UPDATED: $75,000 of savings - How would you invest it?

LTed Mosby on 27/05/2014 - 23:45
Last edited 02/06/2014 - 19:12

Update: 2/06/2014

  1. As suggested by paulsterio and others, today I have purchased $15,000 in an ETF that tracks the ASX200 (ASX:STW). So I have $60,000 in saving left.
  2. Subscribed to money magazine for some light reading (currently $3/3 issues, then $13.50/3 issues there after)

Next steps:
Looking for a 300-350k investment property around Melbourne to lease out.
Looking to invest in shares more geared towards dividend payouts.
As always, suggestions/opinions welcome.

Original Post: 28/05/2014

I have been putting money away for the last 2 years and now have $75,000 in a savings account (CBA Goal Saver) that I would like to invest.

I am 24 years old, still living at home. My outgoings basically consist of myki(public transport), phone, foxtel, gym, petrol, girlfriend. I am able to save an average of >$650/week (slightly more than half of my net pay).

I am going to be seeking professional advice from a financial advisor in the next couple of weeks. (pm me if anyone can recommend someone in the Melbourne CBD).

So my question is: How would you invest $75,000, and what what type of realistic return would you expect from your suggestion?
Would love to hear the opinions of the OzB Community.

Cheers
Ted Mosby

Financial

Comments

  • Aceboy884 on 02/06/2014 - 12:49

    If you don't know anything about shares
    Than just buy yourself an index share like sider

    Low fee and well diversified

    You will get a better return than bank interest. Plus the potential for capital upside

    But then again. Being able to save is great, but you will never get rich saving. So maybe it's time you invested your time into learning

  • andrewz on 02/06/2014 - 15:06

    Back to the topic: bet it all on black

    $75,000 x 2 = $150,000.

    Genius!!!

    I also take a 10% commission.

  • congo on 02/06/2014 - 15:13

    Look for a unit or Apartment that that gives you 8-10% yield :-)

    • andrewz on 02/06/2014 - 15:17

      mate if you can find a unit or apartment that gives you a net yield of 8-10% you will be doing well..

    • p1 ama on 02/06/2014 - 16:25

      You will not find a property with cap rates of 8 - 10% when mortgage rates are around 8%.

      • andrewz on 02/06/2014 - 16:44
        +1

        well mortgage rates aren't around 8%, and if they are you fixed in at the wrong time.

        but even so..say a $350,000 unit

        you'll be getting around $300 in rent $15,600
        Interest @ 5% on $275,000 ($13,750)
        Then body corp, rates, water, R&M etc.

        You will be doing good do not having it run at a loss haha

    • congo on 02/06/2014 - 21:29

      My current apt now is making about 7.2%.
      If I had brought it a few years earlier, I would be making even more, maybe 10% yield …

      8-10% is not impossible.

      If you get a property at great price and at 6-7% yield.
      When the rent picks up, you can then make 8-10% yield.

      • andrewz on 03/06/2014 - 08:31

        So in my example..you would have to be getting $540 a week rent and have zero expense and no mortgage…i somehow think that is not possible

      • tomleonhart on 03/06/2014 - 08:32

        Can I get the purchase price and the current rent? Is the 7.2% yield before or after expenses ?

  • Pacify on 02/06/2014 - 23:50
    -1

    Personally, I'd split it up into 2-3 portfolios.

    Long term, low risk taking up the largest %, I'd suggest bonds if you can get a decent rate (might be tough atmo).

    Then ETF like mentioned.

    Then the remaining on a more speculative, higher risk-higher yield stock, commodity, derivative trading.

    • p1 ama on 03/06/2014 - 13:03
      +1

      Bonds isn't a good idea at the moment, with the interest rates so low, when the economy is better, bonds will be a good investment.

      Derivatives trading is good, but know what you are doing, especially with options, it's a good way of losing money if you don't understand what you're doing.

      Commodities is good for diversification, so buy an ETF which tracks different commodity prices such as gold, oil, iron ore…etc.

  • tomleonhart on 03/06/2014 - 08:30

    With Melbourne price has just dropped a whopping 3.6%. You might be on to something here !

  • johnno07 on 03/06/2014 - 09:02
    +1

    The important question is - have you already met your children's mother?

  • nadan on 03/06/2014 - 12:05

    Hi Ted, who have you got the trading account with? I am keen to get started as well.

    • CI on 03/06/2014 - 22:49

      STW says in OP

  • coolhead on 03/06/2014 - 12:23

    ted: thanks for updating the thread,, same as nadan's question how did u go about investing in ETF?
    i already have an account with commsec for last year or so but never invested anything :(

  • p1 ama on 03/06/2014 - 13:00
    1. As suggested by paulsterio and others, today I have purchased $15,000 in an ETF that tracks the ASX200 (ASX:STW). So I have $60,000 in saving left.

    Awesome to hear, good luck with your investment!

    Looking for a 300-350k investment property around Melbourne to lease out. Looking to invest in shares more geared towards dividend payouts.

    What you're looking at here seem to be pretty opposite things, investing in shares for dividend payouts and investing in property when you'll be heavily leveraged.

    Remember that at this stage, if you have $60,000 and you want to buy a $350,000 property, you'll probably be neutrally geared or you'll even be negatively geared (especially if you take out an amortising loan), so you won't be making too much income either way, but don't worry though, you'll get a tax break from being negatively geared.

    Either way, at your young age, with a healthy income, you want as much of the money you make to be in capital gain as possible. There are two reasons for this:

    1) Reinvestment is always good, you waste less money. I know it's not scientific, but the more free cash you have, the more likely you are to spend :P

    2) Tax reasons - income is taxed at your marginal tax rate and capital gains is taxed at 50% of your marginal tax rate, so unless you need the income, you should reinvest earnings.

    • Cluster on 03/06/2014 - 15:56

      "you'll probably be neutrally geared or you'll even be negatively geared (especially if you take out an amortising loan), so you won't be making too much income either way, but don't worry though, you'll get a tax break from being negatively geared."

      Translated: You'll be losing money (a simple translation for negatively geared) but don't worry, the taxpayer will come to bail you out until the property grows in value.

      There are so many investors reliant on taxpayer handouts in the form of a tax break on losing money that I doubt it will ever be reversed. Paul Keating tried it once but had to abandon his reforms with haste.

      • p1 ama on 03/06/2014 - 19:05

        It's not as simple as that unfortunately. Firstly, negative gearing does not mean you are losing money. Simply what you are doing is to forgo free cash now in order to claim that back as capital gain further down the track.

        I don't know how much you know about finance, but to say that negatively gearing is losing money is completely wrong, you can have a negatively geared property, but still be making money. Again, it is the trade-off between income and capital gain.

    • tohara on 03/06/2014 - 20:40

      2) Tax reasons - income is taxed at your marginal tax rate and capital gains is taxed at 50% of your marginal tax rate, so unless you need the income, you should reinvest earnings.

      This is incorrect. Capital gains are taxed at your full marginal rate, unless you have owned the investment for more than a year in which case the gain is halved and then your regular marginal rate is applied. There are plenty of other rules but that's the basic jist of it.

      • p1 ama on 04/06/2014 - 09:30

        Yes, but the assumption is that if you invest, you will be holding your investment for more than a year, so that's a moot point anyway.

        The reason why it's done this way is to stop people from reinvesting the dividend and then sell the share ex-dividend, essentially capturing the dividend, but also getting the 50% discount.

        So it's a moot point either way.

  • andrewz on 03/06/2014 - 15:27
    -1

    If you are looking for great dividend yield have a look at Monadelphous Group (MND). 7.1% Dividend Yield, fully franked. have had recent capital growth also (today not such a good example haha)

    • redslert on 03/06/2014 - 19:37

      http://au.investsmart.com.au/shares/asx/MONADELPHOUS-GROUP-L…

      Recommendation: Sell
      Recommendation Date: 26th Mar 2014
      12 Month Target Price (average): $15.891
      Brokers Surveyed: 7

      2013 Yield (%)6.4 Franking (%)100.0

      • andrewz on 04/06/2014 - 08:30

        okay so in march they recommended to sell, since march the SP has gone up by about $2, their growth over the last year has been 10.27%. The current dividend yield is actually 7.3% not 7.1% as I stated. Recommendation: don't believe everything you read on investsmart and do a little extra research.

  • tohara on 03/06/2014 - 20:43

    What's your attraction with high dividend yield shares?

    I understand the advantages of franking credits. But unless you SIGNIFICANTLY invest, the dividend income will always be insignificant.
    Its all about the long term gains.

    In any case, in my experience BHP and Telstra are safe and they always pay healthy dividends.

  • fruit on 03/06/2014 - 21:49

    Do report back in 6 months and let us know how you go.

  • drexxx on 04/06/2014 - 06:50
    -1
    What are your goals?

    Shares & property (general speaking):
    - take too long
    - you are not in control
    - require a lot of risk for significant gains (shares)
    - require a lot of capital for fast growth (property)
    - are used by rich people to MAINTAIN their wealth, not CREATE it

    Quickest way to get the greatest ROI?

    = start your own business(es)
    But not just any old ones, "fastlane" ones.

    I would seriously consider reading these books, written by actual rich people (check the amazon ratings):

    1. The Millionaire Fastlane
    2. The Four Hour Work Week

    HOT TIP:

    Take advice from who you want to be!
    Do you want to be a millionaire before 30?
    Then stop listening to people who are NOT millionaires before 30. Which is MOST of Australia.
    But if you want to be like most of Australia, then keep listening to them! Man (or whoever reads this), I do not care what your goal is, along as you are happy, but just dont make the mistake of following the majority's advice, unless you want TO BE the majority!

    In general, would you take weight loss advice from a morbidly obese person?

    Peace

    • p1 ama on 04/06/2014 - 09:32
      +2

      Easier said than done.

    • Ughhh on 04/06/2014 - 13:22
      +1

      Your can still lose a lot of money if you have no idea what you're doing or how to run a business.

    • [Deactivated] on 04/06/2014 - 17:45
      +1

      you sound like one of those scam buy my ebook make million dollars in 2 years sites.

  • PLANT on 07/06/2014 - 17:31

    Roger Montgomery Fund $25K buy in!!!!

    Comments?

  • chillybags on 13/06/2015 - 15:01
    +1

    A year on, how is your investment going? Made any money from it Mr Mosby?

  • MathNerd on 20/01/2018 - 10:23
    -1

    $75,000 of savings - How would you invest it

    Easy - save $5000 more and buy an $80k car, an investment with high yield, to show off to your colleagues and potential clients.
    Guaranteed return in the short and long term.

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