{"menuItems":[{"label":"Should you invest your money?","anchorName":"#should-you-invest-your-money"},{"label":"What are my options if I want to invest $5,000?","anchorName":"#what-are-my-options-if-i-want-to-invest-5-000"},{"label":"Looking to compare super, savings and share accounts?","anchorName":"#looking-to-compare-super-savings-and-share-accounts"},{"label":"What else can I do with $5,000?","anchorName":"#what-else-can-i-do-with-5-000"},{"label":"How do I compare investment products?","anchorName":"#how-do-i-compare-investment-products"},{"label":"What about a savings account?","anchorName":"#what-about-a-savings-account"},{"label":"What are the risks of investing?","anchorName":"#what-are-the-risks-of-investing"},{"label":"Is there anything else I should consider?","anchorName":"#is-there-anything-else-i-should-consider"},{"label":"Frequently asked questions","anchorName":"#frequently-asked-questions"}]}
Investing is only for the rich and you need a large sum of money before investing, but those are common myths.
In reality, investors can start small and quickly improve their financial position through the wonders of compound interest.
So, if you have a few thousand and are wondering what you should do with it, here are some handy hints on where you could invest $5,000.
Should you invest your money?
When investing, it's important to understand that there's always a risk versus reward payoff. For example, keeping your money in a bank account offers security, but your return on investment is very low or zero. You're barely beating the rate of inflation.
Your other option is to invest outside of the bank, such as in shares, exchange-traded funds (ETFs) or superannuation.
What are my options if I want to invest $5,000?
Learning about various investment alternatives matters because of the different levels of risk involved as well as commissions, fees and minimum deposits to think about. We share some of your main options below.
Pay outstanding debt
First, if you have any debt it's important to pay it off before you think about investing. This is because the interest you're charged on debt is likely higher than the returns you can achieve through investing.
Contribute to your superannuation
Contributing to your superannuation fund can be a great idea provided you're happy to have the money locked away for a long time. The best reason to top up your super is you can avoid paying your usual income tax.
Any contribution you make to your super straight out of your salary is only subject to 15% tax. If you make contributions from post-tax income and earn less than $50,564 per annum, the government matches your donations and this money adds to your super as well.
Investment funds allow you to invest in a portfolio of stocks and other assets such as gold or property. Instead of building an investment portfolio yourself, you benefit from the expertise of fund managers.
Not all investment funds are successful, so before you invest, do your research and understand what kinds of fees you'll be charged and how the fund has performed historically. Most managed funds have a minimum investment of $10,000 while ETFs have a $500 minimum investment. For a $5,000 deposit, an ETF might be your better choice.
Shares
Although riskier, the stock market historically offers better returns than bank accounts. By buying shares, you're essentially owning a small portion of the company. If the company generates profits, you stand to earn dividends. You can also benefit from an increase in share prices.
The minimum initial investment in Australian shares is usually $500, so you can invest in one or multiple companies with your $5,000. Meanwhile, US stocks have no minimum investment requirement, so you can start investing as little as a few dollars into stocks if you choose, depending on your stock broker.
Robo-advisors are platforms or apps that automate your investments. They provide a list of stock or ETF portfolios for you to choose from and you can deposit a few dollars at a time or thousands of dollars if you prefer. Head to our robo-advice homepage for a list of robo-advisors in Australia.
P2P platforms
Peer-to-peer (P2P) platforms allow you to lend your money to everyday borrowers in exchange for a fee. The lender is typically offered an interest rate on the amount they've deposited which varies depending on risk level and the P2P platform itself.
Minimum deposits range from as little as $10 up to $10,000 and the return you can expect is normally a fixed rate. Head to our P2P homepage to find out more and compare your options.
Term deposits and high interest savings accounts
Anyone looking for guaranteed returns can consider setting money aside in a term deposit or a high interest savings account. While a term deposit requires that you put your money away for a chosen period, high interest savings accounts offer easier access to funds.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
Important: The standard brokerage fee displayed is the trade cost for new customers to purchase $1,000 of either Australian or US shares. Where a platform charges different fees for both US and Australian shares we show the lower of the two. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.
Disclaimer: General information only. All forms of investments (and in particular, trading CFDs, commodities and forex) carry significant risk, including the risk of losing more than the invested amounts, market volatility and liquidity risks. Past performance is no guarantee of future results. Such activities are not suitable for most investors.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
Trading CFDs and forex on leverage is high-risk and you could lose more than your initial investment. It may not be suitable for every investor. Refer to the provider’s PDS and consider the risks before trading.
*Past performance data is for period ending June 2023 and fee data is updated monthly.
Disclaimer: Performance, fees and insurance data are 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 and 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.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
Those with a high-risk tolerance could try options.
Options aren't really considered investing, but instead are trading.
This is because when you trade in markets such as forex, CFDs or futures, there's a high possibility you'll lose your money. In the case of CFDs and forex, most customers lose their money – so in some ways, trading can be more like gambling.
As always in investing, the higher the risk, the greater your potential to make a big return. If you're willing to take on the risk, below are some of the options you can choose:
Options
Options are contracts that let you buy or sell underlying assets at specified prices on specified dates, without actually having ownership. The period they remain valid for can vary from a few weeks to a few months. Investing in options requires that you learn the tricks of the trade well. Fail to do so and you may lose money.
Futures
You can benefit by investing in futures through considerable leverage. With $5,000 you can control a futures contract worth around $75,000. However, you may need access to additional cash if your broker makes a margin call. A risk to keep in mind is in the end, you could lose more money than you'd started off with.
Trading foreign exchange
You can benefit through leverage by trading currencies in the forex market, but you can also suffer significant losses. Similar to the futures market, leverage allows traders to make a significant amount of money from small initial investments in exchange for the risk of losing it all. Head to our guide on forex trading to find out how it works.
Minimum amount requirements. If you want to open a term deposit, the starting point is $500 or $1,000. Traditionally, you would have to start with something similar to get into the share market. However, investors who shop around can enter the market for as little as a few dollars both in Australia and with US stocks.
Fees and commissions. Fees vary across different products. If you plan to invest in shares or ETFs, expect to pay some kind of brokerage fee. High interest savings accounts and term deposits tend not to charge any account-keeping fees.
Putting your money into a savings account won't give you the returns you might want. However, it comes with the least risk. It could be helpful if you need access to the funds over a shorter period.
Any money you need in the next 3 years is probably better to be in a savings account. This is because investing can be volatile and your capital could fall when you need the money.
It also has a major benefit of being government-backed and guaranteed returns. This means if an investor places up to $250,000 into a bank account, even if the provider collapses the government will guarantee your savings.
Although it's worth pointing out this is only to a maximum of $250,000, so anything above this is not guaranteed. Instead, investors could open multiple accounts with different providers.
While your money is safe in a savings account, it does come with some drawbacks.
Australia's current cash rate is still low at 2.35%, even though the RBA has been rapidly lifting rates in the last few months.
At the same time, inflation is still relatively high.
This means that your money is going backwards in real terms.
Your capital can fall. Investing comes with risks. You can lose part or even all of your investment if it goes wrong.
Limited information. A little research can go a long way in the world of investments even if you're putting your money in a seemingly simple asset like a term deposit. This is because not all financial institutions offer the same interest rate. When dealing with more complicated assets such as shares and futures, learning the intricacies becomes more important.
Fees. When you invest your money, you'll use the services of a financial institution or a broker or both. Before you begin any such relationship, take the time to find out the cost of fees in different situations.
Risk. In most cases, there is a direct link between the risk your investments face and the returns they generate. If you're looking at greater potential returns, it is only natural that you should prepare to take higher levels of risk. However, risk perception can vary and does not have a necessary bearing on statistical analysis.
Risk profiling. Assessing your willingness to take risks and understanding how they can affect your judgement make up your personal risk profile. By going through the process of risk profiling, you address aspects such as risk capacity, risk required and risk tolerance. This helps you find out your optimal investment risks.
Financial goals. Setting financial goals is crucial but you should measure how you're doing as and when required. When planning for retirement, calculate just how much money you'll require when the time comes.
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades. Read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) for the product on the provider's website.
Frequently asked questions
Diversifying your investments across different asset classes can help you minimise risk. You don't have to suffer much if any asset underperforms because benefits from other assets can often offset the same.
Yes. The value of shares can drop all the way down to zero. If the company you've invested in goes bankrupt, you stand to lose all your money.
Penny stocks are stocks that trade at low prices, typically under $5. They tend to come with a higher risk compared to conventional stocks.
Important information: Powered by Finder.com.au. This information is general in nature and is no substitute for professional advice. It does not take into account your personal situation. This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for most investors. You do not own or have any interest in the underlying asset. Capital is at risk, including the risk of losing more than the amount originally put in, market volatility and liquidity risks. Past performance is no guarantee of future results. Tax on profits may apply. Consider the Product Disclosure Statement and Target Market Determination for the product on the provider's website. Consider your own circumstances, including whether you can afford to take the high risk of losing your money and possess the relevant experience and knowledge. We recommend that you obtain independent advice from a suitably licensed financial advisor before making any trades.
Kylie Purcell is the senior investments editor and analyst at Finder. She has completed a Certificate of Securities and Managed Investments (RG146) and specialises in investment products including online brokers, robo-advisors, stocks and ETFs.
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