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Living on Equity

Discussion in 'Investing Strategies' started by canbruzhero, 16th Mar, 2009.

  1. canbruzhero

    canbruzhero New Member

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    19th Feb, 2009
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    Location:
    Canberra, ACT
    Hi, I'm new here and I'm trying to understand Living on Equity more. I'm reading the guide at

    (http://www.invested.com.au/76/living-equity-part-1-preliminary-concepts-1552/?garpg=4)

    and so far I'm understanding and getting alot out of it. What I'm having trouble with is a 'Safety Buffer'

    "For example, say an investor desires an annual passive income of $65,000. If an investor had $2.4m in assets growing at 5% per annum this would provide $120,000 of growth each year. Using a loan 80% of this growth could be harvested to provide $96,000 in a line of credit. After putting aside $31,000 as a buffer, this would leave $65,000 for living expenses. Generally you should only access two-thirds of your capital growth in any year and leave the remaining third to compound for leaner capital growth years and to cover the interest cost of the dollars you have spent.

    The part in red is the part I don't understand, if anyone could shine some light on it, it would be appriciated.

    Thanks.
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Specifically what are you unsure about ?

    The buffer is used to provide a bit of a safety-net for situations where the growth you were expecting didn't eventuate. Markets are generally cyclical, so there will be periods of low or no growth (and after a boom, sometimes there will also be a correction) - by putting aside some of your growth during the good times, it can help smooth out the cashflow crunch that may occur during the not-so-good times.
     
  3. canbruzhero

    canbruzhero New Member

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    19th Feb, 2009
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    Location:
    Canberra, ACT
    Exactly what I needed, thanks alot for that :) Writing a speech on this, so I need to know what I'm talking about!! Thanks again.
     
  4. Nigel Ward

    Nigel Ward Team InvestEd

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    Who is the speech for Canbruzhero?
     
  5. Sacko

    Sacko Well-Known Member

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    Central Coast, NSW
    Wayne Swan? :rolleyes:
     
  6. TROM

    TROM Active Member

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    17th Jul, 2006
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    Location:
    WA
    Is anyone here still with Steve Navra Income Fund.

    How did you go with the big correction over the past 2 years has it really knocked you around and do you believe that the shares and property is a better way to gain financial independence faster?

    I am asking because I am still just building my property portfolio quite slowly and was also caught up with the high interest rates and negative cashflow but now it is coming down to neutral.

    Also When would be the best time to see Steve Navra group when you have your PPOR paid off or when you have a minimum amount of equity::eek:
     
  7. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Hi TROM - the Navra fund dropped about 30% compared to the market which dropped over 50% at its worst point.

    This was because the fund moved to cash back in October last year and avoided the last 20% or so of falls. The fund is gradually moving back into cash right now and I beleive is about 40% invested right now.

    The NavraInvest funds have outperformed most similar funds in recent times - but that only means they have fallen in value less than everyone else. There has not been much in the way of distributions in recent quarters while they have been in cash - but that should change once they are more fully reinvested in the market.

    Steve's company (Navra Financial Services) is a financial planning company - if you are after investment advice, any time is a good time to go and speak to them about your strategy.
     
  8. TROM

    TROM Active Member

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    Thanks Sim, does anyone know if LOE part 5 is coming out yet? Waiting for how many years now :)
    :eek:
     
  9. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    As far as I know, Steve hasn't written it yet. He has been rather busy first with the (now cancelled) launch of his growth fund and more recently dealing with the fallout from the collapse of Great Southern.

    If Steve does get around to writing part 5, it will most likely be published on his own website at navra.com.au and not on InvestEd.
     
  10. greygoose

    greygoose Member

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    LOL LOL.............