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Where and how to invest $1,000 in Australia
Choose between low risk, high risk or guaranteed returns when investing under $1,000.
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Are you looking to invest $1,000 and not sure where to start? Luckily, there are plenty of options available for you to choose from – it all depends what your goals are and how much risk you're willing to take on.
This guide explains what these investment options are, how to distinguish between assets like shares, cash, options, futures and ETFs, and what sort of fees you need to pay.
What are my options when I want to invest $1,000?
- Pay off existing debt - Before you invest, make sure to pay off any outstanding debt you may have, especially if the interest rate is high. Even if you find an incredible investment, will the returns cover what you're paying on your debt?
- Invest in shares - You can start investing in Australian shares from as little as $500 and as little as $10 at a time into US stocks – depending on your online broker. Share market investors earn profits when share prices increase, and they can be paid dividends when the company generates profit. While you can make a lot of profit with shares, the downside is that it's a risky investment. $1,000 is enough to buy stocks in one or two companies – can you afford to lose the money if the price falls? And will your returns cover your brokerage fees.
- Invest in an ETF. Like stocks, the minimum investment for an Australian exchange traded fund (ETF) is $500. ETFs are less risky than buying shares directly because it gives you access to hundreds of companies in one trade. Here's how to invest in ETFs and why they're great for beginner investors.
- Contribute towards super - Add funds to your super while you're still young and watch it grow over the years. When you make contributions to your super from after-tax income, the government does not tax the contribution up to a certain threshold because it's already been taxed. If you earn less than $50,564 annually as your pre-tax income and you end up making post-tax contributions to your super, the government adds to your super by matching your contributions.
- Open a high interest savings account. A high interest savings account is your zero-risk option, and you'll still earn a return on your money. You can check out the best savings accounts in our comparison.
- Micro-investing. Robo advisers allow you to invest small amounts into the share market, sometimes as little as a few dollars at a time. This is known as micro investing, and you can learn more about it in our guide.
- P2P platforms. Peer to peer (P2P) platforms allow you to lend your money to everyday borrowers in exchange for a fee. Minimum deposits range from $10 up to $10,000 depending on the provider, and the return that you can expect is normally a fixed rate. Head to our P2P homepage to find out more.
How do I compare investment products?
- Minimum investment amount. If you're considering getting into the share market, you can start with just one share. You can start trading foreign currency with no more than $25, and can also start trading in futures with little investment. To open a term deposit, you may have to start with a minimum of $500 or $1,000, depending on the financial institution you choose.
- Commissions and fees. If you plan to deal in shares and futures, there may be brokerage and other fees. Full service brokers normally charge fees as a percentage of any given trade value, and some online brokers charge fixed fees per trade. For assets like term deposits and high interest savings accounts, financial institutions tend not to charge any account keeping fees. Percent-based fees are often more suitable for smaller trades, but if you'll be making larger investments it might be preferable to find an account with flat fees.
Important: Share trading can be financially risky and the value of your investment can go down as well as up. Standard brokerage is the cost to purchase $1,000 or less of equities without any qualifications or special eligibility. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.
*Past performance data is for the period ending .
Disclaimer: Performance, fees and insurance data is based on each fund's default MySuper product. Where the performance, fees and insurance data for the MySuper fund vary according to the member's age, results for individuals between 40-49 years of age have been shown. This article is general advice. You should consider your own personal circumstances before deciding if a superannuation product is right for you. Superannuation is a long term investment and past performance is not indicative of future performance.
Should you just keep money in the bank?
The answer to this will depend on how long you can afford to have your money locked away for. Shares and ETFs can be a good investment over several years, but very risky and volatile over a short timeframe. Can you afford to wait for a year or more to get a good return on your investment and are you prepared for the possibility of losing your investment entirely?
If you’re wanting guaranteed returns without the risk, look at high interest savings accounts and term deposits. Both earn you interest as long as you have money in the account. Term deposits will require you to lock away funds for some time, but high interest savings accounts let you access your money as needed.
What are the pros and cons of savings accounts?
- Government guarantee. If you put your money in a savings account or a term deposit, the Australian Government Guarantee Scheme Security covers you in case your bank fails to honour the deposit. This guarantee applies on deposits of up to $250,000 per person per institution, and does not limit the number of institutions you can bank with.
- Returns guaranteed. A savings account comes with virtually no risk, especially if you have no more than $250,000 with any one financial institution. The money in your account continues earning interest as long as it's in there. Credit unions tend to offer more competitive rates than mainstream banks because they don’t have the added costs associated with shareholders. Online banks, because they don't have to spend money on physical stores, also tend to offer competitive rates. Some financial institutions provide bonus interest to account holders who meet given criteria.
- Flexibility. Savings accounts come with varied features. While some let you access funds via online and phone banking, some others provide access to BPAY as well. Some savings accounts designed especially for children or for retirees can offer preferable interest rates, all while ensuring you have around-the-clock access to your money.
- Limited returns. Despite offering guaranteed returns, the interest you earn from such accounts can be noticeably lower than what you may earn through other types of investments. The interest rate of Australian savings accounts is normally between 0.5% to 3%.
What are the risks of investing?
- Inadequate information. No matter where you plan to put your money, carrying out a little groundwork is important. Even with simpler assets like savings accounts and term deposits, it's still a good idea to do your research because banks offer different interest rates.
- Fees. Investing requires that you work with a financial institution or a broker. Both may charge fees to provide services, and it’s important that you know how much they may charge in different scenarios, and consider these costs alongside the potential returns of an investment.
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Is there anything else I should consider?
- The risk factor. Every investor should start by understanding the link between risk and returns. High risk investments tend to offer greater potential returns. What’s also true is that how people perceive risk can vary, and perceived risk does not necessarily reflect upon statistical analysis. You may want to avoid following your instincts until you've checked it against the facts.
- Your risk profile. Your risk profile essentially refers to your willingness to take risk and how it can have an effect on your ability to make decisions. Risk profiling gives investors the means to recognise investment pitfalls with consideration to their own capacity for and tolerance of risks. If you're a naturally cautious person or a natural risk-taker it's important to recognise these qualities in yourself.
- Financial goals. Set yourself clear and measurable financial goals so you know whether your investments are on track to get you there. For example, you might be planning to have a specific amount by the time you retire, and can adjust your investment habits to stay focused on this.
How to invest $1,000
Frequently asked questions
What are the risks of investing in shares?
You’ll lose money if share prices fall, and it's possible for them to go all the way down to zero. If the company you invest in goes bust, shareholders are often last in line to receive any money. Since share values can vary periodically, you cannot expect fixed dividends.
Does borrowing to invest work well?
Borrowing to invest, also referred to as gearing, can be risky. While it can increase your returns in favourable market conditions, the reverse holds true as well. Ideally you'll only go this way if you know your after-tax returns will exceed the cost of borrowing.
How much of it can I afford to invest?
Before you start investing make sure you have your debts under control. Paying off debts is always a sensible financial move while investing is a riskier. Keep money aside for emergencies, the equivalent of about three months of household expenses is a good amount, and consider making sure you have adequate insurance cover as well to reduce the risk of losing it all if something goes wrong. With these taken care of, you can start investing in diverse asset classes. Consider making some practice trades and trying out different markets until you've found one you can call home.
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