Total investment noob #2

I thought i better start a new thread seeing as the previous one was 6 months old and some things have changed.

Im now 22 and have about $100-$150k i can use to invest. I am currently working in the IT sector and earning 45-50k a year.

I live at home with parents and dont have any debt.

I am interested and am willing to learn. I am planning to organise and see a financial planner soon to try to work out something for me to do.

Can anyone suggest any financial planners or books/seminars i should have a look at?

Cheers.

 

Also is this a great time to get into MF with the high interest rates on loans and the low performing MFs?

 

Are you trying to be funny

Dollar cost average your way into some ETF's over the next 6 months. By the time you've got your capital all invested interest rates may hopefully have dropped, and you can gear up then.

 

Nope not being funny at all, sorry if it sounded that way. Btw what is ETFs? Exchange Traded Funds?

 

Zman,

Don't get fooled by the funds management hype or 'pornography' (as Travis Morien calls it).

Read a few of the threads in the "Passive Index Funds and ETF's" section first and go from there...

 

Thanks mate!

 

LOL I hope I didn't sound like a prick

I thought you were being sarcastic with that comment - I apologise.

I think for anyone starting out ETF's are great - they give you diverse exposure, have lower MER's (less fees being taken by the fund manager), can be sold by you whenever - none of this suspension on redeeming units crap.

 

No you didnt sound that way and i appreciate your post! I will deff need to read up more about ETFs.

Cheers mate!

 

At 22yrs of age
you need to make a decision on whether you want a ppor soon
Congratulations for saving that much money - if you saved it

The affordability crisis for australians is getting worse

I would set aside 100k as deposit money
25k for shares, 25k for emergencies

Stick your deposit money into a high interest account - like ING direct - there are others paying better rates though, look around

or some ingdirect term deposits at 7.2% for 90 days

I would start with property with a low mortgage but high deposit
Either buy ur own home or start with an investment
with property you could buy 250k-400k property

There are various ways to do things
The way I did my first is
Buy a run down unit - in a small group, live in it, paint, new floor boards and kitchen, get the first home owners grant, dont over extend then either hold on as an investment by furnishing and attracting top yield or selling CGT free
Though buy / sell renos may be hard depending on which market you are in

Brisbane and adelaide grew by 20% in the last year. If you can get a property that grows even close to that then you are in for a good start

By not having any property either PPOR or investment - it will get even harder for you to get one later esp with fast property growth

I wouldnt put too much in shares at this stage

 

Be careful with your financial planner you choose
They often have no idea about property
and may advise to invest the whole 150k in managed funds

How would you feel if in 6 months your portfolio was 15-20% less?
which could realistically happen

Whereas if you bought your first house or investment property
I dont think it would be as 'risky'

 

Thanks for your post DKMC.

I was thinking of owning my own PPOR sometime this year. The problem is i only make 45-50k a year dont know if a bank would lend me 300k-400k?

 

Hi Samaka,

I do believe that things which are listed on the ASX can be suspended, ie, Centro stock was suspended, so there is no reason why an ETF can't be suspended from quotation which is the same as suspending redemptions (sells) from managed funds.

Cheers,

Dan

 

Yeah i dont know where to turn to in that respect. Is there any financial planners on this forum that are respectable?

 

Whats the price of the ppor
Yes you will find banks that will lend that much to you quite easily
Get a good mortgage broker to help

In that case put all ur cash into the PPOR
thats effectively 10% + return on your money guaranteed

forget the shares
maybe just a little to dabble and learn only - <10k

Actually - forget the shares entirely and keep reading

I dont think you need a financial planner
get the house first
build some equity

Then later think about borrowing against the equity to invest

Also setup an offset account against ur ppor and put money into that rather than into the home loan if you are disciplined - may save some headaches later

read a few good books on basic personal finance
Property books - Jan somers'

 

I was thinking of getting into property and was recommended that option by my parents.

Only issue is i have no idea as to what to be looking for in a house/location nor what a offset account is lol. I will have a look at that book tomorrow see if any shops here stock it.

 

the book is
"more wealth from residential property" - its a bit dated
and Building Wealth - Story by Story
More Wealth
Its a bit dated but its gold!
- best book to start with
- and one of the earlier books got me started in property investing

a few general property books
have a look on www.businessmall.com.au on peroperty investing

I can recommend the following that were on businessmall
Confessions of a Real Estate Agent
Don’t Sign Anything
How to Grow a Multi-Million Dollar Property Portfolio - in your spare time
Real Estate Mistakes

as a start
Theres also a book about how to buy a home - by penguin books
which is a good start

Spend a few hundred on a library - and education - well worth it

You might want to look at the somersoft forum and read the posts there - youll read many inspirational stories

 

Hi Zman,

I'd like to say I'm respectable, I got above average marks from FinSIA and FPA for Ethics and Compliance subjects.

I think what DKMC is trying to say is that Financial Planners don't usually specialise in Residential Property. Entry costs for Investment Properties can be as high as 7% (Ie, buying a unit/townhouse/house for $400k, could cost you an additional $28k).

Through managed funds, you can access virtually any asset class you want. On the property side you can invest in residential, retail, office, heavy commercial, etc.

CRC_error and one of the other people who post up here were talking about property which had lost 20% or more of their "value", they were talking about a terrace next to an Indian restaurant (I think it was indian, it was definitely a restaurant) in Surry Hills which had fallen over. Also the block of units above the Lane Cove Tunnel reminds me of prices suddenly vanishing into a "black hole" (Boom tish! Pun definitely intended!).

The point is, any asset can rise and fall in value, you don't sell the same property everyday hence, not being able to get daily pricing for the same property. Liquidity is higher on the ASX purely because there is a daily demand, flip side is that it can go up or down each day.

I definitely think that DKMCs buy, live in and fix up, then sell is a very good idea. It means that there is no capital gains tax to pay as it is a PPOR versus an IP. The only downside is that you have to be patient and happy to live in a construction zone while the renovations are being done.

Cheers,

Dan

PS Before making an investment decision speak to a FPA registered Financial Planner.

 

Dkmc gives some great starters if you're interested in pursuing property- Australians love affair with their PPOR's has enabled so many of us to build up an asset base which we've been able to draw down on again and again, as our properties grow and we reuse the equity to continue investing.

As far as budget goes, $400K will still buy you something decent, though I'm not sure what state you're looking to purchase in?

Well done on having such a great start with that much cash as well- quite a nice position to be in for someone of your age - only us older ducks can make such comments naturally

Other books I'd recommend would include:

The Wealth Power of Property by Fred and Brett Johnson
Smarter Property Investment by Peter Crerexhe
Dummies Guide to Property by Karin Derkley (new release)

 

The reason most FP's tend not to recommend investing in direct property is because they don't get a cut out of it, unlike MF's and LPT's etc
Let's not beat around the bush here- the only truly independent FP's are those who charge you for their time and financial plan, without being influenced by commissions. Hard call, in the financial world.

 

Yeah, money makes the world go round...
Property managers usually charge commission of about 7% on your weekly rent. Crazy real estate agents want a commission like stockbrokers for selling assets...oh well.

Can't get away from fees.

They are always somewhere as everyone wants to get paid.