Join our investing community

What would you do with 40K ?

Discussion in 'General Investing Discussion' started by Compleks, 17th Oct, 2009.

  1. Compleks

    Compleks Well-Known Member

    Joined:
    18th May, 2007
    Posts:
    348
    Location:
    Melbourne
    Hypothetically, if you were to start investing from scratch.
    What would you do with $40,000?

    I know everyone here is different, so I'm curious to hear some of the different options / opinions.

    Cheers.
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,623
    Location:
    Sydney, Australia
    Depends on your hypothetical goals and timeframes.

    Are you talking about a long term investment strategy, or would this hypothetical money be used for a specific purpose (eg deposit on a house)?
     
  3. Chris C

    Chris C Well-Known Member

    Joined:
    2nd Apr, 2008
    Posts:
    1,327
    Location:
    Brisbane, QLD
    Looking forward over the next 2 - 5 years, I'd probably spread it roughly out something like the following:

    10K Cash
    10K ASX 200 Index Fund
    10K Asian/Chinese Index/Managed Fund
    5K Gold
    5K Other Commodities or Commodities Based Stocks

    I'd also be avoiding any sort of debt based investments at this stage (so wouldn't be using any margin loans etc) which is also why I'd be steering away from property in the short term.
     
  4. jrc77

    jrc77 Well-Known Member

    Joined:
    26th May, 2008
    Posts:
    147
    I'd loan it to my trust as start up capital for my enterprises :)

    Regards,

    Jason

    ps. Now seriously - where do you want to be in 5 years time? Where is 10 years time? The come up with a plan working towards this. Think of a few likely deviations from your goals and see how flexible your plan would be.
     
  5. Johny_come_lately

    Johny_come_lately Well-Known Member

    Joined:
    1st Jul, 2009
    Posts:
    703
    Location:
    SE Queensland
    Hi Compleks

    My $40k startup is based on me being 25 and investing for 10+ years. The distributions are reinvested and the funds are rebalanced yearly.

    10K Cash 25%
    10K ASX index 25%
    5K China index 12.5%
    5K India index 12.5%
    5K World index (ex Australia) 12.5%
    5K World Comodities (ex ASX) 12.5%




    This portfolio is for entertainment purposes only.


    Johny.
     
  6. voigtstr

    voigtstr Well-Known Member

    Joined:
    24th Jan, 2007
    Posts:
    679
    Location:
    Hobart
    I'd use it as capitol for day trading (actually end of each business day trading, Daryl Morley style). I've signed up for a workshop in March, and hope to have about 15k starting capitol when I start trading soon after. 40k would be much nicer...
     
  7. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    Earlier this year I would have put it all in shares.
    Now I'd use it as a deposit for a $300K property
     
  8. Compleks

    Compleks Well-Known Member

    Joined:
    18th May, 2007
    Posts:
    348
    Location:
    Melbourne
    Thanks for the replies.

    I'm just trying to get an idea of what some more experienced investors might do in this situation.

    I have 10K invested across 5 different managed funds. Which have not done very well at all (down about %50 across the board). But I'm ignoring that and hoping to start fresh.

    My time frame is long term. As long as it takes really, I'm happy leaving money tucked away (invested) indefinitely at this stage. Whether or not that changes down the track I can't say. But 10 years would surely be manageable.

    My goals. I guess initially I just want some financial security. Some knowledge that I could live 'comfortably' without having to worry about every pay check.
    I'm self employed and my job is fairly secure. I'm not particularly worried about that. Plus I still live at home and have no debt or bills. I probably save 90% of everything I earn currently. Saving 6-7 hundred dollars a week.

    I would love to set myself up with a nice flow of passive income eventually. I don't plan on making millions through investing, or even becoming wealthy (although I'm not against that obviously). I would just like to eventually replace my income and know that I could choose to stop working if I felt like it.
    (Obviously that depends on my lifestyle. But I live very modestly anyway)

    So I was just curious to see what other investors might do. Maybe you might change your strategy knowing a little more about my situation?

    Property? Shares? I'm pretty clueless.

    PS. Sorry about the essay.
     
  9. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,623
    Location:
    Sydney, Australia
    If you have the cash for a deposit and you are confident in your ability to be able to make repayments - consider buying your own home.

    The CGT free nature of a PPOR makes it a fairly compelling long term investment - and you can always draw on the equity for other investments in the future if need be.

    Just be aware that property is expensive to own - maintenance can be a killer to cashflow.

    $40K isn't going to get you very much, but it's a start, and if you're saving as much as you are - then you could probably get an even better deposit together in fairly short order.

    If you aren't interested in property, and don't want to try and time you way into and out of the markets to avoid the low points - then I say you just keep contributing to your investments regularly and let them build up. If the funds you invested in are relatively cheap now and you are still confident that they will be able to produce good returns over the long term, then now is an ideal time to invest in them while they are "cheap".

    You do need to review your investments at least annually to determine whether they still make sense.
     
  10. Compleks

    Compleks Well-Known Member

    Joined:
    18th May, 2007
    Posts:
    348
    Location:
    Melbourne
    Thanks Sim.

    I do like the idea of owning my own property, but I have borrowing issues. My income isn't great and because I'm technically self employed I really don't have much documentation to help me out.
    I'm not sure if I would be comfortable using a guarantor either.

    Also, if I were to buy a property I would probably lean towards renting it out. At least initially. It's not as though I really need to free up cash flow, but it would be nice to not be completely tied down.

    I haven't made any contributions as of late to my managed funds. I lost heart when they were depreciating, and I'm questioning if they are worth it. I was maybe considering some direct share investing?
    Although indexes seem to be quite popular around here. I'm not really familiar with these (or anything else) to be honest.

    Hmm...

    Thanks for the input :)
     
  11. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
    1,448
    Location:
    Sydney, NSW
    Hi Compleks,

    Wouldn't direct shares be more volatile than your managed funds?

    Cheers,

    Dan
     
  12. Compleks

    Compleks Well-Known Member

    Joined:
    18th May, 2007
    Posts:
    348
    Location:
    Melbourne
    Yeah, I assume they would be just as (if not more) volatile than my funds. I didn't mean to suggest them as a safer option, not sure what I was getting at really.

    Someone was recently trying to explain to me how dividends work. I didn't really understand completely though.
    If through shares in a company is the dividend pain on a percentage of my total investment? Or is it a set price per unit/share?
    I'm not sure if that even makes sense.


    What do you think is the most effective method of generating passive cash flow?

    Cheers.
     
  13. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
    1,448
    Location:
    Sydney, NSW
    Hi Compleks,

    A company may pay a dividend usually based on cents per share. Though for comparison reasons most people will calculate the yield (ie, dividend per share divided by the share price).

    There are many different ways of generating passive income and it is usually up to the preferences of the individual.

    Cheers,

    Dan
     
  14. Compleks

    Compleks Well-Known Member

    Joined:
    18th May, 2007
    Posts:
    348
    Location:
    Melbourne
    Thanks AsxBroker.
    It's too late for my brain to make sense of that. But I will look into it further in the morning.

    I'm not after immediate passive income, though I would like to start with that as my long term goal I think...

    Time for some rest.

    Cheers :)