Investment Advice

[bcl]

Ok, my son is about your age, so he gets fatherly advice also.

I’ll give you 2 very simple and conservative models, and some insights into the way I look at it, and some numbers for you to mull over.

Model 1:

Let’s say you have $1m to start with.

Borrow $1.5m

Interest on $1.5m @8%pa is $120k pa.

Return on $2.5m @6% pa on capital growth investments is $150k, so you are cash flow positive by $30k pa. I’d look at putting $15k into super (the current if under age 35).

Model 2:

Let’s say you have $1m to start with.

Borrow $1m

Interest on $1m @8%pa is $80k pa.

Return on $2m @6% pa on capital growth investments is $120k, so you are cash flow positive by $40k pa. I’d look at putting $15k into super (the current if under age 35).

This would give more money pa to live on than model 1.

As I said before the size of the debt is irrelevant, it’s the ability to service it that is important.

Take a long term view of investment. In 25 years time the $1.5m debt will be say only worth $500k using todays values (assume around 4% long term inflation).

Your $2.5m invested will have grown and kept pace with inflation. It may be worth around $7.5m (but probably much more), so your net worth then is $6m minimum.

Retirement would be very possible at this stage.

You will have made a lot of money, and it’s as if two-thirds of the money borrowed really belonged to you in the first place.

Don’t believe that things won’t keep going up. They may not in the short term, but they will in the long term. Look at stock market indices for example. In the suburb where I live housing prices have gone up by a factor or 10 or the past 30 years. There are some very good property bargains around at the moment, and I believe more in the next 12 months.

Avoid direct property where there are poor rental returns.

I’d advise to spread your investments, in Australia and overseas, across a variety of investment types, and having different risk/return levels. These days I focus on blocks of investment amounts of $50k or $100k to keep it easy.

Don’t be lazy with investments: let other peoples money work for you.

I’m not an investment advisor; the above is the type of strategy I employ and my opinion only. I do have a degree in economics, specializing in actuarial and mathematical economics (IT came later). It’s pretty easy to crunch the numbers.

Get professional advice and good luck.

Brian

[F6 RAPID]

Get some professional advice as all have recommended mate. I am the State Manager for probably the largest Fund Manager in Australia and get asked these questions by family and friends all the time.....

If you would like some names of good planners in Canberra, PM me and I will talk to our NSW State Manager and the BDM's that service the Canberra Advisers on their opinions of some good ones for you.

[TUFXRT6]

I work in the Financial market and am more than able to point you to the right people.

I can help you on a few points you have brought up.

1) Dont take any advice from people who are not licensed to give advice!!!!!

2) Please go & see a financial planner.

3) After seeing the financial planner go & see a tax planner.

4) I can tell you as I am licensed that you will NOT be able to place funds into a no risk intertest bearing product & recieve 10% p.a.

Note: This is not financial advice.

[XR06T]

how much $ are we lookin at to talk to a financial planner?

[JimmyXR6T04]

Thanks again guys, all good stuff I'm hearing. Let me stress again, I will be seeing a professional, and not just one or two, or even 3. Between my brother and I we are quite willing to spend some money to get a broad range of professional advice from a range of companies and people, dealing in various investment opportunities.

The idea of this thread is just to get some basic advice, and some general ideas of where I may want to, or need to head in the not too distant future. It is also giving me some great pointers on what I need to look out for, what questions to ask etc.

F6Rapid, I will PM you in the near future for some references, that would be very handy. Thankyou.

Brian, cheers for the numbers and perspective.. such large volumes of money are quite hard for me (being so young and inexperienced) to really get my head around. But I've got patience, and time to learn. I just hope my brother has the patience too!

Thanks again to all with the great advice, opinions and perspectives.

[JimmyXR6T04]

how much $ are we lookin at to talk to a financial planner?

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good question mate... I'm guessing a good few hundred initally.. I'm yet to investigate whether my employer has any free financial advice on offer. One of my fiancee's friends is a financial advisor, so I'll be off to see her in the next week. It'll be a good place to start, from there I can go see a few other people/companies.

I've also gotta sort out a trust account for my brother and I, and we'll be off to see one of the best lawyers in canberra to arrange it all. Organised through a lawyer friend.. I heard figures of between $500-$1000 per hour for a consultation.. I hope he works quick

[markxr6t]

I bought my first property at 21 and made some mistakes - all of which I've learnt from.

My humble views:

1. You can learn as much or more from people like BCL (nice advice, Brian) as you can from a Financial Planner. Some financial planners should be called "financial product salesman" (sorry if I cause offence to the FPs here, but every time I see an FP, they just try and sell me managed funds).

2. Similarly, its hard to get good professional advice on property as most people there also have a vested interest.

3. You've got the right idea by wanting to talk to lots of people. Also read books, investment magazines and speak to successful investors who aren't trying to sell you anything.

4. Find out what sort of investor you are. You are unique and different to others. eg I'm just useless at speculative shares - I never know when to sell and now realise I'm just a buy and hold investor.

5 Like BCL mentioned, investing is a journey where you start off worrying about borrowing $200k and end up seeing that $200k as only $16k a year with income that reduces that anyway.

Good luck mate, you're in a fortunate position to set your life up. Make sure you enjoy yourself along the way (having a T is a good start!) The fact you're already putting so much thought into it guarantees your success as long as you don't put it all into high risk investments.

Mark

[iTec]

I bought my first property at 21 and made some mistakes - all of which I've learnt from.

My humble views:

1. You can learn as much or more from people like BCL (nice advice, Brian) as you can from a Financial Planner. Some financial planners should be called "financial product salesman" (sorry if I cause offence to the FPs here, but every time I see an FP, they just try and sell me managed funds).

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I agree, you hardly ever see a wealthy financial planner do you.... so why take advice from somebody with nothing

[F6 RAPID]

I agree, you hardly ever see a wealthy financial planner do you.... so why take advice from somebody with nothing

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I work in the industry and financial advisers are my clients. Technically, I am a qualified Adviser with PS146 compliance and therefore am able to give advice. I have something??? Including a typhoon..........

Let me say that there are pretty good numbers of very successful planners around and I know that from hands-on experience.

You are getting advice on strategy at the end of the day. Investment Risk is something good planners do not take on - their primary role is focussed around strategy, investments, tax, insurance, superannuation, lending - everything. what you generally do not know is what a good planner can save you in taxation planning, succession planning, estates etc.

You'll never ever know if you never ever go.

Edited 23/02/07 02:45 AM by F6 RAPID

[JimmyXR6T04]

I agree, you hardly ever see a wealthy financial planner do you.... so why take advice from somebody with nothing

←

I work in the industry and financial advisers are my clients. Technically, I am a qualified Adviser with PS146 compliance and therefore am able to give advice. I have something??? Including a typhoon..........

Let me say that there are pretty good numbers of very successful planners around and I know that from hands-on experience.

You are getting advice on strategy at the end of the day. Investment Risk is something good planners do not take on - their primary role is focussed around strategy, investments, tax, insurance, superannuation, lending - everything. what you generally do not know is what a good planner can save you in taxation planning, succession planning, estates etc.

You'll never ever know if you never ever go.

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yep, adding to that, some people whether financial planners or not, are perhaps not willing to take the risk with an investment. I think some times it also takes a windfall to get the ball rolling.. not too many people would want to borrow a few million bucks to get an investment up and running, only to have nothing to fall back on should it go sour.

I bet the financial advisors don't pay as much tax as I do