I want to be smarter with my money

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  bemybubble on 30/08/2016 - 14:27

  +2

  Somnus the first question you have to ask yourself is "where do I feel comfortable putting my money". It's not up to anyone else to decide this for you but you alone as it your money you've worked hard for.

  However I don't mind sharing personal experience and you can pick and choose from my story what to take and what to throw away (and please note none is by any means to be taken as advice and you should seek professional advice when appropriate):

  I found property to be my comfort for my investment portfolio. I feel it's quite conservative and despite what people claim about the ups and downs I figure this:

  1 - People always need a place to live
  2 - You can't create land
  3 - Go to a bank with a title and they'll be your best friend, go with a portfolio of shares and they won't want to know you. So if the banks see value I must be on a winner…!

  That being said I also have a little bit of shares but went into the share game prepared to lose money (which I have by the way).

  • 

    bemybubble on 30/08/2016 - 14:35

    +2

    Further to the above I noticed you mention SMSF. Unless you are near or at preservation age and are looking to create wealth I don't believe in throwing away money under lock and key. I believe if you answer the question of "where do I feel comfortable putting my money" that this will explain why I feel this way.

    That being said, if you are not happy with your class of assets that your current superfund is invested in and want to take charge (say buy a property) then an SMSF is the only way to go as you cannot do that by any other means using super money. Even then i'd caution to make sure that you shop around as more often than not running an SMSF is not worth it with such little capital as you show.

    PS on a personal note (and my view only) I think you are wise to keep things seperate from your partner. No disrespect by any means as it's purely a situational factor not a reflection on the person. At the end of the day if you see a future together, whats yours is going to be hers anyway :P

    • 

      Somnus on 30/08/2016 - 14:49

      +2

      Thanks. I should have said in the OP that I am not taking any of this "advice" as 100% actionable. OzB has a very strong community of like-minded individuals, and if I can leverage off the experience and learnings of similar people who may be 1 or 10 steps ahead of me in the life game, then I am happy to do so. Standing on the shoulder of giants and all that!

      I'm also very skeptical of financial advisors. Apart from pushing specific products, it is also quite an easy qualification to get (no offence intended to anyone in the industry). If I had a personal recommendation of a good Financial Planner I would definitely look at going down that route, but I don't. Choosing one randomly based on online reviews is dangerous (I do get the irony saying that while asking for online advice from strangers!)

      • 

        bemybubble on 30/08/2016 - 14:58

        +3

        Well the best advice is to do what you are doing. Talk to people, get experience from them and make an educated decision off peoples success and failures. I would also align yourself with a good Accountant to explain how wealth creation can also minimise taxation for your and help you achieve your goals quicker. The moment someone tries to sell you something, then I would agree that you should be cautious…not withstanding that I know there are financial planners out there looking to do some good but unfortuntately in my years of experience I cannot fathem how people can take advice from someone making a commission from it and saying it's in the clients best interests…

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  Diji1 on 30/08/2016 - 15:05

  Should I buy an investment property instead of savings?
  Should I buy shares instead of savings?

  The problem with savings is it's 3%. Subtract inflation from that and your under 3%.

  • 

    Somnus on 30/08/2016 - 15:16

    That's true, but it's also true that the ASX200 has dropped ~10% in a year and is flat over a 2 year period (albeit on the back of a large rise in the preceding years). Savings allows me access cash as and when I need.

    Property looks to be the correct move - but being Irish I have many friends and family members who got burned with the "house prices will never drop" mentality. I am not an economist, but median house prices @ 15x median salary (or whatever is now) sounds unsustainable to me, and I am worried about a bubble. To argue with my own point, I have been saying the same thing for about 3 years now

    • 

      bemybubble on 30/08/2016 - 15:19

      Even if housing prices do drop then my strategy is to stock up while it's cheap >:)

    • 

      alabatusa on 30/08/2016 - 15:20

      +2

      Wouldn't you like to transition from being a rent payer(throwing away money) to mortgage payer.

      Where you can still offset your current rent with rental income else where. i.e. your investing in securing a piece of land/home for your self to make yourself independent of paying rent. This is your offsetting property inflation generally whether thats positive or negative. In the long run australian market, the property growth rate is around 3-7%.

      • 

        Somnus on 30/08/2016 - 15:40

        This is exactly what I would like to do. I have just been scarred by what has happened pretty much everywhere other than here. Irish property growth rates were 7%+ for ~20 years before the crash - when they dropped 50% in a couple of years.

        I understand that the long-term gain is what counts - but anyone who purchased between 2004 and 2008 made a mistake. Before that people still broke even / made money. I see right now as that danger period before a potential downturn here… I want to have the balls to bite the bullet but I'm looking for that golden nugget of advice that tips me over the edge that I haven't found yet. Currently I think there will be a slight downturn in the next 2 years (houses probably plateau and apartments drop by x%). It would be good to be in a position to take advantage of that situation if it arose

      • 

        alabatusa on 30/08/2016 - 16:08

        +2

        @Somnus:

        You have to make a decision on whether you are trying to maximise your wealth
        or protect yourself against future price rises in property.

        There is no golden bullet, no matter what there will be risk.

        The question you should answer is, will the rent i lose over the next year, sufficiently cover against any adverse market movement in the next 2 years.

        I agree that the Property prices should remain stable if not slightly reduce over the next 2 years

      • 

        Somnus on 30/08/2016 - 16:19

        @alabatusa:

        That's a tidy way of phrasing the real question. The most probably scenario is purchasing an investment @ around $500k - so I will still be paying rent, and probably topping-up the mortgage from rental earnings - so I don't know what the answer is….

        I will jumble around some scenarios based on your comment and see if that helps. Thanks

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  HeartFeltAxe on 30/08/2016 - 16:17

  I suggest creating a CS:GO lottery website and scam 10 year olds.

  • 

    Somnus on 30/08/2016 - 16:20

    How do you think I saved up so much money in the 1st place? Kids are loaded these days

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  altomic on 30/08/2016 - 17:30

  -2

  your Irish and you haven't spent it all on Guinness and leprechaun traps!?!?!?

  but seriously, the difference between the Irish property market and australian property market is that the weather in Ireland is mostly crap.

  it's desirable to live in Australia (sure, it's desirable for Eastern Europeans to live in Ireland but ….).

  even with Chinese investors buying up property there is still an influx of other nationalities coming to Aus with cash for houses.

  and of course all the Australians vying for housing as well.

  whilst there might be a slowing in the prices in the future it seems doubtful that the property market will plummet as it did in Ireland.

  or maybe I'm just viewing australia through rose coloured glasses (I've in London and Tokyo and travelled extensively)

  but again, who can say for sure? (no pun intended)

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  Oz80085 on 30/08/2016 - 17:34

  +1

  Personally, I find property to be the better investment. One reason is it is much easier to take advantage of leverage with property VS shares. Sure, you can get a margin loan and buy some shares but shares fluctuate much more than the property market and if your share portfolio goes down, you could be up the creek without a paddle. Leverage amplifies losses and gains and I feel that property will give more reliable gains.

  If you are a first home buyer, I would consider buying a first place (as a principal place of residence), live in it for a year. Then, rent it out as an investment whilst you also rent somewhere. This enables you to claim a 50% reduction in stamp duty and potentially also the FHOG if it's a brand new home. Once your place is rented out, you have six years in which to sell it and not pay capital gains tax (read more here: http://www.yourinvestmentpropertymag.com.au/tax-questions/si…).

  Best of luck

  EDIT: When buying property, do your homework! Buyer's agents can help with this.

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  currentfad on 30/08/2016 - 19:19

  Financial planner! We don't know your risk tolerance or your goals. SMSF are relatively expensive and are usually suited for people with say 100k in super. Shares are risky. If you plan to have children maybe invest in insurance bonds etc etc not qualified to give advice etc don't listen to me

  • 

    Euphemistic on 01/09/2016 - 16:36

    Definitely look for a financial planner, but be aware that there are many 'financial planners' out there that are actually insurance salespeople.

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  kryptoz on 30/08/2016 - 22:33

  Superannuation is pretty similar (returns vary wildly and many funds eat up a lot of your net egg with fees, especially if you have a small amount — compare obviously, and look at funds that have consistent performance history — a lot of data can be found in Money magazine and the like); you should choose a fund before your new job, you will have to have something setup before they can pay you anyway, it is far better to start with that already sorted. You can add to your super or create a self-managed fund later, there is no risk to putting it off, and you will benefit from discussing those options with an accountant or adviser before taking the leap.
  Regarding your savings, I would look at a few options depending on your background and future plans:
  * If you have experience with stocks/bonds/futures/etc, that is a clear path, otherwise you are as likely to gain as lose from the experience. If you plan to diversify with a portfolio in the future, it would be worth starting small now and add to it when you can.
  * Given you are not ready to invest all of your savings now into purchasing a property, for example, you should consider a short-term investment strategy with a decent return and low risk. I would stick a chunk of it into p2p lending which can earn you much better interest rates than a bank, and you can pull it out at the end of a fixed term, ready as a property deposit.
  * As for banks, you should look at infochoice.com.au or canstar.com.au, which will give you a comprehensive list of brokers and lenders, you can see for yourself that banks are rarely the best place to look for mortgages or investment, though they are terrific at marketing. For now, you should deposit a chunk of your money into a term-deposit savings account, to establish your savings history for the future with that lender.

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  paulinspace on 31/08/2016 - 09:07

  +1

  Ditch the girlfriend. Everyone knows they are a bottomless pit. The internet will be able to meet your needs ongoing.

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  Seraphin7 on 31/08/2016 - 09:41

  +2

  Unfortunately the answer to your question won't come from any response in this or other similar forum. You need to do some of your own research … particularly around risk profiles … and attempt to find the asset classes best suited to your individual circumstance. Then consider speaking to a financial adviser or other professional in the field and do more research. This is not something to be answered quickly. Take your time before making any choices that commit your finances for the long term.

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  slewis69au on 31/08/2016 - 12:37

  +2

  So one investment approach is Index Funds like Vanguard that can be purchased as shares - they are pretty conservative but less conservative than savings accounts.

  Not everyones experience with property is positive, i have had several investment properties and they have generally done well but i bought one off the plan in a complex where Chinese investors bought the others, put their kids in there and refused to pay the Body Corporate fess - so they kept going up! Also because of funding issues complex maintenance has suffered and the flat isn't appreciating in value.

  Do your homework either way and ONLY invest what you can afford to have locked up/unavailable for 5 years or so - that way you won't be forced to sell if something unexpected does happen.

  One thing i suggest is to keep enough money in your kitty to cover 1 years expenses, sit it in a savings account even though that's not a great use for it and having it always there will make you more comfortable to lock up the rest of your money.

  Everyone is different, you need to sit down and consider how much risk you are OK with, how long you are OK to tie the money up, etc.

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  LakeVostok on 01/09/2016 - 21:42

  maybe you will find wisdom here: https://barefootinvestor.com/