Best Way To Gain Money (Lump Sum) Also extremely low risk of losing it

revo on 19/06/2013 - 22:37
Last edited 23/06/2013 - 01:03

Hi guys!

I have a lump sum of money which my mum had saved up for me through AMP and I was wondering what was the best way to get the most out of it as I do not see use for the money any time too soon. I've heard term deposit for bank gives some decent interest rate and also it seems pretty safe. Also when I say low risk I mean as low as if power blacked out and data gets erased. Shares are probably too risky and I do not want to lose this money. (Perception changing after feedback)

Thanks!

Extra details:
Amount: $20k
No Mortgage for me or my parents
I am 20 y.o.
Not looking to use the money within next 5 years. Probably 7-8 years later is when I will use it.

Reading through the comments there seems to be a good suggestions for investing in banks, although I have close to 0 knowledge in share as I have never bought any.
Extra Questions:
CPHO recommended Commonwealth Share Pack; is that a safe investment? https://www.comsec.com.au/Public/Products/SharePacks.aspx
Also theophilusthistler and a few others recommended Managed Funds/Index Funds. Which I have never heard of but from your words it seems relatively safe

Also are they quite simple to manage, do I need to keep an eye on them? Is there a particular amount of time I should invest for? Risk factor? Is it worth the risk for the gain compared to a term deposit? Term deposit for 5 years seem to be 4.3%pa Roughly.

Pistep has recommended I invest in the big 4 banks which seems like a pretty good idea and relatively safe as well. Commbank, Westpac, and ANZ seem to have performed quite well in the last 10 years whereas NAB seems to have remain quite stationary. Thoughts on investing in the big 4 banks? Also when you invest in the big 4 banks do you invest in shares they own or do you invest in the bank itself?

Financial

Comments

  • ozhunter68 on 19/06/2013 - 22:53
    -2

    I would put my money into Gold Bullion ( physical, not futures ). It has outperformed the average shares over the last 6 years ( medium to long term ), and at the moment is considered by many expert investors to be cheap ( undervalued ). Also no need to declare the gains for tax.

    • revo on 19/06/2013 - 22:57
      -1

      Thanks for your reply! ummm but does that mean I need to find space for it :( Bigger security box? Also don't I run the risk of if there was a sudden abundance of gold that value will slump to almost 0? How unlikely is that to happen?

      • Car-la-la on 19/06/2013 - 23:04

        lol unless you have squillions of dollars, finding space for gold bullion will not be a problem - a kilo of the stuff is like the same size as an iphone (and will set you back about $50,000).

        • revo on 19/06/2013 - 23:40
          -2

          Yea I just realised how expensive it is == But how come jewellery seems so cheap

        • Ughhh on 20/06/2013 - 02:58
          +5

          Most of the jewellery you see at shiels etc. Aren't pure. The jewellery you see on ozbargain is mostly costume jewellery, they worth nothing, including that gold plated crap.

        • Cluster on 21/06/2013 - 13:56

          Jewelery is very light. You're unlikely to be carrying around more than a few grams of gold in any piece. Also pure gold (24k) is very soft and wears easily. No good for making jewelery. Therefore gold is mixed with other cheaper, softer metals which also greatly reduces the manufacturing cost. Then there's gold plating which is an extremely cheap way of making 'gold' jewelery.

        • bargdebarg on 22/06/2013 - 19:17

          I didn't know you're a financial advisor Carlala!

      • CyberMurning on 20/06/2013 - 09:06
        +1

        "Also don't I run the risk of if there was a sudden abundance of gold that value will slump to almost 0?"
        funny i thought human cant create gold.

    • ESEMCE on 20/06/2013 - 10:20
      +4

      Bad idea in my opinion..
      Gold is at record high prices at the moment.. if it were at record lows, then the risk of losing value would be low, but at the moment, with global economic outlook appearing to turn, Gold price will drop as investors pull their funds out to invest in riskier, but more productive assets.

      • JetBombat on 20/06/2013 - 19:55

        It is not gold is expensive, it is dollar losing the value IMO

        • ESEMCE on 21/06/2013 - 09:11

          The graph linked below is in $US which has gone UP (causing the $A to go down).. ie the $A is irrelevant.

          Gold is just coming off the most expensive it's ever been!
          There is a chance that it will jump back up and continue to break price records, but given what we know.. ie the global economy has been going backwards and there are increasing signs that it's starting to turn upward again (or at least flatten), the chances are much higher that the gold price will drop as investors pull their money from that "safe" asset to put back into more "risky" but higher yielding assets.

      • cannedhams on 20/06/2013 - 23:19
        +2

        It is a bad idea, and even a worse idea to buy physical gold. If you dont trust the usual suspects buy gold certificates from the Perth Mint, rather than paying a bunch of mugs to stand around and guard your gold for you.

        Somehow gold bugs think that having physical gold bullion means that they can survive the upcoming zombie apocalypse, although frankly if it comes to that I would much rather have a shotgun, some food and water rather than gold bars.

        People who have bought gold in the last few months have by and large lost their shirts (and then lost a bit more in brokage). Stay away, IMO.

    • ESEMCE on 20/06/2013 - 11:56
      +1

      Gold is not cheap..
      http://www.kitco.com/scripts/hist_charts/yearly_graphs.plx
      Sure the last 6 years have been good, but that's because it's viewed as a safe investment in a risky environment.

  • YTW on 19/06/2013 - 23:02
    +3

    Well you either buy into the theory that our banking and monetary system are safe or you don't.

    If you do, then a term deposit or higher interest saver type of account with any Australian bank probably be your best option if you are after a low risk place to park your money. Otherwise a crapload of tinned food, can opener, shot-gun and a lot of ammo would be your best 'investment' for any apocalyptic scenario where the lights go out and don't come back on.

    • retiredfeline on 19/06/2013 - 23:16
      +2

      Don't forget the inflatable doll. ;)

    • Geewhizz on 20/06/2013 - 07:17

      Term deposits are not paying all that well of late.

  • May4th on 19/06/2013 - 23:11
    +8

    you have two choices, either stick with what you know and go for a low risk/low yield option like term deposits, or govt. bonds etc. or take a risk with something you are not familiar with on the advice of people with unclear qualifications on online forums, and options are too many to list ranging from shares to property.

    bottom line is, you are not going to take anything away from asking people online on what to do. they might help, but should in no way dictate your decision. do your research, or if it's a large sum of money and you don't have the time, see a financial consultant. the alternative is to go safe/low yield, term deposit is probably not too attractive at the moment given the low rates.

    • revo on 19/06/2013 - 23:44

      Yea I was thinking of doing a term deposit but interest rate atm is pretty low :( hence looking for different methods. How much is a session with a financial consultant anyway?

      • 2ndeffort on 20/06/2013 - 00:58
        +4

        Financial planners normally give you the 1st appointment free, some never charge for their services but are remunerated via commissions they get from selling you stuff. Be wary of these guys because you never know if you are being sold the product that is best for you or the one that offers the best commission!!

        Risk=Return. Also, any interest you make on term deposit will be taxed at whatever your marginal tax rate is. Depending on how much you earn you could lose almost half of whatever paltry interest you earn by having to pay it to the taxman.

        If I was in your shoes I would pay it off my mortgage. If you don't have a mortgage I reckon you are better buying shares in a bank than depositing money there. The dividends that you get from the bank will be fully franked so you can offset the company tax paid on them with your own marginal tax.

        • revo on 20/06/2013 - 01:38

          So buying shares from the bank is better than banking it? Yea Risk = Return :(
          The amount I have is in the low tens of thousands and my mum has been saving that up for me for 20 years… if it was my own money I'd probably invest in something, but since it is what my mother has saved up for me it's another story if I lose it :/

        • 2ndeffort on 20/06/2013 - 02:04
          +1

          I'm not sure what the yield is at the moment on bank shares but you dont get much more 'Blue Chip' than Aust banks. It wold be a pretty extreme case if one of our 'Big 4' banks was to go broke. Most of our Super funds would probably collapse if it happened!

          If Bank shares are too risky for you then I'm not sure you will find anything paying you better than bank interest rates. Government Bonds are widely recognized as the most 'risk free' investment you will get, maybe that is an option.

          Someone else mentioned Gold, you'd have to make sure you looked after the gold in case anybody stole it and, like property or shares, the Gold price goes up and down as well.

        • YTW on 20/06/2013 - 09:11
          +1

          Well your best place to start is to have a serious think about what you are going to use the money for, which will lead you to deciding when you will need access to it. I presume your mother had ideas for what the money would be used for when she was saving it for you? University fees? A car? House deposit?

          If it is short term then you can definitely rule out anything risky, if it is long term (5+ years) then you might want to put some of the money into good quality longer term investments. That will help dictate where you put the money whilst you don't need it.

        • ESEMCE on 20/06/2013 - 10:24
          +1

          +1 to putting it into the mortgage..
          if you don't have a mortgage, then put it into blue chip shares.
          If you don't think you'll need it for decades, consider paying it into your Super.. (which is effectively shares, just managed by your super company)

        • Gina Rinehart on 20/06/2013 - 21:34

          If you invest properly, there is next to no risk of losing your money, worst case scenario (other than a gfc again, which doesn't seem that likely right now), you only make a bit less than what you wanted to. As long as you don't put all your eggs in one basket and choose a bunch of different, well performing shares (seek advice on which ones), you should get a nice portfolio with a good yield.

        • ESEMCE on 21/06/2013 - 09:19

          The problem with property is that you have to borrow to buy unless you have a couple of hundred thousand which the OP does not have.

    • KiLLUMiN4Ti on 20/06/2013 - 13:48
      -3

      lulz @ the negz- ignorance is bliss ;)

    • kurtkubin on 21/06/2013 - 22:23

      great to see another port publishing subscriber, i am baffled as to why you are so heavily negged.

      • [Deactivated] on 22/06/2013 - 03:58
        +2

        I haven't negged, but I can tell you probably why others have.

        I subscribed to their emails for a couple of years. They harped on claiming property would crash in Australia - to at least half it's value. Property did start to fall - slightly - they kept on harping for several weeks, but prices stopped falling. So they suddenly announced they wouldn't be mentioning property anymore, because they had said it would "crash" - and it had! (Absolute rubbish.)

        I'd been with them all the way up until that point. (Not a critic.) When they claimed their "victory", when in fact they were totally wrong, it proved they are unwilling to admit they were wrong at best, or dishonest at worst. So I unsubscribed.

  • CyberMurning on 20/06/2013 - 09:08
    +8

    goz.. dont be greedy unless you know what you doing, dont listen to people suggesting gold silver share.
    just stick it to highrate saving or term deposit, and you can sleep at night, study hard and get good job after finish uni.

    • KiLLUMiN4Ti on 22/06/2013 - 16:33
      +1

      Get a job. Go to work. Get married. Have children. Follow fashion. Act normal. Walk on the pavement. Watch TV. Obey the law. Save for your old age. Now repeat after me. "I am free" :P

      "don't be greedy unless you know what your doing"- couldn't agree more :)

  • Oofy Doofy on 20/06/2013 - 09:34

    TBH, the best investment right now would be to make new affordable dwellings for people to rent (or buy). With that though, comes a shit-load of stuff to figure out, beyond the grasp of anyone not in the industry (development) already.

    • Riczter on 20/06/2013 - 10:12

      You know that's a good idea… for a person experienced in the field… Hmmmm

      • Oofy Doofy on 20/06/2013 - 10:34
        -1

        The layman could buy a parcel of land for the right price and build an affordable property on it (taking into account what most people in the area are looking for) and make a good return on $. In many instances, town houses and units are the best bet.

    • No on 21/06/2013 - 13:58
      +4

      How many dwellings can you get for 20k?

  • Riczter on 20/06/2013 - 10:12

    Put half in term deposit, a quarter in gold, and leave a quarter for a rainy day in case you want buy something.
    Diversification is good :)

    You're not going to find a good low risk return in this market.

    • ESEMCE on 20/06/2013 - 10:26
      +1

      apart from shares..

    • May4th on 20/06/2013 - 21:16

      it depends.. diversification is only good if you want to limit exposure and be sheltered from market volatility. which may or may not be your goal. and in that case you are probably better off with something safe and doesn't require research/time anyway like term deposit

    • ThadtheChad on 20/06/2013 - 17:03
      +6

      So when's Jesus coming back with my dry cleaning?

    • tomclancy on 20/06/2013 - 20:29
      +6

      You can't be serious

    • May4th on 20/06/2013 - 21:44
      +4

      hahahaha

    • SydBargainer on 21/06/2013 - 05:06

      Not sure if serious.

    • m0nkeycheese on 23/06/2013 - 23:43

      You are not a postman by any chance are you? Or have a friend that is?

  • sweefu on 20/06/2013 - 10:34
    +1

    How old are you?

    If you're young, you have more time to recover before retirement therefore can look at risker options. But if your mum worked her arse off to save this money, it would be selfish/foolish to invest it in a high risk product.

    If you don't have a mortgage, do your parents? you could park it in their offset account for a while.

    If you want to look at shares, I would be checking out an index fund. Lower fees than a regular managed investment fund, but still gives you exposure to the market.

  • Almost Banned on 20/06/2013 - 11:46

    IMHO you should be looking at high yield blue chip shares.
    Gold has performed well over recent years because of global uncertainty. Again, IMHO that has to start turning around and people will start moving money into other asset classes chasing higher returns.
    Blue chips are pretty safe - a good example is the Big Four banks, very safe investment and good strong yields.
    Also Telstra and Woolworths seem pretty good safe options.
    If you want to go with property maybe consider property shares or a property unit trust through a managed fund.
    Either way, get some professional advice and don't just rely on what strangers on a website tell you.

    • ESEMCE on 20/06/2013 - 11:53

      For some reason the OP thinks shares are high risk! No idea where that idea comes from.
      They're by far the highest yield and safest medium-long term investment.

      • May4th on 20/06/2013 - 21:18

        people are still spooked by the GFC..will take some years for the masses to walk out of that shadow ;)

        although shares are probably the easiest way for someone who has no idea what they are doing who want to make a quick buck to lose all their money

        • nedorb on 20/06/2013 - 22:16

          Made about a hundred thousand dollars post GFC, some stocks were ridiucously undervalued. As Chuck Norris once famously said:buy low, sell high ;).

        • ESEMCE on 21/06/2013 - 09:22
          +1

          Shares should be bought and held.. Provided you're buying a company with strong financials and a good product, the chances of losing money over time are very small.
          Buy CocaCola, Woolworths, Australian Banks, big miners you pretty much can't lose over a ten year+ timeframe.
          "playing the market" is for people with squillions and doing it full time, it's basically gambling.

      • MementoMori on 21/06/2013 - 09:37

        Ummm… IIRC the sharemarket almost halved just a few years ago?

        • ESEMCE on 21/06/2013 - 14:38
          +2

          Who cares, that just makes a perfect time to buy and noone lost anything unless they needed to sell!
          In 10 years time, there is a very good chance that the sharemarket will have surpassed the value of a few years back and grown significantly more.
          If the OP wants to have access to the money at 24 hours notice, then sure, a bank is probably the best bet, but over 10 years, the sharemarket is statistically just as secure and has a far higher gain!

  • revo on 20/06/2013 - 12:16

    My knowledge in shares are actually extremely low all my frienda who do invest in shares usually aim to achieve profit in very short period hence why there's this worry at the back of my head since a lot of them have lost and gained.
    Also give me an example of how low the risk is for investing into blue chips/big banks. And if we were talking about interest rate how much % would I be looking at. Rough estimate will do as no one would actually know haha.
    I'm with comm bank so should I invest in their shares?

    Thanks for all your responses guys

    • narbe on 20/06/2013 - 12:24
      +2

      wouldnt invest in shares unless ur interested.
      a common rule is invest in something your interested in and understand or are willing to learn about.

      shares can pay out dividends that are fully franked (tax paid max 30%)
      keeping shares for more than a year means gives u a 50% tax benefit meaning only paying tax on 1/2 of it.

      the benefits of keeping shares is its easy to liquidate it at a moments notice

      no hassle of dealing with tenants in comparison to property.

      other than that depends on the "lump sum" your dealing with

      if its a small amount shares and term deposits are your best bets

      larger amounts well… there are plenty

    • theophilusthistler on 21/06/2013 - 01:27
      +1

      Your question is not actually an easy one to answer.
      An expected return on a share would typically be 8-12% pa. Some shares with higher risk would expect a higher return. This is very particular to each stock. Some shares will be good, some shares will be bad, and only time will reveal which is which. Some years nearly every stock will be good, some years nearly every stock will be bad.

      The risk of losing money in the stock market is MUCH less when you diversify (hold more than 1 stock). As I mention below in my long post, index funds are a much better way to start in the sharemarket. You will get the average market return (which will be just as good as your friends investments), and you wont have as much risk of losing much of your capital at all. FYI ask your friends how ALL their returns (including the bad ones that they probably wont want to talk about) compare to the market return. Compare again after removing the fees they have paid.

    • ESEMCE on 21/06/2013 - 14:48
      +1

      Also give me an example of how low the risk is for investing into blue chips/big banks.

      The main risk is that the bank you invest in goes belly up.. What do you think the chances are of that happening? (it's not impossible, as we've seen recently in Greece and similarly with lehmann Brothers in the US a few years ago, but Australian Financial regulation is far stricter)

      There's no specific reason to invest in the bank you bank with (apart from maybe feeling less screwed by their fees, since you're at least partially benefiting from it).

      Shares generally pay dividends every 6 months, for a bank in the order of 20c per share and if they're fully franked, the tax will have already been paid on that dividend (at the lower 30% company tax rate) = more money for you.
      Plus any gains that the share price makes during your time of ownership, which noone can tell you..

      I support theophilusthistler's suggestion of going for a managed investment share.. ie shares in a company that buys and sells shares of other companies. basically the same business model and risk as a Super fund, with the convenience of being able to sell your shares to get your money back (without the hurdles that a Super Fund has).

  • twodollah on 20/06/2013 - 12:49
    +1

    How much is your 'lump sum' anyway? If it's significantly less than $10k, don't even bother with shares unless it's an ETF. The amount of research and time you'll be committing won't be worth the return on a measly investment.

  • Gaz1 on 20/06/2013 - 16:35
    +1

    You can compare a lot of the savings acount rates here:
    www.infochoice.com.au/banking/savings-account/list.aspx
    and term deposits here:
    www.infochoice.com.au/term-deposits.aspx

  • Windows7forever on 20/06/2013 - 17:02
    -6

    You should give that 20k to a Nigerian scammer for shits and giggles. Just don't let mummy find out.

    • pmupsinep on 20/06/2013 - 19:25
      +1

      I suppose it would be more socially acceptable than buying Harvey Norman shares.

  • freemoneyhunter on 20/06/2013 - 19:10

    If you can find a good agent, micro financing can bring good returns.

    Also prosper.com is good if you can get your money into the US

  • iluvbargains on 20/06/2013 - 20:00
    +4

    Look into the First home saver account…(google it) a government incentive which gives you a bank account in which you pay no tax on the interest, but you have to use the money in approx 4 years to buy your first home

    • Geewhizz on 21/06/2013 - 06:16
      +1

      The only problem there is that the money can ONLY be withdrawn to purchase a home.

      • inherentchoice on 23/06/2013 - 08:11

        Or it goes into your superannuation.

  • t_c on 20/06/2013 - 20:03

    Put it in Rabodirect HISA account @ 4.75% introductory 4 month rate. (government guaranteed upto 250k)

    during those 4 months have a read of 'The intelligent investor' by Benjamin Graham

    and always remember

    "The first rule of intelligent action by the enterprising investor must be that he will never embark upon a security operation which he does not fully comprehend and which he cannot justify by reference to the results of his own study and experience." -Graham & Dodd, Security Analysis.

  • iluvbargains on 20/06/2013 - 20:04

    The usual timeframe for investing in shares or other growth assets is 5-7 years. If you think you will use the money before then for say, a deposit on your first home, stick to the banks in a Term Deposit or risk losing that money. If there was a risk free option that could earn more than in the banks everyone would be doing it. So if you don't want risk, stick with the banks, especially if you intend to use the money in less than 5 years.

  • Shwayne on 20/06/2013 - 21:55
    +1

    You could look to converting some of it to USD, the AUD is going to see a sharp drop (into the low 80's) in the near future. (However it may be too late for that.)

    Gold looks to have fell quite sharply recently, and may be worth considering.

    There's nothing wrong with shares, just don't put 100% of them in one kind of stock, or sector.

    Keep some in fixed interest or a standard savings account, you may need to use it sooner than you expect. :)

    I am not a financial advisor, this is not financial advice.

    • Davidius on 25/06/2013 - 10:38

      buying USD while the AUD was at and above parity against it would have been a great short - midterm investment IMO too as you could have waited around a year to make ~ 15% when the exchange rate dropped well back under parity or just keep your USD reserves for the future. (you never know what you can use USD for).Speculating on foreign exchange does require constant attention, so it wouldnt be the comfortable investment the PO was after

  • starlancer on 20/06/2013 - 22:04
    +2

    How about putting part of it in a First Home Saver account (E.g 6K Every year).. here is one!

    http://mebank.com.au/personal/bank-accounts/first-home-saver…

    The benefits includes 17% govt contribution and reduced tax on the interested earned. The catch is you will need to keep the account for 4 years before using the funds to purchase your first home.

  • theophilusthistler on 21/06/2013 - 01:01
    +18

    Hi,
    You have done very well to have such substantial savings at your age.

    Be careful who you take advice from. Some people will charge you too much for good advice, but there is also a saying that says, the most expensive advice you will ever receive is free.

    First I would like to comment on Gold and Currencies. These are not suitable investments for you. They are both very volatile and do not produce any sort of growth or income. Gold and Currencies will fluctuate but no one can know for sure the how these will move. (If everyone expected Gold to go up, it would already be up reflecting the current markets opinion).

    The best return you can get (and probably the least popular for a 20yo) would be using the government co-contribution for super. The govt will match you contribution up to $1000 giving you a 100% return on your money which should continue to grow (this could change to 50% if the govt makes some changes). BUT you wont be able to get this money back until you can withdraw your super. Check out http://www.ato.gov.au/individuals/content.aspx?menuid=0&doc=…

    Your next best bet could be the first home savers account (FHSA). 17% bonus from the govt as well as bank interest, means you will get about 20% return on your money. You have to contribute at least $1000 for 4 financial years before using this money to buy a house, or rolling it into a mortgage. As suggested above, ME bank have one of the best accounts.
    http://www.ato.gov.au/individuals/pathway.aspx?pc=001/002/06…

    Next on the list would be a managed fund, or an index fund. Both will have great diversification benefits over investing directly in shares yourself (which is a great option too, but will take some work). If you are willing to put in a little effort and open a commsec account, you could look at IOZ (Australian share index) or IVV or IOO (international share indexes). More info on index funds at http://www.ishares.com.au
    Managed funds take out most of the work for you. There are many to chose from. Platinum Asset Management are excellent and invest in international shares. http://www.PlatinumAssetManagement.com.au
    https://www.moneysmart.gov.au/investing/managed-funds/how-to…

    Lastly, a term deposit or a high interest savings account is also a good suggestion. Interest rates are low now, but this wont last forever. You may get a poor rate now, but have the opportunity to reinvest it in a year or two at a better rate.

    Its likely a combination of these would best suit you. A high interest savings account is very accessible if you need to access the money. A manage fund or index fund you will usually pay a fee on entry and/or a fee on exit. These are typically intended to be a longer term investment. The price may fall in the short term but would be expected to outperform in the longer term. FHSA and super will not be accessible for some years.
    How you split your money is up to you.

    I am not a financial advisor, and this should not be considered personalised advice (I do not know your whole situation). I do have experience in investments and am studying finance. This list, in order, is how I allocate my savings. I hope you find it helpful.

    • revo on 21/06/2013 - 01:51

      Thank you so much for your lengthy response!I know you must have spent a decent amount of time on this.

      Super is probably not what I'm looking for as I probably will use this money within the latter of this decade.

      Mortgage probably isn't my thing either, as I am studying Architecture and that is an extremely lengthy course and so the quickest(likely hood still very vague) time I can finish my degree (B+Mas) is by the end of 2016. Realistically I'd purchase my first house closer to 2020 or sometime later.

      Managed Funds look pretty interesting, never heard of it before and I am after something I don't need to worry about too much. How safe is a managed fund and how do I go about it. I had a look at this but I don't quite understand the values written. http://au.investsmart.com.au/managed-funds/top-managed-funds…
      With my close to 0 knowledge of managed funds who should I speak to about it and which company is a good company to go with.

      Bank always looks tempting, however with the low interest rates at the moment is why I'm looking to alternatives. It seems that the longer you have it in the bank the higher the interest rate is. BUT if I invest all the money into a Term Deposit and the interest rate goes up. Does that mean I can't actually access the money so I can gain a higher interest rate. Is there a penalty?

      Thanks so much again!

      • theophilusthistler on 21/06/2013 - 16:59
        -1

        That is correct, if you have your money in a term deposit and interest rates go up you wont get that higher rate until your term is over. Generally you will get a higher interest the longer you lock it away for. There is no 'best time' to lock it in for, as the different time periods will have different interest rates that should reflect the predicted interest rates over that period. The penalty for withdrawing early would be different with each account, but are set to dissuade you from withdrawing early.

        iluvbargains is correct in saying you can have all different kinds of level of risk in a managed fund. And asking one of banks about investing in a fund should be fairly straight forward and probably the easiest way to go about it. Also be aware it would be in the banks interest (not necessarily yours) for them to suggest putting it all in a term deposit. This gives them a cheap source of funds.

        Generally the return (and risk) is higher in this order for assets, including managed funds which hold these assets.
        Shares >= Property > Bonds > Cash and Fixed Interest
        Hedge funds can be anywhere in this list depend on what they invest in and how they do it. They can also be much riskier! They are probably best avoided unless you care to do some looking research on them.

      • wtfnodeal on 22/06/2013 - 08:16

        As for TD, can you split your $20k into a few different TD account With diff maturity dates instead of 1 TD account with $20k in it.

      • SlickMick on 22/06/2013 - 16:17

        You said you want to invest this $20,000 for 7-8 years, and it seems your intention for it is to buy your first house?? And you want a safe investment with a good return?
        Then theophilusthistler gave you the ultimate answer. 20% return in a bank! You need to act quickly and get $6000 deposited this week. (That's the max the government will bump by 17%) Open a high interest online account for the other $14000, unless you can find term deposits that pays better, but you need another $6000 this time next year, then again the following year.

        Just remember that you have to contribute at least $1000 for at least 4 of the years between now and when you're ready to buy.

        If you won't have any more cash after this $20000, then it will just sit there earning low (3.5% atm with ME Bank) for the remaining few years, but overall it's a fantastic opportunity that exactly fits your needs.

        You sound like you have your life planned out (for next 8 years or so). The only reason I can see that you wouldn't go with a FHSA is if you might change your mind. Because if you don't buy a house, your FHSA can only go to super.

  • iluvbargains on 21/06/2013 - 05:12
    +1

    Hey mate
    With managed funds you can choose the level of risk you want - from Conservative to Aggressive. Just look at a PDS from one of the banks.
    Here's one provider as an example:
    http://www.suncorpinvestmentfunds.com.au/

    Most of the major banks offer a managed fund.

    With a long term Term Deposit, interest get paid yearly to your bank account, but you cannot access the capital during the term or you would get a breakage fee.

    Good luck!

  • Cheap Steve on 21/06/2013 - 07:19
    +1

    The first thing you should do is buy some personal finance books. I recommend:

    1.the richest man in babylon
    2. The millionnaire next door
    3. Motivated money and
    4. Any warren buffett book - i like Buffetology as a good start.

    Reading these books will give you a great foundation on the principles of growing your wealth in a reliable way and steer you away from the get rich quick merchants.

  • MementoMori on 21/06/2013 - 09:41

    If you want the lowest risk possible, I say stick it in a high yielding online saver (Ubank, ING, etc all) initially.

    Then you can research other options. Personally, I'd just keep adding to it and use it to fund your first home deposit in 5-10 years time (i.e. a 20% deposit on a 500k house would be 100k + buying costs of another 20k).

    You could also use the governments 'First Home Saver account' thingy to get a boost on your interest. ME Bank has such a product, no doubt other banks too.

  • srhardy on 21/06/2013 - 10:02
    -3

    Buy silver bullion, it has the most upside over time. Let me give you an example - if you had saved $1000 a year in silver bullion over 25 years you would have spent $25000 but its value would be over x4 times that and at its peak of $50 it would be worth around $200,000 depending on exchange rate chosen.

    Gold is a good store of value against inflation but a crap investment… An example is the cost of a good suite in golds value is about the same now as it was long ago; thats great if your hedging against inflation but i would invest for better shoes, socks, shirt and belt, as well as money for a nice dinner in Paris… Silver is always a better investment over time for wealth creation.

    I would avoid investments that get taxed, your making the government money - buying silver is tax free and perfect for the idiot investor and for your own super managament.

    • tonyjzx on 21/06/2013 - 14:52
      +2

      this

      4% to 4.75% is useless by itself and even worse when it comes tax time when you lose half

  • cpho on 21/06/2013 - 12:57

    +1 for silver. Good timing too.
    Silver just hit a 3 year low today.

    But then again, if you want a fairly low risk investment, take a look at Commonwealth's SharePacks, where they invest the shares in a mixture of BlueChip Shares.

  • congo on 21/06/2013 - 13:19
    +1

    Do the opposite of what most people (the market) recommends.
    For example, if everyone is buying shares, Properties, bonds or gold, then you shouldn't.
    If everyone is selling shares, Properties, bond or gold, then you should buy.

    • ESEMCE on 21/06/2013 - 14:51
      +1

      ie buy at the bottom of the market and sell at the top.

    • Davidius on 25/06/2013 - 10:40

      i like this advice but dont think its what the OP was looking for, but thats the way for sure

  • tooblue on 21/06/2013 - 13:57

    Since some comments mentioned gold and silver bullion, does any one know if the ETFs on ASX (GOLD, ETPMAG) is worth considering as an alternative to the bullions?

  • rooon on 21/06/2013 - 14:36
    -2

    Ubank

  • Lucky13 on 21/06/2013 - 15:29

    I dont know a lot about investing but the first thing that comes to mind would be to put it in a term deposit account at a safe bank like the Commonwealth Bank etc and just invest it that way.

    • congo on 21/06/2013 - 21:41

      Banks deposit are great in a recession.

  • Lucky13 on 21/06/2013 - 15:50
    +1

    http://www.westpac.com.au/personal-banking/bank-accounts/ter…

    Westpac term deposit calculator says ul earn $5000 over 5 years on $20000, not bad

  • mrmarkau67 on 21/06/2013 - 19:31
    +1

    Put it in a term deposit until you learn more about money and investment, and make it your business to learn.

  • revo on 21/06/2013 - 19:36

    Updated with a couple more questions to help narrow down where I should start

    • cpho on 21/06/2013 - 20:33

      Well, I know my suggestion on precious metals got negged and I accept the argument againtst it.

      My other suggestion with the SharePack stems from CommBank's new way to purchase shares; MyWealth where they have forums, and discussion boards about investments.
      They have a few good easy investments which are relatively high yield (Approx 30% for high growth), especially if you don't plan to touch them. Just purchase a share pack, they "help" you pick 6 blue chip shares, and you can pick how you want to distribute your money. Then leave it alone, collect dividends, and then come back for it in a few years.
      Otherwise if you're not keen on the SharePack, you could pick a few ETFs, like Property, ASX200, etc.
      Just don't go for the risky choices. Keep it relatively safe, and if you leave it alone, it'll grow.

      I'm in a similar position to you, but I need the liquidity so I put mine in a high interest account where I can withdraw easily.

  • danielz on 21/06/2013 - 20:10

    Additionally, you could take a look at investing in an Australian Real Estate Investment Trust (A-REIT). They net an average return of about 15% p/a

  • rooon on 21/06/2013 - 20:25

    Ubank usaver 4.66% at call. Better than term deposit imo

    • tooblue on 21/06/2013 - 20:53

      You think RBA will cut the rate soon?

  • PiStep on 22/06/2013 - 09:52
    +1

    Looks like a lot of comments here but I will add my 2 cents as well… as a successful (I think) investor I do have a little bit of experience…

    Safest way (i.e. Less risk)to invest money is term deposits in banks / credit unions, etc, this is a very safe way to invest money and is government guaranteed …… return on investment is low, especially when you take into account inflation rate.

    Because your initial investment amount is low, invest in some blue chip shares that have a dividend reinvestment scheme… I would invest 5k in each of the 4 big banks (and have), believe me these guys will not go bust, pay good returns (dividends) of 6 to 8% and over 7 to 8 years the capital growth, especially if you reinvest the dividends will be very good… Risk in this option is that the share price will go down… but over the long term 7/8 years, shares have always produced some of the best returns available… Just make sure you stay with quality shares.

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