sell shares while also being educated about all aspects of an investment and trade.

There is still one more step to take, however, before joining the stock market. This is to first practice with a trading simulation. With these, you are able to buy and sell shares with virtual money, allowing you to get some much-needed experience. Once you have figured out the ins and outs of the process, you can then make the leap to real-world buying and selling.

How Shares are Taxed in Australia

You need to be informed of how the profits made from buying and selling your shares can be taxed by the Australian government. In the event that you buy and profitably sell your shares, then you will automatically incur the capital gains tax. This is because shares are considered to be an asset.

There is, nevertheless, a silver lining in this situation. If you sell your shares 12 months after you initially acquired them, then you can be afforded the concessional gains tax. This means that your payable capital gains tax is discounted by 50 percent. So, only half of the capital gains is actually added to your assessable income.

Since there is a chance that you will have experienced a capital loss rather than a gain, you will need to report the loss in your income tax return. In this situation, though, you can use the capital loss to reduce a capital gain that you have made. In certain instances, you may be able to carry the loss forward, if you haven’t produced any profits during that particular tax period.

If you are an Australian looking to get into the stock market, you will find all the relevant information in this article. Once you have gleaned the necessary details, it is simply a matter of putting your knowledge to the test. Of course, you should keep in mind that there is always a certain level of risk involved in investing and you should be careful how you buy stock.