General Advice.

Hopefully this is the right section to be posting in this time. If not, I apologise. I also apologise in advance for the length of this post. If you don't have time to read it all, I will summarise at the end.

I was hoping you guys and girls would be able to help me out with some general financial/investment advice.
I know that I need to make a start in organising/improving my financial situation, but I don't have a clue where to start.

I was hoping, if it isn't too much trouble, that some of you could point me in the right direction.

In honesty I'm not even sure what I should be asking, so I figure I should just give some background information on myself.

I just turned 21 recently.
I work in a gym and receive the majority of my income as cash, from personal training. Mind you, it's not alot of money at this stage.
I recently registered for an ABN so that I could start invoicing the gym owner for the other work I do, taking group fitness classes and such. Again, it's not alot of money, and this payment is received by cheque.
My income varies slightly week to week, depending on clients, and classes. If you need specific numbers I'm happy to provide them.

Anyway, I have no debts and still live with my parents. My only real expense is petrol (maybe $20-30 per week), and the rest is usually saved. Occasionally I will buy gifts for birthdays (21st season for me) etc... but I rarely spend my income.

I have no financial planner, accountant, business advisor, or any other advisor s for that matter.

I guess my long term goal, vague as it is, would be reaching 'financial freedom'.

At this stage, I would just like some advice that could help me improve my financial position. Any advice would be welcome, whether it's investment advice, business advice, legal advice, grammar advice... anything.

Please ask me as many questions as necessary, I really do need help, and am willing to do what it takes.

Summary:
-I need help
-I make a moderate income
-I have no debts, no investments, and no clue
-I have minimal expenses
-I have no advisors, accountants etc...
-I am a blank canvas, basically starting from scratch
-I need advice on improving my financial position in any way

-What should I do?

 

Hi and welcome to the forum.
If I was starting out again now I would look at savings geared investments if I could afford the $1000 initial buy and the $200 a month ongoing investment. Some of that is from memory so the numbers may need adjusting, also depends which margin lender you go with. Managed funds are a great way to start out.

 

I would start out with a geared share fund and on a regular months basis try to dump in as much as possible.

Also take advantage of the governments co-contribution into super.. the earlier you start, it makes a big difference when you retire, no point hitting middle age and then say crap, I'm behind and then having to make large contributions.

if you put in $1000 of your own money, then the government gives you $1500, thats $2.5k each year. In 10 years that will be $25,000 plus growth. That would be a excellent start and from there compounding will set in for you and you can sit back.

do some research on websites like invest-smart, and choose a good geared share fund, like the 452 geared australian share, or colonial australian geared share. you can also put a smaller portion into international shares/property say 25%.

The key to wealth are the following (I'm 31 and wish someone gave me this advise at your age)

*Invest as much as you can each month. over time it will dollar cost average in, so if the market falls, your money buys more!
*Use gearing - ie borrow money stick to 50% or use a share fund which internally gears
*compounding - let time take care of things. If you do the math, the first 5 years are vital on how much you put in, after 5 years compounding takes over.
*education - read books, attend free seminars etc etc - but don't get slugged fees to expensive seminars.
* don't be scared to loose money, everyone looses money, but make sure you learn a lesson on where you went wrong.
* stick to your strategies, and be there for the long term. There is no get quick rick schemes out there.

Remember 5-7 years isn't long, and you will be 30 before you know it, like me, and if you waste these first 10 years of your working life, you can be left saying 'crap'!

I started young, but wish I put in more, as today I could have a great nest egg working for me for the rest of my life.

Also call a company called freeman fox, ask for their free DVD. This DVD will open your eyes up to investing and its power. At your stage I don't think its worth using a financial planner. Personally I think make a bit of a effort in learning yourself, as your doing now, and you will do well.

For managed funds, check out the colonial first state website, they are a good platform to use. But invest via a discount provider like comsec or investsmart as they waive your entry fees (normally 4%)

Don't invest in things you don't understand, and stick to simple strategies, don't get caught up in complex negative gearing or other 'too good to be true' opportunities. Remember you pay tax on a profit, rather then getting a deduction on a loss.

Hope I have been of some help!

 

also one more thing, don't listen to the news papers, when they tell you the world is falling! There will be many well meaning people who will scare you and could take away your long term financial security.

 

Thankyou! You guys really are awesome.

I will definitely follow up with your advice.

Expect plenty more lengthy and annoying posts from me, harassing you guys for your knowledge.

Cheers.

 

Compleks, 4 questions:

1. How much money have you got that you'd be able to contribute to investing?
2. Do you have any debts?
3. How much would you be able to contribute per month, without affecting your current standard of living?
4. Can you point me to a website that describes squatting technique correctly?

PS I also don't think you'll need a financial advisor.

 

1- About $10,000 in savings.
2- No debts
3- Currently, $1000 a month (on average, my pay isn't always stable)
4- With pleasure...
Testosterone Nation - 6 Tricks for a Sexy Squat

 

thanks.. my legs -> http://www.germes-online.com/direct/dbimage/50227206/Toothpicks.jpg

 

I called freeman fox, and they are sending out the dvd set. They were very helpful, and gave me a link to another site with information about some upcoming seminars.
He recommended a seminar 'wealth magic' which is coming up in Melbourne.

Thanks for the advice so far.

 

I think they are charging $98 for that seminar. I paid like $3k for it 4-5 years ago. For the $100, I think its worth booking in.

 

Ditto crc's advice. I'd just add "leave your wallet at home"! (altho FF are probably one of the "better" seminar crowds...)

Cheers
N.

 

Yeah, that's what I was told.

Do you know where I can find more information? What exactly does the seminar cover? The site didn't really have anything useful.

I guess I will need to give them a call to book in.

 

I think I may have some sort of investors learning disability. Everything just seems way over my head. I can't make sense of anything, it's all so confusing.

Does anyone have any good resources that can explain the various types of investments in layman's terms?
Things like stocks, shares, super, managed funds etc... What's the difference? How do they work?

Please excuse my ignorance.

Thanks.

 

Thats our fault for talking over your head.

Stocks and Shares are the same thing. They are a "share" of a company. For example you can buy 1000 shares in Woolworths and you will share in any profit that company makes - you are one of it's owners! Pretty cool huh!! They usually make a payment to us twice a year and the value of the share rises and falls depending on the buyers and sellers of that share. So whilst all of us perceive it to be a good investment and are buying more the shareprice will rise and vice versa. We are often quite foolish and will buy and sell on all sorts of news about the company or the whole market. Long term investors choose great value companies that have a great history of paying out good growing dividends and buy when they look at a good price. The forget about watching the price and reap the payments. If you don't need the money they pay biannually then reinvesting in more shares directly through a Dividend Reinvestment Program can be a great wealthbuilding tactic!

A Managed fund is a fund managed by an expert team who buy and sell shares according to a strategy that is predetermined. This strategy might be just to own all the top players or can be very complex. We buy units in the fund and these units will rise and fall in value and also usually pay a distribution to us 1-4 times a year.

Superannuation is an investment/savings vehicle that is mandated by the Government for every worker. We pay into this or our employee does and the funds are held in managed funds as described above. We cannot access this until retirement. There are some very complex rules.

At your age you should definitely contribute to Super but also invest separately. Many of us see Super as a bonus when we are older and not much use until then.

Australian Securities Exchange - Stock Market Information, Stock Quotes - ASX is the stockmarket website and they have some great educational resources as does this site.

Post any questions here and someone will answer if they can!

 

Thanks Simon, that definitely cleared up a few things for me.

I appreciate the effort that everyone here goes to, and only hope that I can repay the favour some time.

So I guess the next step would be learning about the various 'vehicles' and finding one(s) that appeal to me, and suit my needs?

I have always taken a liking to property, and would like to look further into purchasing an investment property in the future. But I still have alot to learn about this aswell.

I also like the sound of managed funds, simply because I could never see myself getting fully involved in the share/stock market. I'm not sure if that is logical, but it seems like managed funds might be a bit safer for me at this stage.

I don't want investing to take over my life, but would like to know that my money is earning for me, and that I always have options.

Anymore advice for someone in my position would be appreciated.

 

This isn't Financial Advice.

If I was starting out today knowing what I know now I would be buying into a managed fund until I hit $20K. even taking out a personal loan and paying it down. Declaring the interest on my tax.

I would then get a loan against it by using a Margin Loan and double the money to $40K but put the second $20K in a new managed fund with a different market exposure or investing style.

I would continue saving into the first managed fund and every time I raised it $X I would increase my margin loan by $X for the second fund. Margin loans automatically do that for you as the value of the investment rises.

I would be studying the property market. When I found something I thought was a good investment I would buy it using enough money from my managed funds to pay a 20% deposit plus costs. I would have an Interest Only mortgage and just pay the minimum down on that loan.

I would direct the rent into my savings and build the managed funds back up.

Keep looking for IP2 and repeat.

Just a quick thread to show what is possible and this certainly isn't advice for you as I am no advisor and I don't even know your situation!!

Cheerio,

 

I appreciate it none the less.

How exactly does a margin loan work? Is it simply a loan up to the amount of cash you already have invested in a managed fund? What sort of repayments/interest would you be looking at?

If you bought an IP and just payed minimum interest on the property, what would be the long term goal? To sell the property eventually and make a profit on capital gains? Would you not look to pay off the property and then receive a passive income from rent?

Anyone is free to answer, as I don't want to harass Simon too much.

 

Hi Compleks,

There are a number of future options available to you when you own property investments. You could sell down a property or two to pay off the loans on others and live off the rent. You could borrow more against the increasing values of the IP's (investment properties) to invest into higher yielding asset classes (shares, managed funds etc). An even more advanced strategy is called Living Off Equity (LOE). There is a four part series of articles on this website covering this strategy (its great reading, even when you're starting out).

Of course this is all just pie-in-the-sky stuff until you actually have the investments...

The best thing you can do at a young age is keep trying to increase you financial education, and keep drip feeding your investments as early as you feel comfortable (as already mentioned by crc and Simon). I bought my first IP at 22yrs and margined into some managed funds not long after that, but long before that I was trying to learn as much as I could from anywhere/anyone I could...you've made a great start just by asking questions.

Best of luck,
Chris

 

Cheers buddy.

I feel like things are starting to make a little more sense.

Currently, I feel as though managed funs would be a good starting point (I'm not even entirely sure why I think this). Even if it's just to get my foot in the door, so to speak.

I have about $10,000 in savings, which I would like to invest in the near future. I know I should probably do something about my super situation (I have none), but I don't really want to put all my cash where I can't get at it.

With managed funs, can I access my money easily? Maybe it's different depending on the fund, but is my cash usually 'locked in' for a certain amount of time?
Can I add freely to the amount I have invested? Is there usually a minimum investment, or monthly deposit?


I'll leave it there for now. You guys must be getting sick of me already.

Thanks again!

 

Whatever you do DO NOT do nothing! The number one mistake experienced investors all report is not starting earlier. My experience is that once actually you put some money into an investment your incentive to start learning will explode.

Investing does have an element of luck to it .
You will lose money at some stage. It will leave you feeling hurt and humiliated. Just like falling off a bike. But unlike the casino, the odds are weighted in your favour. If you learn from experience and keep going you will win and massively so compared with the majority who do nothing.

Without wishing to sound like an ad for our sponsor, go to one of Steve Navra's courses. The nice thing about his approach is that it covers both shares and property.