7 Top investments for young Australians in 2021

MARISSA HAYDEN
Content Producer · 12 July 2021
Every home deposit or nest egg needs to start somewhere and the sooner you start, the better off you’ll be later.

Let’s face it, being young today is hard. Rent is expensive, food is expensive, uni is expensive and the less said about housing the better. But even if it takes hundreds of years of forgoing our $20 a week smashed avocado obsession to save up a house deposit, that doesn’t mean you can’t start investing now.

Start sooner rather than later

We’ve all seen the Compare the pair ads where Alice and Bob both make the same salary but Alice’s super provider has a better return, and by the time they retire she has thousands more in her account than Bob. Compound interest is a strange and powerful force and over time can make a huge difference to your investment.

If you were to start saving while you’re young, even if it’s only a small amount, you’d have time on your side to grow your money. A little now can add up to a lot later, especially with the help of compound interest. You can start investing with as little as $500 in an exchange-traded fund or $1000 for a managed fund.

What should you do before investing in stocks?

Before you go racing off,  it’s a good idea to make sure that your finances are in good shape. While there’s not much you can do in the short term about your HECS/HELP bill you and I have hanging over our heads, you can make sure that your bills are paid and your credit card doesn’t have a mountain of debt.


There’s not much point in making a killing on the stock market if the power company is going to shut off your lights. If you’re in a stable enough position that you can afford to set aside a few hundred dollars, you can start having a look at what’s available out in ‘finance land’.

Ways to invest

There is a seemingly endless array of ways you can invest – ASX 200 funds, emerging market ETFs, REITs, mFunds, CFDs, CDOs – it seems that no matter your interests, there’s a place for you to invest, and in many ways, that’s true.

Hiring a financial adviser can be a bit pricey, but it can also be a great way to identify what’s right for you. Everyone’s situation is different, and an investment that suits your friend might not be a good fit for you.

Working with a financial planner

Whether or not you decide to engage with a financial planner, it’s probably still helpful to get an understanding of the investment options available to you. Below are some of the most common ways to invest and what they offer.

Shares

Old fashioned but no less important, buying shares is still very much a part of many peoples’ portfolios. Buying and selling shares can be a bit intimidating for a first-time trader and it generally requires a bit more involvement than some of the other options. However, typically what it does give you is direct control over your investment, and you can pick and choose exactly what you want to hold.

The mantra of buy low, sell high remains true today, but it’s not the only way to cash in on stocks. You can also receive dividends if the company makes a profit. Buying individual shares is perhaps not the most beginner-friendly and you will need to consider the risk element involved in this type of investing. However, it is often easily customisable to your needs and interests.

Want to trade shares or ETFs? The table below displays a snapshot of online share trading platforms on Canstar’s database for ‘casual investors’, and with links to providers’ websites. Please note that these results are based on an average of 2 trades per month, are ordered by star rating, and then by providers’ name alphabetically. Before investing, check upfront with your provider and read the PDS to confirm whether it meets your needs. 

ETFs

Bought and sold like a share, an ETF is actually a pool of money from many different investors that is then used to buy shares across a portion of the market. The dividends are then passed on to you, the investor. ETFs seek to replicate an index, like the top 200 companies in the Australian Securities Exchange, the ASX.

So, every time you invest in an ETF you are in effect making a small investment in each of the funds captured in the index. ETFs are a fairly straightforward investment option, and cover a wide variety of market sectors, but can never outperform the index it tracks. You can invest in ETFs with an online share trading platform.

Managed Funds

A managed fund pools your money like an ETF, but instead of passively tracking an index, it is actively overseen by a manager who tries to make the best return they can for you by choosing what stocks to buy and sell. A managed fund will have a particular strategy that the fund manager employs, like investing in high-risk Australian shares or low-risk government bonds.

The fund manager hopes to outperform the market with their strategy, but there is always the risk they will underperform. Nevertheless, these funds are another popular investment option for those just starting out.

Superannuation

Ok so, you won’t get to enjoy your money until you retire but putting more money into your super now will mean you have more later. Current regulations allow you to invest up to $25,000 a year into your super (inclusive of employer contributions and personal contributions) at a concessional rate of only 15%.

You can also consolidate your super to make sure you only have one account, to cut down on the fees you’re paying as well as adjust your super strategy to suit your needs.

Cryptocurrency

There has been a recent boom in cryptocurrency, especially in the younger generations. If you’re starting out and want to learn more about the pros and cons of investing in cryptocurrency, you can see the latest trends at Canstar’s cryptocurrency hub.

Term Deposits

When you invest in a term deposit through either a bank, credit union or building society,  you are agreeing to setting aside an amount of money for a set time period (a term), and during this time you will earn interest on your investment. However, if you need to access the money before the term is up, you will likely face some hefty fines. Term deposits are popular with investors who prefer guaranteed returns over the fluctuations of the stock market. However, the investment returns from term deposits are typically lower than the potential gains of other more risky investments.

Property

Despite the property market working against most young Australians, it is still possible to get in on the action. The cost of housing does make it tricky to save up a deposit, but if you manage to squirrel away a sizeable chunk of your income, then you can take advantage of the historically low interest rates. For some, investing in property has two main benefits: a place to live and no longer having to pay rent, and the opportunity to sell the property in the future for a profit.

For others, entering the property market is strictly an investment. In this instance, not only do you benefit from capital gains when the property is sold but you can also derive an income from the property through renting it. However, be aware that renting out a property is not a hands-off investment and in some instances can be costly. There are a number of responsibilities and obligations that come with being a landlord such as maintenance to the property.


Compare Home Loans with Canstar

Lowest interest rates for 1-year fixed home loans

The comparison table below displays some of the 1 year fixed rate investment home loan products on Canstar’s database with links to lenders’ websites available for a loan amount of $350,000 at 80% LVR in NSW, and available for Principal and Interest repayments. The results are sorted by comparison rate (lowest to highest), then by provider name (alphabetically). Before committing to a particular home loan product, check upfront with your lender and read the applicable loan documentation to confirm whether the terms of the loan meet your needs and repayment capacity. Use Canstar’s home loans comparison selector to view a wider range of home loan products. Canstar may earn a fee for referrals.

*Comparison rate based on loan amount of $150,000. Read the Comparison Rate Warning.

Lowest interest rates for 3-year fixed home loans

The comparison table below displays some of the 3 year fixed rate investment home loan products on Canstar’s database with links to lenders’ websites available for a loan amount of $350,000 at 80% LVR in NSW, and available for Principal and Interest repayments. The results are sorted by comparison rate (lowest to highest), then by provider name (alphabetically).Before committing to a particular home loan product, check upfront with your lender and read the applicable loan documentation to confirm whether the terms of the loan meet your needs and repayment capacity. Use Canstar’s home loans comparison selector to view a wider range of home loan products. Canstar may earn a fee for referrals.