How to invest 20k in Australia

Read to find out how to invest 20K in Australia from a personal finance expert and long term investor

The Good

  • Multiple asset classes available to diversify
  • Easy to invest in index funds
  • Superannuation is a tax-advantaged account
  • Can fully automate your investing and portfolio management

The Bad

  • Not all investments are safe
  • Can’t access superannuation until old
  • Be wary of property spruikers
  • Stock market volatility can be scary

Verdict: Investing 20K in Australia depends on your personal circumstances, there is no ‘one size fits all’ answer.

CaptainFI is not a Financial Advisor and the information below is not financial advice. This website is reader-supported, which means we may be paid when you visit links to partner or featured sites, or by advertising on the site. For more information please read my Privacy PolicyTerms of Use, and Financial Disclaimer.

how to invest 20K in Australia
Now, where to invest this cash


So you have worked hard, saved and built up $20K to invest. That’s no easy feat, it can be difficult to save up that much. Or maybe you withdrew 2 X $10K COVID relief payments from your superannuation fund and figured you wanted to use it to invest somewhere you had access to it before preservation age. So what are the options in for how to invest 20k in Australia?

Build an emergency fund

If you don’t already have an emergency fund of at least a few thousand parked in an online savings account, you need to give yourself a nice firm slap on the face. Did it hurt? Good. An emergency fund is a basic essential requirement of being a functioning adult member of society!

Cash is what we use to perform transactions, so you will always need a bit of it on hand. Cars break down, family emergencies occur, and last minute flights need booking. You always need to little safety net you can dip into as a last resort (and which you then endeavour to replenish ASAP).

Depending on your expenses, family situation and job stability, some people recommend increasing your emergency fund from a few thousand dollars at a minimum, up to around 3-6 months living expenses. I agree this is a good move in general, but if you have a stable job then this idle cash could be better put to work somewhere else such as a mortgage offset. But I would always keep a few thousand in cash, tucked away in a no fee online savings account just in case!

Pay off any consumer debt

how to invest 20K in Australia
Consumer debt is like a rope wrapped around your feet whilst your trying to swim. It keeps you tied to your job, and maybe other shitty personal commitments.

After establishing an emergency fund, the first thing you need to think about doing is to pay off your consumer debt. If you have credit card and personal debt – you have an emergency. You should not be consuming luxury items not driving a car. You should pay these off ASAP! Having your $20K sitting around idle in a bank account is a dumb move, instead you should use it to cancel out any debt contracts you have entered in.

Paying off consumer debt is going to be your best bang for buck! On average, consumer debt sits at between 10-15% interest rates, but we all know about credit cards and other lenders charging ridiculous 20% annual interest rates!

Because a debt is always paid using post tax dollars, paying off this consumer debt has a massive effect on your overall financial health and net worth. Personal debt like credit cards is not tax deductible, which means your paying it off with income you’ve likely already been taxed at around 30% on.

This means paying off a 20% interest rate credit card is equivalent to getting about a 30% return on investment – something you would never find in any sane, repeatable or safe investment! Getting rid off this debt immediately should be your number one priority! This is one of the hidden traps of debt and the working class, and is why poor people struggle so hard to get out of debt.

Your order of priority should be either a debt domino, where you pay off your smallest debts first to bask in the psychological goodness of seeing them destroyed one by one, or if you are a bit more mathematical and calculating like me, then pay off your highest interest loans first; the following is an example guide.

  1. Credit card loans
  2. Personal loans
  3. Car loans
  4. Student loans

Pay off your mortgage

After you’ve paid off any dumb debt like credit cards, personal loans or car loans, then make a stab at paying down your mortgage. We are always told that a mortgage is ‘good debt’ and that you should be perfectly happy having a mortgage. Are you ready for another slap in the face…?

This is a lie told to you by real estate salespersons, mortgage brokers and banks. Why? Because they want to sell you products of course! Expensive mortgages bring with them lots of lovely little fees and charges, and even some whopping percentage transaction ones too. Anytime you are buying something, there is someone with a vested interest! Don’t take financial advice from anyone except a licenced advisor – and even then you should be suspicious, fact-check everything and guard your wealth.

how to invest 20K in Australia
The great Australian dream? Add a few financed cars, and some credit cards thanks..

A mortgage on your primary place of residence is not as great as everyone says. This is costing you money and it is NOT tax deductible at all. Just like your credit card debt, your paying this down with post tax dollars that you’ve worked hard to earn, been taxed on, and now have to give to the bank. This means paying off your mortgage is better than just your interest rate, and it grosses up on average at the moment to be about a 6% Return on Investment.

So whats the alternative to home ownership? Renting of course. Getting creative with housing and accommodation and ‘house hacking’ is a fantastic way to save money and get ahead. Do the sums for your situation, and have a look at the difference between home ownership and renting, factoring in everything and see what comes ahead.

Either way, if you have a mortgage then now is great time to get ahead and pay it down whilst interest rates are low. They will eventually rise, increasing your mortgage repayments and potentially leaving you underwater and unable to afford the home – guess what happens to all your peace of mind and security then? It goes out the window as the bank forecloses on the loan and repossesses your home!

If you are looking for great ways to invest $20K, then have a think about using a portion of it to pay off your mortgage, or at least, have it in an offset account that reduces the amount of interest payable on the loan. On average, that’s like receiving a guaranteed 6% return on investment!

Of course, this is a lead-in discussion, because some might argue its better to hold a mortgage at a lower interest rate as borrowing cash is cheap at the moment, and to instead invest that 20K…

How to Invest 20K in Australia

So with those important previous considerations out of the way, how can you invest $20K in Australia…

Tax advantage retirement account: Superannuation

The first step for anyone looking to invest is in Australia is to consider their superannuation. This is a tax advantaged account where contributions and growth is only taxed at the special rate of 15% vice your marginal tax rate which is likely to be significantly higher. Once you reach preservation age and enter retirement, your superannuation is usually tax free!

At the moment you can concessionally contribute (make tax free contributions) up to $25,000 per year for individuals. You can even contribute to your spouses superannuation, and there are a heap of funky and awesome rules and loopholes that the ATO allow.

The reason super is so powerful is because of compounding interest. Because you cant touch it for so long, and the gains are not being taxed as heavily as if they would be in a traditional taxed investment vehicle, where they are subject to Capital Gains Tax and personal income tax. The downside? Your investment is locked up until you retire, which isn’t great for those wanting to retire early.

Remember that your super is just a ‘vessel’ for the underlying investments, buy typically within super people buy diversified managed funds which might include shares, property, fixed interest or infrastructure.

how to invest 20K in Australia
Its a long road to preservation age

Stock market Index funds

Total Stock Market Index funds form part of my investment strategy and its something you could consider, too. There are a number of super simple and easy-to-use passive index investment vehicles such as Exchange Traded Funds.

how to invest 20K in Australia
Index funds are for those who enjoy simplicity. Technology does the work!

Listed investment Companies

Listed investment companies or LICs are companies which are established purely to manage money for people. These are considered actively managed funds, however I would only ever invest in the old school ‘Grandaddy’ LICs which are quite conservative and don’t tend to vary their investments from the index too much. Be warned, some Listed Investment Companies have massively high fee’s, so I personally just stick to ones with very low Management Expense Ratios, conservative management and a long track record of increasing dividends to shareholders.

how to invest 20K in Australia
Outsource your financial decisions to a company, let them do the work!

Managed funds

Managed funds are a type of investment where you hand over your money to a fund manager and they decide what to do with it. Listed Investment Companies would be a type of managed fund, but there are many other examples. Managed funds typically try to offer diversified portfolios which mix things like Shares, Property, Fixed Interest, Cash and Infrastructure across both domestic and international markets. Be careful though – the fees on some managed funds are absolutely disgusting!

how to invest 20K in Australia
Managed funds help fund managers afford luxury items, like this Yacht.

Investing 20K by stock picking

What makes you think you can pick stocks? Did you know that 87% of the worlds most ‘Highly educated, sophisticated and professional’ fund managers managed to under perform a basic total stock market index fund due to trying (and FAILING) to pick stocks.

What is worse yet, the people stock picking are usually slick talking fund managers who then slap on extra fees and charges for the privilege of gambling with your money.

how to invest 20K in Australia
Stock pickers do battle with Bear and Bull markets

The lure of some of those 3,4,5,10x stocks is strong isn’t it? Wouldn’t you have liked to own Apple, Coca-Cola, Google, Microsoft, or Tesla and participated in their meteoric rise from IPO? Well history tells us about the winners, but often we forget about the losers. Just like how a gambling addict only brags about his or her winnings, you never hear about all the losers.

Investment property

You could use your $20K to invest in property. Whilst it might not be enough for a conventional deposit on a property, you could use it to invest in a Real Estate Investment Trust – or a REIT. There is a number of REITs listed on the Australian Stock Exchange.

If you are interested in a traditional investment property, to make a deal work you would generally need to have at least a 20% deposit saved. Whilst there are some fantastic value properties out there across Australia, generally your probably looking at $200K+, so you’d want somewhere around $50K to seal the deal and provide a buffer for emergencies you could keep in an offset account.

Having said that, there are a number of housing affordability schemes and rebates available, and some lenders are happy to provide very high LVR loans in some circumstances, meaning $20K could be enough to get your foot in the door.

how to invest 20K in Australia
People have to live somewhere, right?

Peer to Peer lending

Peer to peer lending is technically a form of “junk bond”. A bond is a contract for fixed interest, like a loan. Except in this case, your the creditor and not the debtor; its like a reverse credit card. Realistically though, they are considered fairly risky and the amount you earn from these investments will vary with the current exchange rates. Any interest or earnings you make of course you’ll need to declare and pay income tax on. The Australian government’s Money Smart website has a great article on P2P lending and whether it is right for you.


So there you have it, options for how to invest $20K in Australia. My final parting words – if you’re thinking of withdrawing from your Super due to the COVID-19 superannuation release package, think long and bloody hard before doing it. I would suggest this is only a good idea if you physically need it to buy food and rent to make ends meet. I know some people have done it to pay off ridiculous loans like credit card debt, high-interest personal loans, or car loans. But before you go and do anything like that, you should seek professional financial advice.

Financial Disclaimer

Financial Disclaimer: CaptainFI is NOT a financial advisor and does not hold an AFSL. This is not financial Advice!

I am not a financial adviser and I do not hold an Australian Financial Services Licence (AFSL). In this article, I am giving you factual, balanced information without judgment or bias, to the best of my ability. I am not giving you any general or personal financial advice about what you should do with your investments. Just because I do something with my money (or use a particular service or platform) doesn’t mean it is automatically appropriate for your personal circumstances. I do not recommend nor endorse any financial or investment product, and my usage or opinion of any product should not be interpreted as an endorsement, advertisement, or intent to influence.

I can only provide factual information based on my journey to Financial Independence, and that is provided for general informational and entertainment purposes only. I make no guarantee about the performance of any product, and although I strive to keep the information accurate and updated as it changes, I make no guarantee about the correctness of reviews or information posted.

Remember – you always need to do your own independent research and due diligence before making any transaction. This includes reading and analysing Product Disclosure Statements, Terms and Conditions, Service Arrangement and Fee Structures. It is always smart to compare products and discuss them, but ultimately you need to take responsibility for your use of any particular product and make sure it suits your personal circumstances. If you need help and would like to obtain personal financial advice about which investment options or platforms may be right for you, please talk to a licensed financial adviser or AFSL holder – you can take the first steps to find a financial advisor by reading this interview, or by visiting the ASIC financial adviser register and searching in your area.

For more information please read my Privacy PolicyTerms of Use, and Financial Disclaimer.

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6 thoughts on “How to invest 20k in Australia

  1. Hi Captain FI. Just came across your page and IG account. Have to say your content is brilliant! Between you, and Dave at Strong Money, you give me some great reads when needing a FIRE hit. Love your work, so please keep it coming. With gratitude, Sarah G

  2. Hi Captain FI,
    Like Sarah, I’ve just discovered your blog too. I’ve been reading a lot about investing for passive income, and eventual FI lately. I’m reading SMA, Pat the Shuffler and Aussie Firebug among others, and am fascinated by the different journeys you have all been on. Thank you for the inspiration!
    We’ve recently started our investment journey with a couple of LICs, and intend to purchase our first ETF next time we have saved enough to make another purchase. Initially, we liked the LIC strategy, then read more and liked the ETF strategy. So we’ve settled on the “why not both?” strategy – partly because we think it will work for us, and partly because we can see advantages and disadvantages both ways, and we want in on both sets of advantages!
    We will include international ETFs eventually, but are just starting with Aussie ones to get the dividend ball rolling! Very excited for our first dividend season in Aug/Sept 🙂

    1. Hey Miranda – Yep I am definitely on both sides of LIC and ETF, but really loving the LIC company structure so it isn’t forced into a liquidity trap situation that ETFs can get because of their trust structure. Peter thornhill gives out some absolute awesome bits of information on The aussie Firebugs podcast interview with him, which makes me lean into camp LIC. But then the returns and low fees of ETFs are so competitive – why not both!

  3. Great content here mate. Always a good read. I love your take on actively managed mutual funds. I share the same sentiment.

    Keep punching out these great blog posts. Looking forward to more.


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