Join our investing community

Have Equity & Twins !

Discussion in 'Introductions' started by Mitch_, 30th Nov, 2007.

  1. Mitch_

    Mitch_ New Member

    Joined:
    22nd Nov, 2007
    Posts:
    3
    Location:
    Melbourne
    Hi Everyone,

    Thought l'd start my first post. Not sure how exactly l came across the site, but glad l did. I've been lurking at quite a few posts and am very impressed with the ideas, strategies and general helpfulness of everyone.

    About me. I'm 32, Chartered Accountant who now works in sales, married with twin girls (4 mths old) - yes l don't get a lot of sleep ! Live in Bayside Melbourne with our PPOR worth approx $570k with $300k equity. The previous strategy has been putting all excess cash into the mortgage, but now want to start investing that is tax effective.

    As a start I've just sorted a $150k LOE with Westpac (8.02% interest only) and ready to invest in managed funds. I would like some advice as to the type of funds l should be considering. My research (but must admit l'm totally inexperienced) has been around 5 star rated funds with proven 3-5 year records such as CFS Geared Share, BT imputation & Macquarie Small Companies Growth Trust. Any ideas would be appreciated.

    With the strategy now to go back to paying the min repayment on the home loan, l've have approx $2-2.5k per month spare. Should l look to repay the LOE, continue with the mortgage or further invest.

    Look forward to a long association with the site. Thanks.

    Mitch
     
  2. DaveA

    DaveA Well-Known Member

    Joined:
    19th Feb, 2007
    Posts:
    617
    Location:
    Sydney, NSW
    From a list like that it sounds like you might be chasing last years returns. Have a think about the funds and the risk profiles of them. Also dont dismiss other funds, one fund which gets alot of attention (positive and negative) only has a one star rating, so that rating isnt the be all end all

    Depends on your risk profile and market bullishness.... Do you think the market can return more than your current mortgage. If yes then you would put as much in as possible. If no, well why are you putting you 150k in the market?

    Also consider if your ppor maybe become an IP at a later stage, if so you wouldnt want to pay any more than you have to and youd set up an offset account for the rest of it. If your looking to pay min then you should switch to an interest only loan

    regardless, you would pay off your current ppor before the loc as the ppor is not deductibe currently (unless your shares are a short term thing)....

    Is the LOC fixed or variable?
     
  3. Simon

    Simon Well-Known Member

    Joined:
    17th Sep, 2005
    Posts:
    520
    Location:
    Newcastle
    Save your excess in your offset account. As you buy managed funds just use your LOC and increase it as required. As a CA you will understand about maximising deductible debt and minimising nodeductible.

    Why are you buyinh managed funds? I don't mean to question that decision - just asking what your goal is for them. Are you after CG or income? That will drive your decision as to what to buy.

    As mentioned by someone else don't just focus on chasing last years star performer...

    Cheers.
     
  4. Mitch_

    Mitch_ New Member

    Joined:
    22nd Nov, 2007
    Posts:
    3
    Location:
    Melbourne
    Thanks for the replies DaveA & Simon.

    My goal with investing using a LOE is to fund the future costs of my twin girls, particularly around education costs so l'm taking a longer term view of at least 7-10 years. I would consider myself to have an high risk profile but see the benefits of diversification into managed funds as being superior to direct share investment. I take your point re chasing last years star peformer, but l am looking at average 5 year returns. At the end of the day, l prefer to invest in a growth fund that has a proven management team and track record and pay a slightly higher MER% then a 1 or 2 star rating. I'm not overly bullish but do think the market can outpeform the rate on my current mortgage with me being able to claim interest on the LOE. Thanks for the advice re the offset.

    Cheers,

    Mitch
     
  5. Tropo

    Tropo Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    3,396
    Location:
    NSW
    “....but see the benefits of diversification into managed funds as being superior to direct share investment”.


    Managed Funds carry higher risk than direct share investment (IMHO).
    You can’t control Fund Managers but you can control your own portfolio, and that is a big difference.;)
     
  6. Simon

    Simon Well-Known Member

    Joined:
    17th Sep, 2005
    Posts:
    520
    Location:
    Newcastle
    Thats a throwaway line. Managed funds having higher risk because you don't control their decisions only works if your decisions are consistantly better than theirs. For most of us rank amateurs our decisions are not markedly better than fund managers like Kerr Neilsen - one of Australias richest men.

    I think having several different people controllin g your portfolio is a good diversification rule. I know I cannot be trusted with 100% of my decisions :D:D
     
  7. Tropo

    Tropo Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    3,396
    Location:
    NSW
    "I know I cannot be trusted with 100% of my decisions"

    Simon,

    I am very sorry for you.....:p
    In your case MFs are the only way to go. :D