Ask Paul: I'm 20 and I've saved $42,000, where should I invest?

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Q. I'm a 20-year-old commerce student, with one year of study left. I work casually, with shifts here and there, and have managed to save $42,000.

All of this money is in a share portfolio, with about 80% of it being in small cap, more speculative shares, and at the time of writing it is valued at $58,000.

What do you recommend I do to invest at this age in terms of choosing between holding all my money in shares or property?

ask paul clitheroe where should i invest property shares

I will be $30,000-plus in HECS debt by the time I finish university.

I don't want to waste any time and want to buy an investment property as soon as I can but I know I don't have enough money or a secure full-time job at the moment.

I also don't know if I should start selling these riskier, small-cap shares and take the $16,000 profit to start fresh and re-invest in safer blue-chip companies. - Josh

Good job, Josh. You are going to do very well with your money. At the age of 20 you are already all over it.

Let's not over-complicate this, though. I think you need flexibility and access to your money until you settle into full-time work.

Who knows, you may need capital to start your own business or to travel. Property will really tie you down. The market is also soft and I don't see it doing much for the medium term.

You are also really young. Blue chips are great for oldies like me but if your small caps are doing well I don't see any reason to change.

Please remember to have plenty of fun while you are young!

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the television show Money, radio, and most notably this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is Chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Click here to email Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. Please view our disclaimer here.