Ask Paul: I've saved $100,000, where should I invest it?

Q. Hi Paul, I am 18 and have been working in construction and heavy industry as an apprentice and labourer since leaving school early in 2011.

Since my first day of full-time employment my goal has been saving towards my first property.

While my parents and work colleagues have passed on an overload of financial knowledge over the past few years, any further advice would be much appreciated.

I have just hit my goal of $100,000 in my high interest-earning "house deposit" account. I am currently earning on average $2000 per week after tax and have no personal debt.

But in the next six to 12 months I will return to my plumbing apprenticeship, where I expect to earn about $400-$500 per week after tax.

Where is the best place to invest my hard-earned $100,000 before I return to award wages, and is property the only solution? - Conrad

A. Wow, $100,000 in savings at 18 - what a fantastic effort. You certainly have taken on board the advice from parents and work colleagues and have developed some excellent work and money skills.

What I am impressed about is the balance you have decided to go with between a high-income job as a labourer and going back to your plumbing apprenticeship.

Clearing $2000 a week is big money at any age but in the construction and heavy industry area no doubt the work is pretty intense and presumably with long hours and overtime. The temptation to keep earning this amount of money must be quite strong but, correctly, you are stepping away from it to continue your education.

It is an old saying but short-term pain for long-term gain is a good one and once qualified your career in plumbing will be rewarding and more sustainable as you get older. It also gives you the chance to be your own boss and run your own business.

Keeping your $100,000 in cash for the long term is likely to be a poor decision.

After tax and inflation you will be lucky to keep your purchasing power, let alone go forward. It is OK at my stage in life to hold some cash long term because as I approach 60 I am moving from a wealth-creation to a wealth-preservation strategy.

I logically should take less risk; risk is my enemy as if I lose lumps of capital it is hard for me to replace it through work as my working years are winding down. But at age 18 risk is your friend - you have decades in the workplace in front of you and time is on your side.

So your cash needs to go to a growth strategy. This could be more than property. It could be your lump sum to start your own business or to buy into an existing plumbing business. Equally, you could invest your $100,000 in shares; over the long term they have been an excellent investment.

But in your case, I do like the property idea. Property has had a very decent run of price growth. Many parts of Sydney, for example, have jumped some 25% to 30% the past two years. These spectacular returns will not continue forever but this is not an issue for long-term investors.

With our population set to grow to 35 million people over the next three decades or so, and a shortage of suitable land and housing, it is not a terribly clever prediction to make that values will rise over time.

But you do need to buy where there is population growth, and personally I would buy where people want to live in this busy world.

This means an area with good public transport, easy access to cafes, entertainment, medical services, schools and a park or beach.

It really depends on your plans but if you decide to buy a sensibly priced property in a growth location without over-borrowing, history says that in years to come it will be a good decision.

You don't need to live in it. You may be living at home now, so buying it as an investment property and renting it is a powerful strategy. The rent will cover a lot of your mortgage interest and you should check out the tax advantages enjoyed by property investors.

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