If you’ve suddenly got a few grand to invest, then you might be wondering what is the best way to make it work for you. You want decent returns, obviously, but you don’t want to lose your shirt. Finding the right balance between speed of growth and safety isn’t always easy. What goes up can also come down… There are no investment vehicles that offer 100 per cent risk free returns. Bank accounts come closest because (up to $250,000) they are guaranteed by the government. If you’re looking for higher returns than the bank will pay, then you’ll need to accept that you’ll be facing higher risks and that you’ll need to be more vigilant and informed. The best way to predict the performance of an asset class is to look at its recent history, although again, this isn’t a guarantee of future performance. Investing in property Residential investment property in Australia produced an average 8 per cent gross return in the 10 years to December 2017 according to the ASX/Russell Investments 2018 Long-term Investing Report. This makes investing in property a good and relatively safe bet, but it’s not easy to get on this particular ladder unless you have some ready funds and/or the willingness to borrow. It can be worth the effort to look for an investment mortgage if you can find the right sort of deal especially if you happen upon an up–and–coming area. There are some great investor loans on the market, such as Reduce Home Loans’ Investor Rate Slasher, which offers a comparison interest rate of just 3.19 per cent on investor loans between $50,000 and $850,000. HomeStar’s Investment Property loan has a comparison rate of 3.42 per cent with offset. House prices in the big cities have fallen in recent years – 5.6 per cent in Sydney, for example – but this could be a temporary blip, as the property market does enjoy its ups and downs. It’s all about finding the right property in the right area at the right time. This can actually be easier than it sounds, as well as fun. Fixed income investment vehicles Bonds, which are fixed income assets, can be either corporate or government-backed. They’re a good form of low risk investing and can offer investors a reliable return. Not all bonds pay out huge amounts, however, and the ones offering relatively high returns are usually variable rather than fixed. With bonds, you’re essentially lending money to a company or the government and they pay back the principal plus interest to you at set intervals during the term of the bond. Bonds in Australia averaged gross returns of 6.2 per cent each year for the ten years to the end of 2017 according to ASX/Russell Investments. While some people find bonds boring and staid, and admittedly they’re not as exciting as buying and doing up a property in a vibrant neighbourhood, they’re a great low risk portfolio diversifier. They usually hold steady even when your other asset classes are wavering a bit. This is why bonds are generally seen as defensive, relatively lower risk investments. Equity investments The most common equity investments are shares and depending on which types of shares you decide to invest in, you can get some high returns. However, with the high returns comes higher risks, so you need to have a bit of experience and knowledge, as well as a sympathetic financial advisor. Shares are more prone to huge fluctuations that many other investment vehicles, so handle with care. ASX Russell says that over the decade ending in December 2017, shares offered an average of four per cent in gross returns each year. This is the second–lowest performing asset class in Australia but remember that that average also contained some very high–performing shares indeed. A2 Milk rocketed by 261.3 per cent in 2017, for example. It’s also worth remembering that the decade to 2017 featured the Global Financial Crisis. More than any other asset class, shares need you to bear in mind that past performance guarantees very little in the way of future gains (or, indeed, losses!). If you’re thinking about shares, then the safest way get into trading is by using an independent investment advisor, at least at the beginning. Cash assets The record low interest rates on savings accounts and term deposits at the moment may not be attractive, but it can be good to have some cash in a bank account because of the safety it provides and because you can access it right away when you need it. Each of the Big Four banks usually keep at least one of their term deposit rates reasonably attractive, even if most of their terms are low. Bear in mind, though, that some providers of term deposits or savings accounts may charge a fee or reduce the interest they pay you if you decide to withdraw your money earlier than expected. Cash assets mainly mean savings accounts and term deposits. These vehicles offer inexperienced investors the safest way to grow their money, but they’re also the ones with the lowest returns. The ASX report states that cash assets gave back an average of 3.6 per cent each year in the decade up to December 2017. There are record lows in interest rates in Australia at the moment, so this may make the returns even smaller in the coming few years, but a savings account or a term deposit is a safe bet, especially if you have a definite savings plan in mind. Cash assets are the most liquid of investment vehicles, however, which is handy if you suddenly need to access your cash. Bonds, shares and property can make this a bit trickier! You need to factor in, however, that many banks and ADIs apply penalty fees or cut your interest rates if you withdraw all or some of your cash too soon or too frequently. Term deposits in particular require you to leave the money in place for the length of the investment term, hence the name! Among the highest 12-month TD rates in the market right now is Community First Credit Union’s 2.30 per cent, interest paid annually. Bank of Sydney’s 6-month Online Only Term Deposit is paying 2.33 per cent. A popular term deposit is UBank’s Green Term Deposit, which offers investors up to 2.10 per cent pa with no fees and term lengths ranging from one month to 12 months. The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. If you or someone you know is in financial stress, contact the National Debt Helpline on 1800 007 007.