Top 15 Investment Opportunities for Young Australians in 2024

Property

Property remains a significant investment aspiration for young Australians, though traditional property investment has high upfront costs that can be prohibitive. However, fractional property investment platforms like BrickX have made real estate more accessible by allowing individuals to purchase “bricks,” or shares, of residential properties.

Fractional ownership lets young investors access the property market without needing a substantial deposit. They can start small and increase their investment over time, enjoying the benefits of capital appreciation as property values rise. This model is particularly appealing in urban areas, where property prices are often beyond reach for younger buyers.

Government initiatives also support first-time buyers. Schemes like the First Home Owner Grant and First Home Super Saver Scheme offer financial incentives to help with deposits, making traditional property ownership slightly more attainable. These programs reflect the government’s recognition of property as a vital wealth-building tool and its commitment to supporting young Australians in achieving homeownership.

While property investment, even in fractional form, provides the potential for stable, long-term gains, it’s essential to understand the associated costs and risks. Property markets can fluctuate, and returns may take years to realize. However, for young Australians willing to commit for the long term, property—whether through direct ownership or fractional investment—can serve as a robust component of a diversified portfolio.

Peer-to-Peer (P2P) Lending

Peer-to-Peer (P2P) lending offers young Australians a unique way to earn returns by lending money directly to individuals or small businesses via online platforms. In P2P lending, platforms like Plenti and SocietyOne connect lenders and borrowers, enabling investors to earn interest on the money they lend. This direct lending model has gained popularity due to its potential for high returns, although it carries notable risks, such as borrower default.

For young Australians looking for high-yield opportunities outside of traditional banks or bonds, P2P lending provides an alternative with potentially greater returns. The interest rates offered through P2P platforms can vary significantly, often based on the borrower’s credit rating and the loan’s risk profile. While high-risk loans yield higher returns, they also come with a greater chance of default, so it’s crucial for investors to diversify their lending across multiple loans.

In 2023, P2P lending became increasingly popular as young Australians looked for alternative income streams amid a challenging economic environment. However, the higher risk associated with P2P lending makes it essential for young investors to consider their risk tolerance. Most platforms offer tools to help manage risk, such as automated diversification features, but it’s still crucial to understand the platform’s policies on defaults and collections.

For young Australians, P2P lending can be a rewarding investment that combines higher returns with the opportunity to support individuals and small businesses, though the risks should be weighed carefully.

Robo-Advisors

Robo-advisors have revolutionized investing for young Australians by making portfolio management accessible, affordable, and automated. Platforms like Raiz and Spaceship use algorithms to create and manage portfolios based on an individual’s risk preferences, goals, and time horizon. This automated approach has become especially appealing to younger investors who may lack the time or knowledge to actively manage their investments.

A major advantage of robo-advisors is the low entry cost. Unlike traditional financial advisors who often require high fees and minimum investments, robo-advisors typically allow users to start investing with as little as $5. These platforms provide a hands-off investment experience, allowing users to contribute small amounts regularly while the robo-advisor handles rebalancing and tax-efficiency strategies.

Robo-advisors are also appealing for their fee transparency. For a relatively low monthly or annual fee, users get access to a diversified portfolio across multiple asset classes. Some platforms, such as Raiz, even allow round-ups from everyday purchases, helping young Australians grow their portfolios passively over time.

For young Australians seeking a low-cost, hands-free way to start investing, robo-advisors offer a convenient, tech-driven solution. They provide an easy entry into the world of investing, making wealth-building accessible even for those with limited capital.

Gold and Precious Metals

Gold and precious metals remain a classic investment for young Australians interested in wealth preservation and stability. Unlike stocks, precious metals tend to retain their value during economic downturns, making them a popular choice for those who want a hedge against market volatility. Investment options include physical gold bars, gold ETFs, and shares in gold mining companies.

Gold is often seen as a “safe haven” asset, and historical trends confirm its stability when other markets falter. For instance, during recent economic challenges, gold prices remained relatively stable, underscoring its resilience in turbulent times. Many young Australians are exploring gold ETFs as an accessible way to invest in this asset class without the challenges of storing physical gold.

Another benefit of investing in gold and other metals is their global value. Precious metals are not tied to any one country’s economy, making them a stable asset in times of geopolitical uncertainty. Silver, platinum, and palladium are other popular metals for investment, each offering unique characteristics and potential growth avenues.

While precious metals may not deliver the high returns of stocks, they provide young Australians with a balanced, low-risk addition to a diversified portfolio. This conservative approach appeals to those who value security and are looking to protect their wealth over the long term.

High-Interest Savings Accounts

For young Australians looking for a low-risk, straightforward way to grow their savings, high-interest savings accounts offer a practical solution. These accounts provide stable returns without market exposure, making them ideal for those who prioritize security over high returns. Banks like BOQ and Westpac offer competitive rates, allowing savers to benefit from compounding interest without the risk associated with investments.

High-interest savings accounts are an excellent vehicle for short-term goals or emergency funds. Unlike term deposits, they provide easy access to funds, though some accounts may offer higher interest rates if withdrawals are limited. This encourages consistent saving while maximizing interest earned.

One of the main advantages of high-interest savings accounts is their flexibility. There’s no need to worry about market fluctuations, and interest is usually paid monthly, allowing account holders to see regular growth. For young Australians still building their financial foundations, this is a low-barrier entry to saving that requires no investment experience.

Although the returns may not match market-based investments, high-interest savings accounts offer peace of mind. They provide a safe place to store cash reserves while earning a modest return, making them a valuable part of any young Australian’s financial strategy.

Term Deposits

Term deposits are a simple, secure way for young Australians to grow their savings with a fixed interest rate over a set period. By locking in a deposit for a term—ranging from one month to five years—investors receive a guaranteed return, making term deposits an appealing choice for those seeking a stable, predictable investment.

With term deposits, the interest rate is fixed at the time of investment, which protects against market fluctuations. This stability is particularly beneficial in uncertain economic times, allowing young Australians to plan their finances with confidence. While the return rates for term deposits are generally lower than those for more market-oriented investments, they remain a low-risk option that appeals to risk-averse individuals.

A potential downside is the lack of flexibility; funds are typically inaccessible until the term ends. However, for young Australians with a specific financial goal or those looking to set aside funds without the temptation to withdraw, term deposits offer a disciplined savings approach.

Term deposits are a reliable choice for those prioritizing security over growth. By providing a fixed return, they help young Australians build their savings steadily and with minimal risk.

Government Bonds

Government bonds are one of the safest investments available, making them suitable for young Australians with a conservative approach. Issued by the government, these bonds pay regular interest over a set period and return the principal amount at maturity, offering stable, predictable returns that are less volatile than stocks or corporate bonds.

Government bonds are highly regarded for their low risk. They provide young Australians with a way to diversify their portfolios while safeguarding against market volatility. Bonds are also available through various ETFs, allowing even small investors to benefit from government-backed returns.

For risk-averse young Australians, government bonds offer a stable way to grow wealth incrementally. Although the returns may be modest, they provide certainty that aligns with conservative financial goals.

Sustainable and Ethical Investments

Sustainable and ethical investments resonate strongly with young Australians, who increasingly prioritize aligning their finances with their values. Ethical funds, such as Australian Ethical Investment and BetaShares Global Sustainability Leaders ETF, focus on companies that meet environmental, social, and governance (ESG) standards, offering investors a way to support positive impact through their portfolios.

Ethical investments typically screen companies for issues like carbon emissions, labor practices, and governance. By choosing funds that prioritize sustainability, young Australians can actively contribute to social causes while pursuing financial growth. Sustainable funds have shown strong performance, and as consumer and regulatory pressures drive more companies toward ethical practices, the potential for growth in this sector is significant.

These funds offer young investors both financial returns and the satisfaction of making a positive difference, marking a new era where profit and purpose can align effectively.

Real Estate Investment Trusts (REITs)

Real Estate Investment Trusts (REITs) offer young Australians a straightforward way to access the property market without directly buying real estate. By investing in a REIT, you’re essentially buying shares in a company that owns, operates, or finances income-producing properties. This structure allows investors to enjoy the potential gains from real estate, like rental income and property appreciation, while avoiding the responsibilities of property ownership. For young investors, REITs can be a more liquid alternative to traditional property, as they’re traded on stock exchanges and can be bought or sold like stocks.

One of the standout benefits of REITs is their income potential. Most REITs distribute a significant portion of their income back to shareholders in the form of dividends, offering a reliable income stream that appeals to those seeking passive income. For example, Australian REITs focused on commercial properties, like shopping centers or office buildings, often generate stable returns from long-term lease agreements.

The market has also expanded to include specialized REITs, such as those focused on industrial properties, healthcare facilities, or even data centers. This diversification means young investors can target specific property sectors that align with their interests or market outlook. Ethical REITs are also available for those who prioritize sustainability, focusing on properties with lower environmental impact.

For young Australians, REITs are an attractive option due to their liquidity, income potential, and accessibility, offering property market exposure with fewer barriers than traditional real estate investments.

Exchange-Traded Funds (ETFs)

ETFs have become a go-to investment for young Australians seeking an accessible, cost-effective way to diversify their portfolios. Unlike individual stocks, ETFs allow investors to hold a broad selection of assets—such as stocks, bonds, or commodities—within a single fund. This instant diversification minimizes the risks tied to individual companies while providing a balanced exposure to the market.

One of the main draws of ETFs is their flexibility and affordability. Tracking well-known indices, such as the ASX 200 or the S&P 500, ETFs let investors gain exposure to a wide range of sectors. With options beginning at around $500, ETFs are accessible to many first-time investors. Moreover, their low management fees make them a cheaper alternative to managed funds, allowing more of an investor’s money to stay in the market.

Current trends show a steady increase in ETF investments among young Australians. According to recent reports, ETF usage among investors under 30 grew by 40% in 2023, showing a clear demand for these passive, growth-oriented options. ETFs also appeal to those interested in thematic investing, as they often track sectors like technology, healthcare, or clean energy. BetaShares, for example, offers a diverse range of sector-specific ETFs, including those that align with ethical investing—a major trend among younger Australians.

The liquidity of ETFs is another benefit. Unlike mutual funds, which are typically priced once a day, ETFs trade on the stock exchange, allowing investors to buy and sell throughout the trading day. This feature makes them particularly attractive to younger investors who value flexibility and market accessibility.

As ETFs continue to grow in popularity, more Australian platforms are offering access to both local and international ETF options. This broadens the appeal for those looking to diversify globally while keeping fees low and strategy simple. For young Australians seeking a practical, low-cost investment strategy, ETFs offer an efficient way to participate in the market’s growth.

Index Funds

Index funds provide a straightforward approach to investing, appealing especially to young Australians with a long-term focus. These funds aim to replicate the performance of a specific index—such as the ASX 200—by holding a portfolio that mirrors the underlying assets of the chosen benchmark. This approach makes them ideal for those wanting steady, low-maintenance growth without the need for active trading.

The appeal of index funds lies in their simplicity and consistency. Known for their low expense ratios, they offer a cost-effective way to invest in a broad market segment, allowing investors to benefit from the general market’s upward trends. In the past decade, Australian index funds have averaged annual returns of around 7-8%, making them a reliable choice for young investors planning for the future.

Current trends in passive investing show that young Australians are increasingly opting for index funds. According to Finder.com.au, millennials and Gen Z investors are particularly attracted to the “set-and-forget” nature of index funds, which requires minimal intervention. Vanguard, a leading provider of index funds, offers options like the Vanguard Australian Shares Index Fund, allowing young investors to gain exposure to a broad range of Australian companies without needing extensive market knowledge.

In a volatile market, index funds are often seen as a safe harbor, reducing the emotional strain associated with individual stock picking. Their performance may not be as explosive as certain individual stocks, but they offer stability that aligns well with a long-term, passive investing strategy. This makes index funds a preferred option for young Australians looking to build wealth steadily, with a focus on growth over decades rather than rapid, high-risk gains.

Managed Funds

Managed funds are an excellent choice for young Australians who want exposure to the market with the guidance of professional oversight. These funds pool resources from various investors and are managed by experts who make investment decisions on behalf of the fund. This model can reduce the guesswork for individual investors while providing them with access to a diversified portfolio.

For many young Australians, managed funds like the Vanguard Growth Index Fund and Perpetual Industrial Share Fund offer a balanced approach to investing. Managed funds typically include a range of asset types, such as stocks, bonds, and property, which helps diversify risk. Unlike ETFs or index funds, managed funds are actively managed, meaning fund managers adjust holdings to maximize returns based on market conditions. This can appeal to younger investors who prefer a hands-off approach but still want dynamic portfolio adjustments that can optimize growth.

The cost of managed funds can be higher than passive options due to management fees. However, the expertise and guidance provided often justify these fees, especially for investors who are unfamiliar with market trends or lack time for extensive research. In 2023, Australian managed funds saw record inflows from investors under 35, reflecting a trend toward managed investing in response to market volatility.

With managed funds, young Australians can enjoy the benefits of professional oversight and diversified exposure without the need to become market experts themselves. This makes managed funds an attractive option for those seeking a blend of growth potential and reduced risk, particularly when compared to the complexities of self-directed stock investing.

Superannuation (Super)

Superannuation, or “super,” remains one of the most critical investment vehicles for young Australians planning for retirement. Super is mandatory in Australia, with employers contributing a portion of an employee’s income into their super fund. However, young Australians can further grow their super by making additional contributions, a strategy that can have significant benefits over the long term.

By contributing to super, young Australians not only increase their retirement savings but may also enjoy tax advantages. Contributions made through salary sacrifice, for example, reduce taxable income and are taxed at a lower rate than ordinary income. This can be particularly advantageous for those in higher income brackets who want to maximize their take-home earnings while building a retirement fund.

In recent years, young Australians have become increasingly engaged with their super, seeking out funds that align with their values and long-term financial goals. Ethical super funds, such as Australian Ethical Super, are growing in popularity among younger investors, as these funds focus on environmentally and socially responsible investments.

Additionally, many super funds now offer a range of investment options, allowing members to select a risk profile that suits their financial goals and comfort with market volatility. Young investors with a higher risk tolerance might select a growth-focused option, while those seeking stability might prefer a conservative approach.

Super is a long-term investment, and for young Australians, starting early can make a substantial difference. Compound interest over decades means even small contributions today can lead to significant retirement savings, underscoring the value of proactively managing superannuation from a young age.

Cryptocurrency

Cryptocurrency, though volatile, is increasingly popular among young Australians who see digital currencies as an alternative or speculative investment. Cryptocurrencies like Bitcoin and Ethereum offer a high-risk, high-reward approach that attracts those seeking rapid returns or interested in emerging financial technologies.

Digital assets are unique in that they are decentralized, operating independently of traditional financial institutions. This appeals to young investors who appreciate the autonomy and innovation cryptocurrency offers. However, the price swings are notorious. For example, Bitcoin surged by over 60% in 2023, only to experience a sharp correction months later. This unpredictability requires a strong risk tolerance and the willingness to face potential losses.

Platforms like Swyftx and CoinSpot make it easy for Australians to invest in cryptocurrency with minimal initial capital. These platforms allow fractional investing, enabling young investors to purchase small amounts of Bitcoin, Ethereum, or other digital assets. This feature is crucial, as buying a single Bitcoin may be prohibitively expensive for many young investors.

The regulatory landscape is evolving, with Australia’s government exploring policies to protect consumers while fostering innovation. As regulations firm up, cryptocurrency may become an even more mainstream investment. However, young Australians should approach this market cautiously and ensure it represents only a portion of a diversified portfolio.

Cryptocurrency offers potential for significant growth, but it comes with heightened risk. For young Australians, this market is best approached as a speculative opportunity rather than a core investment strategy.

Shares and equities

Shares and equities offer a dynamic and rewarding path for young Australians looking to grow their wealth. By investing in individual stocks, whether on the Australian Securities Exchange (ASX) or global markets, investors can directly tap into the financial success of companies.

This approach gives individuals the potential to benefit from capital gains as companies grow and expand. Some stocks also pay dividends, providing an additional stream of passive income.

However, the stock market can be daunting for those just starting. The volatility and complexity of equities may deter many from diving in headfirst.

That’s where micro-investing platforms like Raiz and Spaceship step in. These platforms are changing the investment landscape for younger investors.

With as little as $5, these platforms allow users to begin investing in diversified portfolios that span across different sectors. This offers a low-barrier entry for those who may not have the capital to invest in individual stocks.

In fact, in 2023, Raiz reported over 1 million users growing their portfolios with small, regular contributions. These platforms also focus on educating young investors about equity markets, making it easier for them to grasp investment strategies and build financial literacy.

Micro-investing is becoming a popular trend, with young Australians making up over 60% of Raiz’s user base. This trend highlights a shift towards more accessible, beginner-friendly investment options.

Moreover, young investors are increasingly diversifying their portfolios, incorporating both local and international equities to manage risk. By choosing platforms that cater to this need, young Australians can enjoy exposure to both the ASX and global markets, setting them up for long-term financial growth.

With a long-term investment horizon, equities have the potential to deliver strong returns, especially for young investors willing to start early and remain patient.

Originally Published: https://www.starinvestment.com.au/best-investment-options-young-australians-2024/