How to Invest 20k in Australia (6 Best Ways In 2020)

how to invest 20k australia

You'd like to invest 20k in Australia and you're wondering how to do it. 

Well for starts, great job! You have managed to build up to 20k in savings and that is more than 49% of Australians!

Knowing how to invest money is important because it'll affect your long-term financial position.

Let's dive into my guide on the six best ways to invest 20k in Australia in 2020.

1. Invest in Stocks Through Commsec

Investing money in the stock market is one of the best investment options no matter where you're from. And the bigger your portfolio is the faster it grows.

Investing in the stock market through a discount broker like Commsec is a popular way to invest in the stock market.

Commsec lets you buy stocks, bonds, ETFs, and options through the Australian Securities Exchange (ASX).

Investing with a discount broker like Commsec is a great way to invest money if you don’t require investment advice, you like to trade regularly or you have a small portfolio.

It’s cheaper to trade through a discount broker than a full-service broker (one who provides investment advice), but they still charge fees. Their fees are roughly 0.12% to 2% per trade, depending on how much you invest.

Why Commsec?

Commsec is Australia's leading online broker with 20 years of industry-leading service and experience. They offer Australia's best online and mobile trading format and they are the go-to online broker for many Australians.

Consider visiting our Best Investing Books post if you want to learn more about stock marketing investing.

2. Contribute to Your Super Fund

Another great way to invest 20k 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 investment option is for people who want their money to grow on autopilot for their retirement.

3. Open a High-Interest Savings Account with BOQ

Another way to invest 20k in Australia is to put it in a high-interest savings account with Bank of Queensland.

They offer some of the highest interest rates for any savings account in Australia. Their savings account interest rate fluctuates between 2.5%-3.5%.

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 (Temporarily paused till 31 August 2020)

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.

4. Investor With a Robo-advisor Like Raiz

Maybe you don't want to manage your money actively and you want to know how to invest 20k in Australia passively. Well, Raiz might be right for you.

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 ticket 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 by signing up for Raiz here.

5. Use a Peer-to-Peer Lending Platform Like RateSetter

Another way to invest 20k 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 and can expect to earn an average return of 7%.

This is one of the risker investment options on this list, so do your research before investing with any P2P lending platform.

6. Start a University Fund for Your Child

Every parent wants their student to live a successful life, and one path to success is through a university.

But the fact is that studying at a university is expensive and is showing no sign of slowing down. Investing 20k in a university fund is a great way to invest in your children’s future.

Investing is expensive, even for domestic students. For example, I have to pay $11,155 a year to complete my Bachelor of Commerce at Deakin University—even with a Commonwealth supported place. 

This is contributing to my HECS debt because my parents didn't make the choice to create a university fund for me.

If you are a new parent I urge that you do not make the same mistake—consider starting a university fund for your child today.

What Will Happen if I Invest 20k in Stocks?

Here is a graph showing what a $20,000 investment at age 25 would look like while growing at average stock market returns of 7% until age 65.

investing 20k

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

As you can see, investing $20,000 in an ASX 200 index fund at age 25 would have grown to $299,489 by age 65.

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

How to Invest 20k in Australia (Summary)

I have explored the six best ways to invest 20k in Australia. Now that you know where to invest money, you need to decide which of these investment options is right for you.

Perhaps you don't quite have 20k to invest yet but still want to get into investing.

If that's the case, consider visiting our How to Invest 1000 Dollars article. I explore some of the best ways to start investing with only $1,000.