Where to invest $100,000

Discussion in 'Share Investing Strategies, Theories & Education' started by Dave_Seaford, 20th Feb, 2017.

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  1. Dave_Seaford

    Dave_Seaford Member

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    Victoria
    Hi Everyone,

    First time poster, however have been soaking up the information contained in this excellent resources for a number of weeks now.

    Our situation:
    - Mum, Dad & 3 kids (9, 7 and 1)
    - I'm the only paid worker in the family, and this is likely to remain the case for a number of years
    - We have recently established a Family Trust for the purposes of investing in shares and property going forwards
    - We currently have ~$220,000 to invest which we intend to split between shares and property

    Current thinking is to take $100,000 and invest in shares as part of our long term wealth creation strategy. I'd like to say I could actively track and manage my portfolio on a daily basis, but with a busy job and growing family, I think I would be kidding myself.

    My financial adviser is guiding me down the path of various CommSec products, however I'm not convinced, for the following reasons:
    1) High fees when compared to similar Vanguard offerings (which seem to be popular on here)
    2) I suspect my advisor is motivated by some form of commission as his end also
    3) Working my way through Peter Lynch's "One Up On Wall Street" book. He's pretty negative on the limitations of fund managers who he considers 'easy to beat', as they are more and more constrained in what they can and can't purchase.

    It's fair to say my thinking is somewhat confused right now, but I don't want to procrastinate any longer if I can avoid - time to achieve clarity and act!

    Keen to get feedback from this community on what they would do if they were in my position. Please let me know if you feel I need to provide any additional information to help make the picture clearer.

    Thanks in advance!

    Dave
     
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  2. Simon Hampel

    Simon Hampel Founder Staff Member

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    Welcome Dave - great to have you here!

    I think reading up on low cost index funds as well as ETFs and LICs will be a great place to start.

    If you don't have the time to do a lot of research in what you're buying - I would recommend you avoid direct shares for now. You can always add them to your portfolio later if things change.

    You don't have to (and probably shouldn't) put everything into a single fund - so perhaps just choose three or four low cost funds/ETFs/LICs and put some money into each of them.

    Will you have additional funds to invest in the future? Doing a form of DCA (dollar cost averaging) can help build a good portfolio - or you can do some self-balancing with additional investments.

    I think if you start with the low cost approach and at least use that as a learning process, it will serve you well moving forward and give you a good basis for future investments. If you want to expand your strategy to include more aggressive (and likely higher cost) options - you can always add them later.

    What are you thinking of doing with property? Some parts of Melbourne are doing really well right now - but so are parts of Brisbane and Adelaide, so you've got a bit of choice. $100,000 is going to give you a lot of options in that regard - depending on your serviceability (ie how much income you have available for servicing investment loans), since the banks have been tightening their criteria recently.
     
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  3. Dave_Seaford

    Dave_Seaford Member

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    Victoria
    Many thanks Simon - I think your proposed strategy makes a lot of sense and is aligned with my thinking.

    Other than re-investing dividends etc, I don't expect to have a large sum to add to the portfolio in the short-medium term (1-3 years).

    Property will be the next thing I wrestle with. Again, my financial advisor is pushing me towards smaller Commercial-based investments - something he has personally had a lot of success from in the past 15 years. I myself struggle to get a 'feel' for these investments. In my mind there seems to be more risk and hidden 'gotchya's'.

    Residentially, I have been looking to the West of Melbourne (Point Cook, Deer Park, Werribee, Wyndhamvale), as well as around my own area of Skye/Somerville/ etc. Some areas of Brisbane have attracted my interest (Logan etc), and I have a soft spot for Hobart (but that could well be more sentimental which obviously isn't a good premise for investing).

    I'm very fortunate from a serviceability viewpoint, with an annual income of around $250K (self employed, so depends upon how many days I put in). I'm hoping with ~$100k deposit plus our income, we should be ok with at least 1 property purchase approaching $500K.

    Really appreciate you taking the time to respond Simon - I have read a lot of your stuff on here, and it really resonates with me.
     
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  4. Simon Hampel

    Simon Hampel Founder Staff Member

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    I agree with your analysis here.

    It's fairly hard to get it completely wrong with residential - it's pretty easy to pick a property that is going to have reasonable or good demand from tenants and from there it's just a matter of running the numbers to see whether rental estimates are reasonable and whether you can justify the cashflow position based on the expected rent and the asking price.

    However, with commercial the supply and demand formula is a LOT different to residential and there are many things you need to take into consideration and learn before you can be sure you're buying something which is going to get you the return you want while remaining within your risk profile. The gotchas with commercial can be really big (particularly extended vacancies).

    I think if you're going to get into commercial - you need to be doing a LOT of research and perhaps learning from someone who is prepared to mentor you and guide you through the ins and outs - and you want to make sure you have a fantastic solicitor on your team who understands commercial leases, because from everything I've read over the years it's the lease which makes or breaks a commercial deal - and you absolutely must ensure that you're covered yourself and your asset.

    I think you'd be best to build up more of an asset base and spending the time to learn everything there is to know about the commercial property market before you seriously look at that side of things.

    If you're self employed - are you in a position to buy a commercial property for your business? I know a few people who have done this via their SMSF and offered a relatively low risk entrance point into the commercial market - since they are being their own tenants. Of course, if business doesn't go well, it can become a real noose - but then, so will a long term commercial lease too.

    Outer western parts of Melbourne have been getting a lot of attention over on PropertyChat for a while now, Logan is always a popular discussion topic too.
     
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  5. twisted strategies

    twisted strategies Well-Known Member

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    welcome Dave ,

    currently i am staying in Logan and would NOT suggest it , especially if bringing the family to reside there , i could start a ' hate list ' ... but let's call it false value . ( apart from the adequate hospital , not that much to recommend it above others ... and god forbid you need a genuine tradesman )

    now my situation varies from yours , but the New England Tableland ( Northern NSW ) repeatedly catches my eye , schools and medical facilities might detract .

    central QLD ( Maryborough , Gladstone etc. ) are struggling to sell properties now , but once ( resource) boom times come back will be good rental properties ( the weather might be a bit harsh for you and family )

    again for rental properties South Australia has some intriguing deals ( think industrial towns )

    if looking to invest in property see what your $100k gets you cash up front ( the $20k towards costs involved ) , you might be able to haggle a fair deal ) , ( my rent it out now , renovate it later plan ).
    i haven't been to Tassie but apart from the jokes ( even from ex-pats ) shouldn't be too bad

    the Commsec financial advisor inspired me to strike out on my own as well ( so can't rib you about that )

    now the share markets ( including bonds and hybrids ) is fairly poor value , yes the share prices may still go higher , but investment is about ( div.) yield on investment AND the chances of losing some ( or all ) of your investment cash ( bearing in mind , inflation is trying to eat that cash relentlessly ).

    would waiting ( in a term deposit or holding account be wise and see in the May/June sell-down is a small dip or a much bigger one . ( using the extra time to research )

    good luck
     
  6. Simon Hampel

    Simon Hampel Founder Staff Member

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    I'd be very very careful investing outside of Adelaide (except perhaps the Adelaide Hills - within commuting distance to the city) in SA ... there are no towns of significant size to have a diversified enough industry base to not be overly affected if there was a downturn or something else affecting the industry in those towns.

    For example, Whyalla is very much dominated by a single company employing large numbers of people in the town - so the population dropped from over 30,000 in it's heyday in the late 70s to nearly 20,000 in the mid-2000's, and it only now starting to pick up again. If commodity prices drop significantly, that may have a severe negative impact on the growth of the town.

    Mt Gambier is the only other town of significant size and is a large rural centre that is very isolated - although I believe is starting to show some fairly rapid population growth in recent years. While I feel it is quite a bit more diversified that other cities like Whyalla and serves a large farming area - it's still a relatively small town and probably very much affected by commodity prices.

    Murray Bridge is an interesting case (where I went to school and my parents still live), it's still within commuting distance of Adelaide and again services a large rural area and isn't dependent on a single large employer or industry. While I don't think it's likely to boom - I think strong rises in the Adelaide market will help drive up prices as people look for cheaper options or lifestyle property away from the city.
     
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  7. LoansOne

    LoansOne New Member

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    The rising prices in Adelaide are quite interesting to look at, Melbourne and Sydney sure are taking off quite rapidly too
     
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  8. Gockie

    Gockie Life is good ☺️ Premium Member

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    Hi @LoansOne - I'd be very cautious in Melbourne and Sydney right at the moment - they've been booming for a few years now and there's no guarantee that will continue in the future... To jump in now could expose someone to more downside risk than upside risk.
     
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  9. Rakhi Withanage

    Rakhi Withanage Member

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    Hi Dave,

    I certainly believe in a diversified portfolio including both property and shares (both local and international). For $100k I don’t believe you have quite enough to get proper diversification through direct shares so perhaps a few LIC and ETFs would work for you.

    On the property front you could either look at DIY with your research, or leverage the knowledge of an expert (buyers agent) who could help build the foundation of your property portfolio and then you can grow from the knowledge gained there.

    Also Simon’s comment about a CP for your business via a SMSF is a great strategy depending on your other goals and objectives.

    Sounds like you are the main income earner in your family so protecting your income should also be a strong focus. No point building wealth if you will need to sell down assets to live should something happen to you.

    In terms of your adviser, commissions on investments have been banned for quite some time now so I doubt this would be the case. Also CommSec is just a trading platform which only charges for brokerage so not sure where the adviser would be getting any commission from.
     
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  10. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    Another thing to add that your FA may or may not have mentioned is debt recycling your $200k prior to investing it - if you have an owner occupied home with a mortgage, this is a great way to increase your deductions and reduce the home loan at the same time.
     
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