A 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:
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.
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.
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.