7 smart ways to invest your inheritance

You’ve received an inheritance and perhaps it’s a sum that has the potential to change your life. This means financial opportunities you mightn’t have had before and the first question on your mind is more than likely, “What’s the best way to invest my inheritance?”

If that’s the case, good on you. We of course could’ve titled this blog post, “7 smart ways to spend your inheritance.” But such smart spending has its limitations; ‘spending’ is far different to ‘investing’. Growing your wealth promises far more longevity for your capital than showing off your newfound wealth with new cars, clothes and gadgets.

Whether your inherited sum is large or small, being thoughtful with your inheritance could help secure your future a brighter future for you and yours. Here are seven smart ways to consider using your inheritance:

1. Pay down debt

Depending on the amounts you owe, reducing debt might be one of the most effective ways to use your inheritance. Clearing credit cards (which typically burden you with high interest rates), personal loans or even paying down your mortgage could free up cash flow and give you that financial breathing space .

Paying down debt mightn’t be “sexy”. You won’t be a hedge fund manager’s best mate anytime soon. But this approach might provide serious long-term savings by minimising interest repayments.

If you’re considering reducing your investment loan amount, talk to your financial planner or accountant first because the interest on a property investment loan is usually tax deductible. Based on their advice, you might even consider keeping that facility if your tax obligations are overwhelming.

2. Invest in property

Property has long been a popular choice for Australian investors. Look at the list of Australia’s wealthiest each year and you’ll inevitably find that many (perhaps most) made their wealth in real estate. Depending on your goals, you could use your inheritance as a deposit for an investment property, make extra mortgage repayments or renovate your existing home to increase its value.

While the property market has its cycles, real estate may offer capital growth and rental income over time. Just be aware that all investments come with risks. And while it’s far less volatile than the share market, property is no exception.

3. Consider syndicated investments

If you’re looking for an alternative to traditional property investment—where you buy the asset and consume all the risk—a syndicated property investment might be worth exploring.

Property syndicates involve pooling funds with other investors to access larger-scale opportunities, such as commercial properties or a portfolio of residential assets. This option could suit those who want exposure to significant assets without managing them directly. You’re likely to get the benefit of expert investment leadership, attaining a high-quality property (or group of property) and receiving returns usually reserved for exclusive investors.

Want more information on how you can join one of our property syndicates? Get in touch with us today or subscribe to receive our investment updates. 

4. Build a diversified portfolio

Investing in shares, managed funds or ETFs (Exchange Traded Funds) could be a way to grow your inheritance over time. A well-diversified portfolio might reduce risk, spreading your risk over individual investment vehicles, and provide long-term returns.

Speaking with a financial professional will help you tailor an investment strategy to your risk tolerance and goals.

5. Boost your superannuation

It’s an option that’s likely reserved for the most self-controlled forward-planners. But using your inheritance to make voluntary contributions to your super fund deliver you a far more comfortable retirement.

Depending on your age and financial position, contributing to super might also hand you tax advantages and compound returns over time. If this avenue seems the smartest move for you, check your contribution limits and the potential tax implications before making any deposits.

6. Start a business or side venture

If you’ve ever dreamed of starting your own business or kickstarting a side project, an inheritance could provide the financial backing to get it started. Having a decent amount of capital to get you off the starting blocks can reduce financial pressure in the early stages.

7. Keep a portion in cash or an emergency fund

While investing and reducing debt are important, keeping a portion of your inheritance accessible might be a wise decision. Having an emergency fund can provide peace of mind and flexibility for unexpected expenses (we ensure a reserve fund for every one of our commercial property investments), career changes or economic downturns.

Before you invest your inheritance, consider where you’re at

Deciding how to use an inheritance depends on your financial situation, goals and risk appetite. Everyone is different, so don’t believe the hype of one investment avenue over another. One thing is consistent with nearly every investor though. And that is seeking professional advice before making major financial decisions is crucial. It might just ensure your inheritance works in the best possible way—for you.

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Properties & Pathways is a leading commercial and residential property syndicator in Australia. Our priority is our investors, ensuring the highest quality investments and the most transparent communication. 

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