Smart ways to invest $10,000

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Investments that pay interest are often seen as safe investments. But some types of interest bearing investments may not be as safe as you think. Here we describe different types of investments that pay interest and when they may be right for you. We also explain the advantages of investing your money with a 'prudentially regulated' institution.

What you are really doing is lending money to a company, financial institution or government and in return you receive interest payments. Simple investments like term deposits are unlisted, you invest directly with the financial institution. Some of the more complex interest-bearing investments such as debentures, unsecured notes and mortgage funds are also unlisted, which usually means you deal directly with the product issuer and they cannot be traded on a secondary market.

This may mean they are less transparent and harder to sell. When interest-bearing investments like bonds or capital notes are listed, they can be traded on an exchange such as the ASX, which makes them easier to value and buy and sell. Just because an investment promises interest doesn't mean it is safe. Investments vary from the very safe, such as a savings account or term deposit with a major bank, to the very risky, such as unlisted unsecured notes.

You need to examine a product carefully, and not be swayed by the name used to describe the product. For example, a 'secured note' does not safe investment options australia a safe investment, it means that the issuer has provided some form of security to the trustee of the note issue.

The product is not guaranteed, and there is a risk you could lose some or all safe investment options australia your money. This would apply to products such safe investment options australia savings accounts and term deposits but not to other riskier interest-bearing investments.

Find out more about the government guarantee. It won't guarantee your money, but it does at least mean the company has a higher level of accountability. APRA regulates banks, building societies, credit unions, life insurance companies and superannuation funds excluding self-managed super funds.

APRA licenses and monitors the financial soundness of the institutions it regulates, safe investment options australia gives you a higher level of protection than with unregulated entities. It has a list safe investment options australia regulated entities on its website as well as a disqualification register, so you can check that the entity you are dealing with is licensed.

Higher returns usually mean there is a higher level of risk involved. Safe investment options australia may lose your money if:. Not all investments paying interest are suitable for all purposes.

Safe investment options australia because an investment is paying interest does not mean that your capital is safe or that you are guaranteed to receive interest payments. You need to understand the nature of the investment and the risks associated with it.

Some types of investments paying interest are relatively safe and safe investment options australia can be quite risky. It's very important to do your research before you invest in some of these products. Investments that pay interest can differ in the following ways. Interest rate Floating rate safe investment options australia the interest rate can change over the term of the investment, usually in response to changes in the market Fixed rate - the interest rate is set and will not change over the life of investment Time period At call - you can access your money at any time although some products may require a day or two's notice Fixed term - your investment is for a specific length of time Listed and unlisted investments paying interest Simple investments like term deposits are unlisted, you invest directly with the financial institution.

Read more on investments that pay interest: Higher returns, higher risk Higher returns usually mean there is a higher level of risk involved. You may lose your money if: Products vary in risk considerably so read the prospectus or PDS carefully to understand the security being offered and what your money will be used for. The risk of these products can also vary considerably so make sure you know exactly what your money will be used for, and understand the risks, before you invest.

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We explain how can you get the most from your savings, whether it's reducing debt, creating an emergency fund or starting an investment portfolio. Don't forget to revisit your goals first so that whatever you decide to do fits within your overall financial plan. The first step in any financial plan is to set some goals. What are you trying to achieve? How long will it take? The investment you choose should suit your investment timeframe.

If you have already set your goals, your financial decisions should support those goals. Check out our web page on goals and risk tolerance to help you get started. Interest on these types of debt is not tax deductible and is usually quite high, so these debts should be your first priority. Credit card debt usually carries the highest rate of interest, so the sooner you get them paid off the better.

Personal loans are also often high-interest debt and depending on the amount of the loan, the repayments can take up a large chunk of your income. This money could help a lot if say, you are temporarily unemployed, your car needs major repairs, or you have urgent home maintenance to do. How much you need in an emergency fund will be different for each person. We suggest working out how much you would need to cover all household bills and expenses for 3 months and use that as a starting point.

Make sure your emergency savings are in a high interest savings account you can access when you need to, but try not to dip into it unless it is really an emergency. Exchange traded funds ETFs can be a low-cost way to gain exposure to growth assets like shares or property without a large up-front investment, and without having to choose individual assets. This sort of investment has a higher risk than a savings account but will usually provide higher returns over the medium to long-term.

ETFs can be bought and sold like shares on a stock exchange, through your stockbroker or online trading account. ETFs in Australia are passively managed investments, meaning they track an asset or market index, and usually have lower fees than traditional managed funds.

They are available for assets such Australian shares, international shares, property, fixed income products, foreign currencies, precious metals and commodities. Read the PDS carefully before you invest to make sure you understand the investment. Find out more about ETFs. An index fund generates a return, before fees, that is almost the same as the index it is tracking and is an inexpensive way to gain exposure to a large portfolio of assets. Read the PDS carefully before you invest.

If you want to retire with a similar standard of living to what you are used to while you are working, your employers' super contributions are probably not going to be enough. Adding to your super can be tax-effective and because the money is locked away until you retire, you will reap the benefits of compounding returns over time.

If you are planning to add to your super you should also think about reviewing your super investment options and check the super fees you are paying. Consider your current financial position, your goals and what's most important to you, so you can work out the option that suits you best. Credit cards Credit card debt usually carries the highest rate of interest, so the sooner you get them paid off the better.

Work out how you can pay off your card faster and how much you can save. Credit card calculator Personal loans Personal loans are also often high-interest debt and depending on the amount of the loan, the repayments can take up a large chunk of your income. See how much faster you can repay your personal loan. See how much interest and time you can save by making extra repayments. Consider an exchange traded or index fund Exchange traded funds ETFs can be a low-cost way to gain exposure to growth assets like shares or property without a large up-front investment, and without having to choose individual assets.

Boost your super If you want to retire with a similar standard of living to what you are used to while you are working, your employers' super contributions are probably not going to be enough. There are two ways you could contribute your savings to super: Salary sacrifice through your employer - this will reduce tax and you can top up your income from your savings Make an after tax contribution to super - this can be a good option for low income earners as they may also be eigible for a government co-contribution.

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