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My 'Wealth Creation' Strategy.

Discussion in 'Investing Strategies' started by Compleks, 5th Jul, 2007.

  1. Compleks

    Compleks Well-Known Member

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    Melbourne
    I have been spending time lately trying to develop my wealth creation / investment strategy.
    I want to do this right, so I'm trying to finalise my goals and plan before I begin. I'm sure they will change along the way, but I want some direction to begin with.

    So far, it's just a very general outline of what I plan to do. I'm getting a little bit stuck on how to progress into the finer details, and actually making the commitment to invest.

    So basically I have started by generating income.
    I won't go into any detail here, but I'm basically working on ways to maximise my active income. Working smarter, not harder etc...

    Then I have to allocate the income I earn.
    This area covers basic living expenses, other expenses, and ofcourse investing, which is where I would like to focus most of my attention and income.

    So, the actual 'Investing Strategy' where I'm getting stuck. As a basic aim I have written "To maximise the growth and return of investments". Yeah yeah, nothing surprising there.
    From there I basically continue to break down into more specific goals, such as "Purchase low risk / high growth investments for building equity and security" and "purchase low risk / high yield investments to supplement active income and maximise investment potential".

    Nothing groundbreaking there. If only it were that easy, I'm sure.

    I haven't set any actual figures yet, but the goal is to eventually build a large enough portfolio so that I can live comfortably on the returns I make from my investments.

    I haven't specified any investment vehicles yet either, because I'm not really sure what will best suit my goals, and I don't want to limit myself.
    I have been thinking of getting into property, for the capital gains, as a long term high growth investment. But I would need other investments that could offset the expenses incurred from the property, as it will most likely end up being negatively geared (unless of course I can find positively geared property). My income isn't the most reliable either (self employed).

    Anyway, so the rest of the strategy will try and cover, in more detail, things like super, shares, property etc... and how they will fit into my plan. Not that I'm big on diversification, but I just want to have options available that will best suit my plan.


    If you read all of that I am very appreciative.
    Any comments, criticism, guidance are all welcome.

    I'm glad to answer any questions.

    Cheers.
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    The most important thing and also one of the most effective for helping your develop your strategies (in my opinion) is to start with the end in mind and work backwards.

    What are your goals ? What do you want to do with your money ? More importantly, once you are financially independent, what do you want to do with your time ?

    Find out what motivates you, then work out what you need financially to be able to achieve those things, work out how various strategies will help you reach those goals, and develop a set of rules for yourself which keep you on track.

    I find that once you have a clear set of goals in mind, it becomes much easier to measure an investment opportunity or strategy and consider whether it is really going to get you closer to your goals.

    (Hint: "to eventually build a large enough portfolio so that I can live comfortably on the returns I make from my investments" is too vague to be a motivating goal in my opinion ... how do you define 'comfortably' ?, how much is enough ? what will you do once you have achieved it ? Just a suggestion of things to think about :D )

    Put real numbers and timeframes against everything, work out what compounding returns you need to reach those numbers, and let that guide your strategy.
     
  3. Compleks

    Compleks Well-Known Member

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    Thanks Sim, I agree with you 100%.

    I am narrowing things down gradually until I do have a set of measurable, specific goals, and numbers. I'm just really not sure what sort of figures I will need, or where to start, but I'm working on it.

    Now only if I can learn to take my own advice.
     
  4. Nigel Ward

    Nigel Ward Team InvestEd

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    There are some rules of thumb which are used generally in the super context as to "how much you'll need for your retirement income of $x". To be honest though I think most of them are aiming at what's a pretty modest income and thus lifestyle in retirement...:rolleyes:

    BUT perhaps work out the income you'd like from what date in the future, figure out what you think is a realistic rate of return from your assets at that point and then divide your income by that % return and you'll know roughly how much capital you'll need to sustain that income.

    For example if you want $100k per year gross and you anticipate your investments will return 5%pa then you'd need $2m net assets to generate that $100k income. Of course this is grossly simplified and can be adjusted for gearing levels, inflation, tax position etc etc etc but it may give you a ballpark.

    You could then look at your current net worth and figure out how much you need to make each year to hit your target. I suppose you could even work it down to monthly or weekly goals if you like. Excel makes these calcs fairly easy.

    Cheers
    N.
     
  5. Mark Laszczuk

    Mark Laszczuk Well-Known Member

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    Hi Compleks,

    Pretty much everyone started off exactly where you are now. No one (that I am aware of) woke up one day and magically knew what they wanted to invest in, their structure, how they were going to get there, etc etc. It's all part of the learning process and your goal posts will be constantly moving anyway as you become a more sophisticated investor.

    The best thing you can do right now I reckon is just jump in the pool, have a swim around, check out your options and as you become more investment savvy you will naturally gravitate towards what suits you.

    There's no need to worry about trying to learn everything straight away.

    Mark
     
  6. Compleks

    Compleks Well-Known Member

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    Thanks everyone.

    I hate to post so many rambling threads, but every time I post I get great responses. I feel like each post is actually bringing me a little closer to my goals.

    Thanks again.
     
  7. Simon

    Simon Well-Known Member

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    I am with Mark,

    You can actually spend too much time agonising over the details and never get started.

    There is something to be said for just jumping in feet first. Somehow when you are actively investing you start to learn a whole lot more than when you are just reading stuff.

    So have a think about starting an investing plan via a fund with your capital and a monthly contribution. Buy an IP when you have saved enough!

    I know it is easy for me to say it but once you have stepped into the pool you will never look back - scuse the mixed metaphor!!
     
  8. Compleks

    Compleks Well-Known Member

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    Thanks Simon, you have always been very helpful since I first posted here.
     
  9. Simon

    Simon Well-Known Member

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    A pleasure.

    Something I posted on your other thread which really belongs here,

    When you start investing you chase up all these opportunities, thats how these presenters make their money - by selling the idea that making big money is quick and easy.

    We have all been there.

    you are on this website and you will notice that nearly all of us are doing it almost the same way. Property. Direct share ownership. Managed Funds. Mortgages. Margin Loans.

    Why not save yourself a heap of time and effort and just duplicate what we are doing. I would give my left nut to go back to my early 20's and have this resource to get myself started bigger and faster. But back in the mid 80's there was no internet, magazines, books or TV shows about money. Investing was for people from a different social circle than us. You youngsters have it all but sometimes I think you have too much info that stops you from getting the ball rolling.

    Making Money Made Simple by Noel Whittaker got me started with my first property buy and I am forever grateful to Noel.

    Get yourself started and stop trying to find the easy way.
     
  10. Bantam Roosta

    Bantam Roosta Well-Known Member

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    Do most of you guys really have detailed financial plans/wealth creation strategies? I certainly don't, but perhaps that's why I'm so poor.:rolleyes:

    Maybe when I get some more assets under my belt it might be worth it, but at this stage I just tinker away, doing a bit here, a bit there, with my eye on the 1st major goal, exiting the rat race.

    BR
     
  11. Simon

    Simon Well-Known Member

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    I do.

    I reckon you should have a crack at it. It is a worthwhile mental exercise.
     
  12. Compleks

    Compleks Well-Known Member

    Joined:
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    Melbourne
    Thanks Simon.
    Feel free to give me a good kick in the ass every now and then, it's the only way I will make any progress.