How do I invest $25,000?

I want to invest $25,000 but I'm worried about the stockmarket falling after three very strong years. What are my options?

The first mistake I suspect you are making is common to most people - you're looking at your annual return. Sure, if you want to draw the money out next year you could play it safe and put it into a fixed deposit at a reasonable rate. If you go to the likes of www.infochoice.com.au you'll find you can get around 6.5% at best from the banks or credit unions. If you want to risk a debenture, you can get as high as 9% but with debentures, you're ramping up your risk. The companies are often well-known names, but they could go broke and you could do your dough.

All investment is about risk and reward and so as your return rises, so does your risk.

On the subject of risk, a friend of mine got his daughter to borrow $100,000 as she had no money, but she had a good job and could afford to pay $600 a month to meet her loan repayments. She turned that $100,000 into $132,000 over two years, which is an annual return of 16%. Share picking was important and the father in question was an expert.

If you don't need to access the money straight away, you could put the $25,000 in super and just let it roll. But if you do need the money, say over the next three to five years, then buying 10 blue chip shares and hanging onto them has been a rewarding play for many investors.

By the way, hanging on for a correction in the stockmarket and buying then is an even a smarter tactic, but that takes patience. This virtue helps when it comes to making money.

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