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Where to from here ?

Discussion in 'General Investing Discussion' started by johna, 18th Mar, 2010.

  1. johna

    johna New Member

    18th Mar, 2010
    G'day all. Great forum.

    I am after some general ideas on building some wealth, having reached what I call a bit of a crossroads.

    I am 38, my wife is 33. We have three young children.

    We own our own house - worth about $450,000 - debt free. 4 bedder, double garage, pool - so no need to upgrade it - very happy where we are.

    We own 2 good cars so no need for replacements there.

    I earn $65,000 p.a and my wife earns $30,000 pa. I have been employed with the same company for 15 years with very stable future

    My wife has $14,000 in managed funds and we have about $5,000 in the bank as a buffer.

    I have been fortunate in that I purchased an IP when I was 21 and that has enabled me to be debt free now (having sold it a few months ago).

    I am over the whole IP thing now & don't really want another for various reasons.

    I am more interested in investing in more managed funds or shares.

    At present, we are dribbling money into my wifes managed fund accounts but I am thinking I need to be doing more (maybe gearing ?) to increase long term wealth.

    I have worked pretty hard from an early age - having come from housing commission with no "family money" to help so I am enjoying the fruits of this a bit now. I am trying to give my kids what I didn't have to some extent.

    Ideally, I still want to treat my family to a nice holiday each year and not be a scrooge with that side of things - but I also want to be able to build some wealth.

    I have considered salary sacrificing to super but locking my money in there for 25/30 years does not appeal to me at the moment. Maybe this is the wrong attitude.

    Thanks in advance. I look forward to peoples ideas.
  2. Chris C

    Chris C Well-Known Member

    2nd Apr, 2008
    Brisbane, QLD
    Firstly I just want to say awesome effort!

    I particularly admire all the smart decisions you have made along the way and your choice to pay down debt first and build wealth the low risk way, and I imagine there aren't a lot more secure feelings in the world than knowing you actually own your home!

    That said, in regards to your question I think you are very much on the right track, I agree with your decision to move away from investing in your own IP, especially given you have more than enough exposure to the property market through your own home.

    Secondly I like your move into shares (at least as a long term investment), I personally would probably be looking to avoid gearing, my reasoning is simply that if debt can be avoided it should be as I think debts will become much more burdensome over the coming decade and I don't think asset prices in the future will be driven by credit like they have been in the past.

    When it comes to doing "more" I don't ever think that that should be synonymous with using credit unless that investment's returns (excluding capital growth) is higher than the interest payments, in which case using leverage may be a way to increase returns.

    I'm personally of the opinion that capital growth should be factored in investment decisions as prominently as it is, not to mention that most people assume in the long run it is a one way street (for both properties and shares), which is clearly not the case as was shown by the GFC, and prices of goods in an economy have much more to do with money supply (which is often in the form of credit) than it does anything else.

    That said if you want to increase your potential for returns (and obviously risk as well) you could potentially look at some international stock markets, particularly the emerging markets. It would seem at this stage that the emerging markets are likely to outperform developed world's economies over the next couple of decades, if for no other reason than those countries don't have the excessive levels of debt, if any, at the household, business and government levels of their economise which gives them a great ability to expand.

    Another idea that I was going to throw out there which you didn't mention, which was potentially going into business for yourself. I don't know what industry you are in but in my opinion one of the best ways of building wealth is being in business for yourself as you get to reap a much larger chunk of the pie.

    That said setting up a business is quite difficult in the first few years, and obviously you'd probably want to weigh up the desire to have the chance to earn more versus the security of providing for your family.

    Anyway best of luck with it all.
  3. Johny_come_lately

    Johny_come_lately Well-Known Member

    1st Jul, 2009
    SE Queensland
    Hi johna

    Everything my friends say and all I've read, point toward 'Paying yourself first'. That is; taking a percentage of all pay and investing it (10% or greater). This money is wisped away Before the rest of your wages are spent. Its not a quick rich scheme, but it does require disipline.

    Also, starting your kids own saving/investment plan. Give them dollar sense at an early age along with setting goals. Its worth a thought.:)

  4. Billv

    Billv Getting there

    15th Jul, 2007
    Sydney, NSW

    Congratulations on your achievements so far.
    I'd continue doing what you do, you have many years to grow your portfolio.

    Do you contribute anything in super?
    I'd contribute because it's 1 more investment for you
    Don't look at super as money locked away because it isn't.

    You can withdraw your contributions and you should also consider that
    by the time you retire, your retirement age could be 70 so if you have money in super you could access it and retire earlier.
  5. AsxBroker

    AsxBroker Well-Known Member

    8th Sep, 2007
    Sydney, NSW
    What the???
    Did I miss the bit about a Condition of Release being age 55 and retired?

    When can I access my super benefits?



    PS This is general information and does not take into account personal information. Before making an investment decision speak to your FPA financial planner.
  6. Billv

    Billv Getting there

    15th Jul, 2007
    Sydney, NSW
    No you did not miss anything, I should have added the words "after your preservation age" in there or for reasons of illness, hardship etc

    So although the above statement is conditional, as you know we can control our super (today) through a SMSF and hopefully make it grow faster