10 Easy Ways to Invest $1000 in Australia

Deciding how to invest your first $1000 can be exciting and intimidating.

I bet you’re wondering, what can I invest $1000 in? And is it worthing only investing $1000?

Well, there is no need to worry, I’m going to answer all of those questions and more in this article.

Let’s dive into my guide on how to invest $1,000 and make your money grow.

1. Invest in Stock Market Index Funds Through Commsec

Investing in stock market index funds is arguably the best way to invest $1,000. These funds provide consistent returns and regular interest payments through dividends.

Even legendary investors like Warren Buffett praise index funds. Buffett once said, “A low-cost index fund is the most sensible equity investment for the great majority of investors”.

Whether you’re looking to invest in your 20s or even your 50s, investing in index funds is a great way to build wealth over time.

Index funds give you exposure to the stock market through a diversified portfolio of well-established companies.

Your money will grow at an average interest rate of 7% annually (adjusted for inflation) when invested in an ASX 200 or All Ordinaries index fund.

Your portfolio will double in value every 10 years on average at this interest rate.

This might not sound significant, but your money will grow exponentially.

The Best Index Fund

I’d recommend the SPDR S&P/ASX 200 Fund (ticker symbol STW) above any other actively or passively managed fund. They purchase all of the stocks in the ASX 200 index, with annual fees of just 0.13%.

Investing in this fund is the best way to grow your money with minimal effort or investing know-how.

You can invest in this index fund through a discount broker like Commsec (which I use).

2. Invest in a Mutual Fund

Another way to invest in shares in Australia is through a mutual or managed fund.

Investing your money in a mutual fund is a great hands-off way to grow your money.

A mutual fund is an investment vehicle where money is pooled from investors to invest in securities like stocks, bonds, and other assets.

Mutual funds are operated by professional money managers who often have advanced degrees in finance and economics. The manager, along with their team of analysts, allocate the fund’s assets to attempt to produce capital gains and or income for the fund’s investors.

This is one of the best ways to invest if you just want to grow your money without thinking about it.

Mutual Fund Fees

According to Morningstar, the average large-cap fund with assets greater than $5 million has an expense ratio of 1.45%. 

For example, if you invested $1,000 in an average large-cap fund, you would have to pay $14.50 in fees annually. This is a small price to pay for your peace of mind, knowing that your money is managed by a professional.

I still think investing in an ASX 200 index fund is the most lucrative way to invest your money, but some people want to try their luck with a managed fund, even though only 1/20 managed funds beats the major indexes on any given year.

3. Invest With a Robo-Advisor Like Raiz

Another way to invest your money passively is to invest with a robo-advisor like Raiz.

A Robo-advisor is basically your personal portfolio manager except it’s a software-based algorithm.

The Robo-advisor will automatically pick your investments, diversify your funds, and adjust your portfolio over time. These changes are all based on your chosen long-term investment goals.

Raiz is one of Australia’s largest Robo-advisor platforms and is listed on the ASX under the ticker RZI.

Raiz has three main features:

Roundups: Allows you to invest the change from your daily purchases.

Recurring: Allows you to set recurring daily, weekly or monthly investment amounts.

Lump sums: Allows you to invest a lump sum into your account and let their technicians help you grow it.

Smart Portfolios

Raiz constructs and optimizes 6 diversified portfolios with help from the Nobel Prize-winning economist and father of Modern Portfolio Theory, Dr. Harry Markowitz. 

You can pick whatever portfolio is best suited to your long-term investment goals. Their portfolios are constructed using ETFs on the ASX.

Investing with Raiz is a great way to get started with automated investing.

You can even get a $5 bonus when you invest $5 or more with Raiz here.

4. Invest in a Real Estate Investment Trust (REIT)

You don’t need hundreds of thousands of dollars to start investing in real estate. In fact, you can start investing in real estate for less than $1,000!

A real estate investment trust (REIT) is a company that owns, operates, or finances income-generating real estate.

REITs work much like mutual funds, in that they pool capital to invest in assets. This allows you to earn dividends from real estate investments without buying, managing and financing any rental properties yourself.

Investing $1,000 in a REIT is a great way to start buying real estate.

REIT shares are priced by the market throughout the trading day, like all companies that are publicly traded.

5. Invest in a High-Yield Savings Account With BOQ

Another way to invest $1000 in Australia is to put it in a high-yield savings account with the Bank of Queensland.

They offer some of the highest interest rates for any savings account in Australia. 

Their high-yield savings account is called the Fast Track Starter account.

The normal interest rate for the account is about 0.20%, but you can receive the bonus rate by meeting the following criteria:

  • Deposit a minimum of $200 into your linked Day2Day Plus Account each month from an external source- like your pay; and
  • Make 5 or more eligible transactions from your linked Day2Day Plus Account each month such as settled Visa Debit Card or Eftpos card purchases, ATM withdrawals or direct debits

So basically, all you have to do is create two accounts with BOQ which are their fast track savings account and their Day2Day Plus account. 

You will be paid interest on the first day of each month at the bonus rate if you met the criteria the previous month.

There are plenty of other high-interest savings accounts in Australia, but I found this account to pay the highest interest rate while being with a large, reputable bank.

Opening a high-interest savings account with BOQ is one of the safest investment options in Australia.

Other banks like Westpac are also opening their own high-interest savings accounts, you really just have to stay on the lookout to find the most lucrative savings accounts.

6. Contribute to Your Superfund

Another great way to invest $1000 is to contribute to your super fund.

Making extra contributions is a great way to increase your retirement savings and it can reduce your taxable income.

If you’re on a low income, you may also be eligible for extra contributions from the government.

Pre-tax Contributions

You can ask your employer to pay part of your pre-tax income into your super account. This pre-tax payment is known as salary sacrifice or salary packaging.

These concessional contributions are taxed at 15%—likely lower than your marginal tax rate. Basically, you can reduce your taxable income while boosting your retirement savings.

There is a limit however to how much extra you can contribute to your super accounts. The combined total of your employer and salary sacrificed amounts cannot equal more than $25,000 per financial year.

After-tax Contributions

You can also contribute to your super through your after-tax income.

These payments are called non-concessional contributions because you have already paid tax on the income. You can contribute up to $100,000 of after-tax income to your super fund each financial year.

This is another investment option for people who want to grow their money on autopilot for retirement.

7. Put Your Money in a Term Deposit

Placing your money in a term deposit is another defensive way to invest your money.

A term deposit is a cash investment held at a financial institution, either a bank, building society, or credit union.

When you invest in a term deposit, your money will be locked away for a predetermined period. The length could be as little as 1 month, or as long as five years.

You can withdraw your money at the end of the period, or earlier, by paying a penalty.

Term deposits are a good hands-off way to invest your money in the short-term. High-yield savings accounts are also good, but they typically require you to make five or so purchases a month to reach the bonus rate.

8. Invest in Bonds

Another way to invest $1000 in Australia is through bonds.

When you invest in bonds, you’re lending money to a company or government (government bonds are typically safer). 

Bonds pay you interest regularly in the form of coupon payments. Once your bonds reach their maturity date, you’ll also get back the face value of the bond, which is the value of the bond set by the company or government when you purchased it.

Bonds prices typically fluctuate less than shares, making them a common defensive investment.

You will typically receive a higher interest through a high-yield savings account or term deposit, but bonds are another way you can go.

9. Try Peer-to-Peer Lending with RateSetter

Another way to invest $1000 in Australia is through a peer-to-peer lending platform.

Peer-to-peer lending, or P2P, is the practice of lending money to individuals or businesses through online services that will match you a borrower.

You can expect to attain a 3-7% annual return by becoming a lender on a peer-to-peer lending platform.

The largest peer-to-peer lending platform in Australia is RateSetter.com. Just over 20,000 Australians are making money on the platform by lending their money to credit-worthy borrowers.

You can start investing with RateSetter with as little as $10.

This is one of the risker investment options on this list, so make sure you do your own research before investing with any P2P lending platform!

10. Pay off Debt

And the last way to “invest” $1000 in this list is to pay off debt.

Having debt is basically the opposite of having an investment. You are paying interest back to your lender instead of earning it.

You can expect to earn about 7% annually through the stock market, while you could be paying double-digit interest back to your lender.

And investing $1,000 to pay off debt could make a huge difference.

If $1,000 doesn’t fully wipe out your high-interest debt, it might be a good idea to focus on paying it off before you start investing your money to build wealth.

What Will Happen if I Invest $1000 in Shares?

Here is a graph showing what a $1,000 investment at age 25 would look like while growing at average stock market returns of 7% until age 65.

I made this graph with a great compound interest calculator created by ASIC.

As you can see, investing $1,000 in an ASX 200 index fund at age 25 would have grown to $14,974 by age 65.

This means that every dollar you invest when you’re 25 will be worth $15 by the time you’re 65.

You can become vastly wealthier if you continue to invest money in index funds throughout your career.

How to Invest $1000 Summary

These are some of the most lucrative ways to invest $1,000 and I hope there is an option that works for you. 

Even though $1,000 isn’t a huge amount of money today, your mere $1,000 investment could be worth significantly more down the track if you stick with it. 

And your portfolio could be much larger if you continue to invest with these options throughout your career.

And while I think investing $1000 in stock market index funds is the best way to go, you can still make plenty of money with the other options as well!