Young Guy with a Bit of Money - Shares/Property? What to Do?

Lactiv8newbs on 31/05/2016 - 19:58

Hi Guys,

Very long time lurker and first time poster. I’m a Full Time Uni Student studying Accounting and Finance. I work Part Time in Retail Banking for one of the big 4 banks. I want to know what to do with my money. Below is a snapshot of my financial situation:

Age; 20
Savings: $50k
Income: $1400 a fortnight after tax ($42k p.a before Tax)
Super: $5k
Assets: Just an old Toyota Camry
Thoughts: Would love to get into Property Market (But appears out of reach for at least the next 1 year). I want to speed up my savings process by getting into the share market. Willing to throw $5k into shares….yet to do my research. I’ve got a Savings account at 3% with ING at the moment which helps a tiny bit.

Note: Im working on a start-up with some uni friends at the moment but this won't affect the picture until at least 6 months - a year down the track.

Input/Advice/thoughts? Anything I should keep in mind?

Financial

Comments

  • kipps on 31/05/2016 - 20:05
    +1

    I would be looking at shares. No question.

    If you don't want to research and work out particular shares perhaps look at an index fund/ETF.

    If you want to get a bit more understanding, have a look at Warren Buffett and Ben Graham based books about value investing. Strongly recommend that you understand the underlying financials rather than blindly investing in companies.

    • activ8newbs on 01/06/2016 - 00:37
      +3

      Seems like some insightful information. Thanks heaps mate.

      I'll be honest, I'm not a huge reader.

      Can I just ask. With ETF's, are they just traded on asx like other shares?

      I don't know the first thing about them - please excuse the lack of knowledge!

      • MustacheFire on 01/06/2016 - 17:03
        +1

        Yes ETFs are traded on the asx just like shares, but give you a broader exposure than an individual holding

        • -.- on 03/06/2016 - 01:47
          +3

          I second this advice. No question, at a young age, you should have a large appetite for risk (i.e. you don't have a mortgage to default on or kids' mouths to feed). I would put at $30,000 into shares. I wouldn't go after large cap shares at the moment. Try investing in small-mid caps. Anything relating to lithium has been very bullish, as have niche healthcare and agricultural/food shares. $5000 is too small of an amount to be investing in shares. Even with a 10% return p.a., it's still only $500 (excluding brokerage of around $20 per trade. If you buy and sell that's $40 already…assuming you're only buying one share and not diversifying). But yes, an ETF is a good option for diversification benefits without getting stung by brokerage when you're investing small amounts.

        • swimmingtoad on 03/06/2016 - 18:48

          @-.-:

          I would stay away from small and mid caps and anything to do with lithium. (Major fad). Unless you could slee comfortable at night if one of your investments went bankrupt. If you cannot tolerate risk/the thought of losing money look at blue chips. Great returns around 6% atm and tax credits also. Alternatively,

          Look at opening an investment account somewhere like Colonial First State. Free to do yourself. Then you can invest in 100s of professionally managed funds. They perform well, lower risk than direct shares - due to professional management and you can still choose which sectors you are inclvested in.

  • mskeggs on 31/05/2016 - 20:16
    +1

    I'm not really an advocate of investing in this bubbly property market, but $50k would be a fine deposit in a regional city or somewhere like Hobart. You will get a unit or small house that will generate more than enough rent to pay the mortgage, and in 20 years time you will have a bit of property paid off.
    These markets won't see the capital appreciation that has occurred in Syd/Mel, but then, those markets won't see it either. But you will get rent that moves with the CPI or maybe a bit ahead, making it an ok investment, I think.
    Consider to get the same return (approx 4x return in 20 years) you would need to achive 7%+.
    (my assumptions: low rates persist for at least a few more years, inflation stays low but positive, OP pays off P&I but keeps devoting growing rent to pay off earlier than loan term, $200k property will rent for $200+/wk)

    • activ8newbs on 01/06/2016 - 00:39
      +1

      Thanks a lot for the input.

      I've never considered investing in ccountries like Tassie :P

      But honestly I'm afraid to invest there because it's not very common. I feel I'm not informed enough to make investment decisions that aren't the same as everyone else.

      You hear about people investing in fringes of Melbourne and Sydney CBD etc…. not Tasmania!!

      • Rocket6 on 02/06/2016 - 23:35
        +1

        What's the difference/problem, if you don't mind me asking?

        Tasmania is a much more sensible option for a cheap investment IMO.

        • activ8newbs on 02/06/2016 - 23:55
          +6

          For me, it's what I think is human nature…

          Afraid of what I don't know.

          I just dont know if it's too common.

          I have no rational reason not to invest there.

        • yk300 on 03/06/2016 - 08:29
          +8

          @unistudent1: I think your logic is quite on point. Don't invest in something you do not know.

      • tryagain on 03/06/2016 - 00:49
        +10

        countries like Tassie :P

        :P

    • duchy on 02/06/2016 - 21:35
      +2

      (those markets won't see it either)

      I heard that 6 years ago. And look at Melbourne/Sydney now. I am glad I didn't follow advice of people like you. :)

      No one invests in Tasmania, because there is no economy in Tasmania. No one wants to live in Tasmania.

      • mskeggs on 03/06/2016 - 06:57

        I agree Hobart or regional towns are unlikely to see capital growth like Syd/Mel have in the last 6 years. But they are likely to see price growth in line with wages and the chances of a price fall are slim (excluding mining towns which have probably already seen it).
        The OP said they were interested in property investment, and with limited capital they would be very vulnerable to a correction if, for example, prices fell 10% and rents followed.
        But an investment in regionals has some downside protection because they haven't had the same big run up in prices.
        If the OP was asking about Syd/Mel property 6 years ago, I guess I would have said the same. GFC was happening, US property was dropping like a stone and it was far from clear that the Chinese would keep our economy from doing the same. And I would have been wrong.
        But do you think the outlook for the next six years for Syd/Mel will see similar price growth?

        • duchy on 03/06/2016 - 11:34

          Those are all valid points.

          But jobs growth is slower there, unemployment is higher, wages growth is generally lower and there is no shortage of land.

          My opinion - it's not worth it. :)

    • Azn310 on 02/06/2016 - 22:33

      I wonder how easy is it to rent out properties in regional cities?

      I hear people there are moving into the big cities for jobs.

  • dasher86 on 31/05/2016 - 20:25
    +44

    You're young. Invest in yourself and go travel for a while.

    • toristo on 31/05/2016 - 20:49
      +8

      Yes to some of this… but also invest financially too. No reason you can't have both.

      You can be frugal and travel to some very interesting places and learn a lot about yourself and the world, and still invest in shares / managed funds / etc

      Check what you're eligible for as a bank employee - you may find your benefits give you things like a LMI waiver (i.e. no lenders mortgage insurance for a higher LVR) and interest rate discounts for a home if you do decide to buy something, or possibly discounts on brokerage, financial planning advice etc.

      Also think about your insurance - are you protected if something happens?

      Nice work on having $50k stashed already - that's a tidy effort and shows you're not a ridiculous spender.

      • activ8newbs on 01/06/2016 - 00:42
        +1

        Thanks guys.

        Just early today I did a bit of research on entitlements as bank staff.

        I get LMI waived even with 10% deposit which is pretty nifty.

        Must admit though, I've never done any real travel.

        Best bit of the world I've ever covered was probably Nelson's Bay with a few mates one long weekend. :/

        • yaziyo on 02/06/2016 - 22:44
          +16

          Mate, go travel. Before you start full time work is pretty much the only time you can easily take off a few months just to do nothing. Once you graduate you'll have lots of money and no time.

          Travel doesn't need to be too expensive either. I spent 4 months backpacking around Southeast Asia after I graduated uni. It cost me around $5500 including flights, travel insurance etc. Go by yourself. You will meet so many people, even without being an extremely sociable person, in the hostel traveller environment is just so easy to meet people. If you want more info feel free to PM me.

          If you're on reddit, I recommend you check out reddit.com/r/solotravel

          EDIT: Thought I'd mention I'm pretty similar to you plus a few years. I'm 24, graduated uni a couple years ago and have been working in a big 4 bank for a bit over a year now. One thing I forgot to mention is the single best experience I have had in my life is studying a semester on foreign exchange. I spent half a year studying in USA when I was at uni. I had been working before that so it was all self funded and while I didn't have 50k like you, I was probably worth 20ish k at the time. Now that I'm working while still living at home my savings are rapidly growing but time for travel (and other fun) is much harder to come by - so I'm extremely glad I took my two big trips when I could.

        • activ8newbs on 03/06/2016 - 03:05

          @yaziyo:

          WOW dude that's so awesome

          absolutel no idea on earth how you managed to survive 4 months off $5500!!!

          I'll definitley be PM'ing you to know momre.

          I'm not a fan of the idea of travelling alone, and not keen to explore it either, though, I would definitely love to travel with mates.

          But yeah that's awesome advice, thanks heaps.

        • Dollarsandsense on 03/06/2016 - 03:23

          @unistudent1:
          Even more reason to leave for travel alone IMO :-). Part of travel is communicating with locals, you are likely to do less of this if with a bunch of friends.

          You are never actually alone while you are travelling, as Yayiyo pointed out you quickly connect with other travellers. The back packer scene is its own culture, full of 1 day, 1 week, 1 month friendships with new people.

        • activ8newbs on 03/06/2016 - 03:36

          @Dollarsandsense:

          Thanks :D

        • watwatwat on 03/06/2016 - 12:48
          +1

          @Dollarsandsense:

          Never alone? Nonsense. Traveling alone definitely involves moments of loneliness. Commuting, at airports, at hostels with no one social or empty. You'll have moments where you feel lonely for sure.

          It's still worth it though.

  • nubzy on 31/05/2016 - 20:29
    +5

    wow, wish I was you at 20..

    • activ8newbs on 01/06/2016 - 00:43
      +11

      I better learn to not make my position for granted.

      I Appreciate that mate, thanks.

  • anoykw on 31/05/2016 - 20:45

    You could invest in ETFs shares, do some research. I second recommend in travelling, as a student myself i put in some savings into some shares and i also went travelling a bit too, whilst we are young enjoy it!

    • activ8newbs on 01/06/2016 - 00:43

      I think I might just throw $5k into shares. Whatever I get at the end of 1 year, I'll keep as my budget for traveling lol

      • WhyAmICommenting on 02/06/2016 - 23:24
        +3

        Shares aren't generally ideal for that time frame, although it depends which one (s)

    • activ8newbs on 01/06/2016 - 00:45
      +2

      You are horrible.

      Hahaha I've been wanting to get a car so badly lately. My Camry is so banged up. A bit embarrassing at times. I know I can afford a second hand Audi TT (dream car) at ~$25k easily. I want to do it but at the same time I keep telling myself that I'll be shooting myself in the foot if I prioritise a car over a deposit for inv property!

      • Mumbles on 01/06/2016 - 20:59
        -4

        Mwhahahaha. Yes but I don't have to be the only one, come join me ;)

        Money is a just a means to an end. Some say its a vehicle. What greater way to symbolise this than with a vehicle.

        Somebody neg voted me. Not sure why. Was it because I implied that wine and women were a bad idea? Okay, I change my statement to "It's a fantastic idea if Unistudent were to give me all the dollars to spend on wine + women and join me".

      • RocketSwitch on 03/06/2016 - 09:49

        IMO I wouldn't buy a brand new car, the value will depreciate as fast as you will save.

    • watwatwat on 03/06/2016 - 12:50
      +1

      Bahahahha that's some good trolling. Glad you aren't my financial advisor.

  • mini2 on 31/05/2016 - 21:12
    +4

    Vanguard ETF's. They come in all sorts of flavours.

    • activ8newbs on 01/06/2016 - 00:46

      If that's a joke, I don't get it.

      But ETF's seem to be a common trend in this forum. Thanks ;)

      Vanguard…anyone care to explain?

      • ninjawarrior on 01/06/2016 - 02:10

        https://www.vanguardinvestments.com.au/retail/jsp/investment…

        mini2 just means there's a huge variety of Vanguard ETFs to choose from, and Vanguard are the market leader when it comes to this sort of stuff. ETFs should be your first choice for a medium-long term investment if you're not familiar with the share or property market. They come with low fees and historically speaking, will outperform almost all managed funds (at least over the medium-long term).

        But I agree with some of the others here, take out $5k and go to South East Asia for a month - that kind of money will cover your budget expenses easily and you will come back with some priceless memories.

        • activ8newbs on 01/06/2016 - 02:15
          +1

          Thanks so much!!

          I've spent the last two hours researching ETF's. Learned a lot!!

          Exam in 6 hours. What am I doing with my life?!?! Hahaha

          I'd love to go on holidays. But it's just so hard to get leave and organise friends to get leave and balance everything out etc.

        • ninjawarrior on 01/06/2016 - 02:51
          +1

          @unistudent1: As someone in your position about 3 years ago, let me tell you it doesn't get any easier! Good luck sorting it out!

        • mini2 on 01/06/2016 - 08:43
          +4

          @unistudent1:

          My comment up there was meant to be a little cryptic so you will do your own research and I can't be held liable for any screw ups :)

          Those things are generally suited over a 3-5 years horizon and by the time they've grown a bit, it should already be the next property cycle so works out fairly well.

        • dasher86 on 01/06/2016 - 08:48

          $5k for a month you'll be like royalty

        • activ8newbs on 01/06/2016 - 08:50
          +1

          @mini2:

          Hey champ! you've really served me well.

          Since I initially posted this post, I've literally spent upwards of 10 hours researching ETF's.

          Ive really enjoyed the research i've done.

          Though, I must admit, there are a lot of foreign terms.

          I plan to sit down with a finance lecturer from Uni that's known to me and see if he can shed some light.

          Thanks a lot!!!

        • blindwilly on 01/06/2016 - 11:47
          +5

          @unistudent1: If you are looking at ETFs have a look at www.stockspot.com.au (no, I don't work for them) as they offer a range of ETFs and can blend them into a portfolio depending on your goals and attitudes towards risk.
          The good thing about ETFs vs property is that ETFs are liquid and you can redeem your funds when you need them back for something else (car, holiday, etc) while an investment property would require a further loan or even sale if you needed all the cash back, since you can't sell part of a property.
          Sure, you can refinance or remortgage but if you want to invest but are unsure exactly what to invest in ETFs are not a bad choice (BTW, ask your lecturer - or Google - about active ETFs which allow you to manage some of the stock positions as well).
          As for buying a car keep the old beater until you can afford something else. Cars don't hold their value and tipping in a large amount of money will not get a return. If you need something to go from A to B there are plenty of cheap reliable cars out there.

  • ndarg3 on 31/05/2016 - 23:11
    +1

    Shares. As you're new, pick a big bank. Look at its 52week price history and watch it's price for next coupla weeks or months. Buy when you're comfortable. No one can guarantee right time. Owning it makes reading financial news so much more tactile. Best thing I've ever done.

    • activ8newbs on 01/06/2016 - 00:48

      This sounds like really good advice.

      I like it.

      I'm going to do it.

      My business partner in my start up is in a similar boat to me. We decided we'll do some good research and run some good numbers after exams and make this shares portfolio happen.

      Thanks a lot. I'll report back in 6 months if I remember.

      Though can I just ask: With that kind of investment (big 4 banks), would I be looking at share capital growth or dividend paymentd, or both…?

      • Charlatan on 01/06/2016 - 08:15

        Banks are valued for their consistent long term growth and dividend income. You'll want to work out the overall return including both (accounting for the tax effects of imputation and the CGT discount) for your time horizon to decide if you want a high yield (dividend yield) investment or a more growth-focussed investment (I.e. a company that reinvents earnings and pays less out as dividends)

    • Azn310 on 02/06/2016 - 22:43
      +3

      No. Definitely not go for the big banks at this time. Hedge funds around the world are shorting our banks big time. Banks' share price will go down. In fact, it has been going down for a year now.

      Our banks are some of the most profitable in the world right now because Australians owe them billions of dollar in property mortgages. Property market is no long solid. Banks will be cutting down on dividends to cover their bad debts.

      Link here

      • bigoldtoo on 03/06/2016 - 13:38

        Seriously listen to this guy.

        I would consider investing in gold or US dollar ETF instead.

  • icejester on 31/05/2016 - 23:25

    50k savings?!
    How did you get that at 20 after expenses and taxes on a 42k p.a. salary?

    • activ8newbs on 01/06/2016 - 00:35
      +6

      I live at home. My expenses are very minimal. Phone bills. Petrol. Car related expenses (insurance service etc). Just discretionary expenses and going out occasionally.

      But don't get me wrong. Ive really been saving actively for the best part of the last 3 years

      • Sweetnsour on 01/06/2016 - 12:37
        +6

        Good on ya. Not many 20 year olds are in your position. Most would just complain they dont earn enough as opposed to not save enough

        • cDNA on 02/06/2016 - 19:11
          -1

          Most don't have jobs at banks and have the fitness to become a firefighter too.

    • cDNA on 02/06/2016 - 16:48
      -6

      The guy studies commerce and works at a bank. lol

      He's not doing anything demanding, so he has time to work. I'm guessing his contact hours are ~12 hours

      • activ8newbs on 02/06/2016 - 18:51
        +12

        I study a double degree, full time in Accg and Finance.

        I work at least 25 hours a week, so more than double what you thought.

        I'm also working on a start up which is demanding. I'm a firefighter too. That's also demanding.

        • cDNA on 02/06/2016 - 19:04

          Yikes. Good on you then.

          The firefighter job was unexpected.

          I know a few people like you. They do finance, work at a bank or investment bank or a trading company. Never met anyone who was a firefighter at 20 years old.

        • activ8newbs on 02/06/2016 - 19:23

          @cDNA:

          Thanks mate ;)

          Appreciate it.

        • No ONE on 03/06/2016 - 12:54
          +1

          Wow 25 hours/week and full time uni student, now that's called hardworking. Bravo

        • linkii on 03/06/2016 - 22:38
          +2

          @Oz Bargain 3:
          Contact hours for a commerce degree is really only like 12hrs per week. I know plenty that have done it. In fact you have to do it to get anywhere in a commerce degree these days. The hard part is actually geting hired, not the work..

  • Charlatan on 01/06/2016 - 08:10
    +2

    https://www.ozbargain.com.au/node/236544#comment-3496698

    Personally I would recommend ETFs for a long term “set and forget” investment. Property is an option but at the moment I am ignorant of it and feel it is risky, so I won't talk about it. See comment above for a response I gave to someone in another thread about ETFs.

    I'm not an expert but feel free to ask me any questions.

    • activ8newbs on 01/06/2016 - 09:03

      Thanks Charlatan!

      Really enjoyed reading your other comment. Was insightful to say the least.

      Do you think I'd be correct in saying the following:

      Given that I would ideally like to invest $5k for about 1 year, I'd be better off putting that money directly into shares opposed to ETF's as ETF's are usually more longer term?

      Thanks

      • MustacheFire on 01/06/2016 - 17:22
        +1

        Over a 1 year horizon neither share nor ETFs would be advisable. Shares are high return but also high risk, ETFs just diversify that risk significantly. Over 1 year you could easily have a capital loss, so either invest for the longer term or stick to high interest where your capital is protected

      • Charlatan on 02/06/2016 - 09:38

        If your time horizon is 1 year I would recommend a debt investment, being either:

        • High interest savings account or term deposit (This is a "debt" investment in the loosest possible sense, in that when you give the bank money they "owe it" back to you)
        • Bonds. I don't know much about these beyond what they are. If you don't know, to "buy a bond" is effectively to lend someone money, the bond being the thing that says they must give you the money back with interest. I'm not even sure how to invest in bonds, so sorry about that but I'm no help there. You would want to go with government or high quality corporate bonds if you want safety, but I don't know enough to talk about this really.
        • P2P lending. Again I know little about this but you will get a better rate of return than you would on anything else in this list. Of course, you are lending your money directly to another individual and this comes with an increase in risk. I think providers generally have a "fund" to cover lenders in case of default, but I'm mostly ignorant - do your research.

        Why do I recommend these over a 1 year horizon? Simply because stocks and ETFs are both volatile (stocks moreso than ETFs). If you invest in an ETF or a stock for 1 year, you are effectively stating that you know enough about the company or index that you are sure that it will go up this year. This is called timing the market; general consensus is that it is somewhere between very difficult and bloody impossible to do this successfully, and as an unsophisticated investor I would say you are likely to fail. Note that even "safe" investments like ETFs and stocks of large, stable companies (Banks, wesfarmers, etc.) can go down over the course of a year - they are considered "safe" because capital growth over the long term (at least 5 years, probably more like 10) is reasonably certain.

  • TransportPosters on 01/06/2016 - 09:02

    A guy I worked with bought an investment property in South Australia because apparently it was the cheapest place to buy houses. Then with that asset he could easily buy another, and another. Over 10 years or so he told me he had 12 houses in total and had just become a millionaire with what he had in the rising value of all the homes.

    • WhyAmICommenting on 02/06/2016 - 23:30
      +3

      Yep, that worked 10 years ago as it turns out, wouldn't bet on it now.

  • PlasticSpaceman on 01/06/2016 - 10:33
    +11

    I used to work for a stock broker and wouldn't call putting money into the share market for one year an investment - that's more what I would call a gamble or at best a hobby. Shares are a long term investment unless you are actively trading which requires a lot of effort to do well. Let's say you manage to get a 10% return on your shares - some go up, some go down, but on the whole don't do too badly. You end up with $5,500 from that $5,000 investment. That $500 you made will be taxed so let's say after tax you have $400. You also have to pay brokerage fees to buy/sell the stocks - let's say $50 each way. You just made $300. If you'd left the money in the bank you would have made $150 less tax - say $120. So overall you are $180 better off. Wow. ;-)

    OK - you might manage to do better than that. You may also lose money on the deal, and then can claim that loss on your tax but overall a lot of effort for not much gain. What I'd do would be:
    * consider adding a bit more into your super - this is taxed at a lower rate (15%) plus the government may also add some extra money in because you are a low earner (check out 'Government co-contribution'). I know you're young and just starting out so retirement is a long way away, but this is a really good way of making the most out of your money if you have a good super fund
    * give yourself a small allowance to use to 'play' on the stock market. This will let you learn about how it works as well as potentially start to build up a portfolio, and will provide some useful knowledge for your studies in accounting & finance.
    * set aside another amount for fun - travel. See places. Do stuff. Go out. Oh, and maybe do something nice for your parents - get a groupon deal for a holiday overseas at one of those luxury resorts (eg the Pullman at Phuket), or just take them out to dinner. They are helping you be in a really good position for when you leave home. Be nice to them. :-)
    * the rest I'd leave in the bank - if you are considering getting some property to live in soon (ie in the next year or two) then that will make a great deposit. When you get the place, it's possible you may also be able to include the cost of a newer car into the overall loan.

  • ols108 on 01/06/2016 - 12:06
    +28

    Avoid girlfriends if you want to continue to save.

    • rgr on 02/06/2016 - 21:27

      YES

    • Xastros on 05/06/2016 - 04:46

      Getting a girlfriend isn't really that bad. Getting married isn't even that bad. Worst financial move you can make? Having kids.

  • Lcfc2016 on 01/06/2016 - 14:31
    +17

    How long could you see yourself staying at home? I always had two dreams, travel the world and own a house outright. So I set up two funds. Staying at home longer meant I was able to travel Europe, America, Asia and New Zealand (only Canada left on my list to do). I eventually left home at 27. I'm now 32 and own a house outright. I've never earnt more than 50k a year, but because I saved plenty I now have no debts, and doing a job I love even though I only earn 30k. I've always told myself don't spend what you don't have, and if I have to take on debt, pay it off asap. It goes against the flow of this society but it works. I hope whatever you decide to do, it works out for you. Trust only in your own goals, society isn't always right

  • Skramit on 02/06/2016 - 09:13
    +2

    When I was your age I was in a similar position. I put all my part time work earnings into the share market. I think it was about 50k investment over a couple of years. By the time I came round to getting married and buying a house it was worth about 200k and i sold the lot to buy my house.

    Get into some stable blue chip long term shares, and build it up either to buy a house or simply build wealth. but as others above have said, this cant be a 1 year thing, you have to expect 5+ years or it's nearly not worth it given the market volatility.

  • joyee003 on 02/06/2016 - 16:54
    -5

    i suggest u not to get into Property Market,it is really risky.the best way is to deposit into the bank.

    • johnno07 on 02/06/2016 - 17:40
      +2

      i suggest u not get into banks,it is really risky.the best way is to deposit in mattress.

      Obviously the OP is looking for something with a bit more risk/reward than 3.5% in a savings account.

    • duchy on 02/06/2016 - 21:37

      Can you be more elaborate why it's risky?

  • leiiv on 02/06/2016 - 17:15
    +5

    Take advantage of the first home buyer grant/concessions and CGT exemption. Buy a property as your principal residence, not as an investment. The benefits are:
    1. No capital gain tax if you sell the property in the future.
    2. As singles, both you and your future partner can get the all the advantages first before being married.
    For example, if you and your future partner sell the two properties (one for each) before getting married, you don't have to pay CGT for both sales. After marriage, both of you can only have one property as your principal residence.
    Downside is you cannot have a (reportable) rent income on that property…

    • johnno07 on 02/06/2016 - 17:48

      An addition to number 2: it applies to marriage or de facto relationships. Last time I checked, I believe when determining a de factor relationship, you look at a number of factors, a major one being you've lived domestically together for a period 2 years. Speaking from a QLD perspective here.

  • johnno07 on 02/06/2016 - 17:44
    +1

    Property would be my vote here. It will appreciate (unless you are pretty bloody unlucky), but it also has inherent value to you as a place to live… and a place to take chicks home to… and a place to start a (hopefully not unplanned) family with said chick.

    Bloody marvellous work by the way - that's some quality saving. Hopefully you're not burning yourself out already! Keep that work/life balance healthy :)

    • gromit on 03/06/2016 - 22:39
      +1

      given current market I would not count on property appreciating significantly at all, at least not in the next 5-10 years. A lot of people are about to get very badly burnt on unit/apartment investments.

  • catbug on 02/06/2016 - 18:00
    +3

    Hi There,

    Me and my partner have been lurking through the threads reviewing everyone's suggestions.
    We're in much the same position as you. We might even make a seperate post to gauge popular opinion on a similar matter.

    So, coming around to your initial question let me tackle by busting a few myths that people(especially in this thread) hold.

    Property is not a very good investment period. Based on aggregate quality corrected indexing (if you go to Melbourne uni check out the real estate analysis subject LV3 to learn about this) benchmarked against the ASX index, equities provide a much better risk adjusted return than property. Now, there is exceptions to this depending on specific personal tax structure and what investment entities you use (trust funds is good if you can access it). However the general conclusion is unless you are very rich, its better to rent than to own and better to invest in equities rather then in property. There are some academic material published on this matter check it out at your UNI's databases.

    Second, investment horizons. Now this entirely depends on how active you want to be in the management of your portfolio and what your personal risk profile is. If you learn up a little up derivatives and hedging strategies you can further tune your risk and exposure. Hence you can leverage up your investments without thinking short term return are fairly low or that you're missing out on compounding effects etc.

    Okay now, I've gotten that out of the way lets talk about some potential strategies. As mentioned before I am in a fairly similar situation to you. Young, at uni and involved in a start up.

    We(me and my partner) have chosen to invest a certain portion of our wealth into starting a business(s). We realised from the outset that we wont be seeing any of this cash for what could be a very long time. > 2 year horizon accomodating for potential compensation via wages.

    I have also recently taken up active investing. I used to trade junk bonds quite heavily a little while back but I lost a lot of money doing that.. Leveraging too much and not having adequate skills or knowledge to manage your exposure can do that (especially with bond reaching negative yields).

    Now I am looking at creating a well diversified portfolio consisting of equities, debt, derivatives. I would portion the investment in each of these based on the volatilities associated with the specific instruments as well as with a bit of consideration on how much of a loss am I willing to incur (safely) ?

    None of these need a lot of brains or training, just a subscription to AFR and an internet connection all combined with some ambition.

    You mentioned your not big into reading. Try out audio books. As long as your not lazy, plenty of ways gain knowledge.

    I would say ignore anyone who say consuming your money is a good investment strategy i.e buying a car. However investing in yourself via travel is worth considering. I personally have gained a lot.

    Good luck.

  • p1 ama on 02/06/2016 - 18:44
    -1

    Savings: $50k

    I know some people might just hate me, but if I were you, I would just use it - buy a new car, go some cool places, buy some new toys, renovate your room…etc.

    What is $50K anyway? One day when you're 45 and making $200K per year, you'll regret not spending a what is now a few months wages on fun things when you're 20. The point of having money is to spend it and to have fun.

    • rgr on 02/06/2016 - 21:34
      +7

      the problem with this kind of advice is it assumes certain things:

      1) the value of 50k to you is the same to someone else, 50k can mean a lot to a person who hasn't come into big money young but it could also mean nothing to someone who makes $300,000 a year
      2) he will be making $200k by 45; too many things could happen that can alter this possibility

      in all honesty, he shouldn't be asking for financial advice here but rather ask himself what his goals are and look at how to achieve them in a way that doesn't force him to commit too much money to a point where it's a point of diminishing return. buying a new car could entail expensive maintenance costs whereas travelling would only incur money (much less than a car) and time, but the return is MUCH higher due to the potential of meeting new friends, understanding your limits as a person, trying new things etc. - you can have anything in life but sometimes not both, and i think this could be one of those cases.

    • No ONE on 03/06/2016 - 13:02

      Can you guareentee that at age 45 he would be making 200k p.a or even close to that?

      • p1 ama on 04/06/2016 - 02:29
        +3

        Of course not, but someone with the smarts and work ethic to get where he is today can surely get to much greater places later on in life, so I am confident that OP will get very far.

        That said though, I think that enjoying your youth is important. I'm not saying go and spend every dollar and every cent in a meaningless and brash way, I'm saying to get out there and enjoy life. Uni days are honestly some of the best days in life - you get super long winter breaks (great for going to Europe or the US) and long summer breaks (great for exploring Australia). You also have relatively few responsibilities and commitments - no marriage, no kids, no mortgage to pay, no boss to answer to…etc.

        The fact that you can just go missing for a week or two without fuss and do things that you consider fun without having to plan in advance, convince your wife or try to find a way to take the kids is great. It's the time in your life when you can drive a nice coupe without having to think about whether you can fit a baby seat in the back.

        There's an old saying - that when you are young, you have a lot of time, but not a lot of money. When you are old, you have a lot of money, but not a lot of time. OP is in the great situation of being young, having a lot of time and having a lot of money - that is a luxury. Ultimately, regardless of how you end up, 50K isn't a huge deal of money (as much as it hurts for me to say that). You will make it over and over many times. When you are 50, getting old and starting to reflect on life, what will you regret more, not having done everything you wanted to do when you were 20, or managing to get a house two years earlier than you otherwise would have?

        You will only have an opportunity to be this young and this care-free once. It'd be a waste to not give it all a go.

  • johnno07 on 02/06/2016 - 18:53
    +6

    Oh and also - re: your car. I drive a shitty old Falcon that's literally the same age as you. It's not stylish in the slightest. Don't be self-concious about it. I own the crappiest car out of my circle of friends so I just work it. My mates are always surprised to see that "The 'Coon" is still going. It's the bare minimum car for my needs really. Maybe worth about $1000 - on a good day. The beauty about having a shitty car though, is that you don't need comprehensive insurance, and third party property is a pittance ($130/year for me). And no stress in parking lots. Whenever a (profanity) hops carelessly opens there door into mine, they lose out. It's almost satisfying to notice a new door mark. Work that Camry, mate!

    EDIT: for reference, I'm mid-20s.

    • activ8newbs on 02/06/2016 - 19:38
      +1

      Holy shiiite this was hilarious.

      This hit close to home.

      I know those feelings all too well lol

      My Camry is yet to be named :/

      Though I know my mates often confuse it for. Ferrari or a Lamborghini - Changes depending on their mood lol

  • inittobinit on 02/06/2016 - 21:59

    Have nothing to contribute but thought it was interesting how close our situations are.

    FT Student studying Eco/Finance, PT Retail job.

    Age; 21
    Savings: $25k
    Income: $1200 a fortnight after tax
    Super: $6k
    Assets: Just an old Toyota Camry as well.

    Bank: ING Direct as well.

    What year is your camry? :P

    EDIT: "Hahaha I've been wanting to get a car so badly lately. My Camry is so banged up. A bit embarrassing at times. I know I can afford a second hand Audi TT (dream car) at ~$25k easily. I want to do it but at the same time I keep telling myself that I'll be shooting myself in the foot if I prioritise a car over a deposit for inv property!"

    Dude who are you, are you me? I'm thinking about a new car as well but can't help but think i'll hate myself for not putting it into a house deposit.

    • activ8newbs on 02/06/2016 - 22:33

      hahaha

      that's awesome dude ;)

      I've got a 98 camry for the record!

      What're your (financial) plans for the future?

      • inittobinit on 02/06/2016 - 23:18

        91 Camry here, thankfully mine sat in a garage for 20 years before being handed to me so its ugly, but its still shiny!

        Not really sure what to do with my savings apart from add 1k to it each fortnight.

        Parents have considered buying another property if i surrender my savings for the deposit, move in and pay rent.

        Rent is dead money but i guess when you inherit the house anyway its not so bad.

        Would have done this already but with the housing market the way it is i think it might be safer to wait a little longer.

    • mezje on 03/06/2016 - 00:07

      Don't get a TT you goober ;)

      • activ8newbs on 03/06/2016 - 00:23

        LOL why not?

        They're soooo nice!

        • mezje on 03/06/2016 - 01:15

          Just not a fan, prefer the other car he's interested in ;)

          I know ptenkae irl and found it amusing reading his comment and this post and it all sounding familiar…

        • inittobinit on 03/06/2016 - 10:03

          @mezje:

          Ahaha sup m8.

          Wouldnt get a TT, one of my big criteria is that its depreciation has to have steadied, after 2-3 years i'll be able to get all my money back if i buy something like a MX5 or S2000. Euros crash through the floor in value all the time, not to mention euro maintenance costs.

          Have been in a 2015 TT and it is pretty nice though.

    • suicine94 on 03/06/2016 - 14:57
      +1

      Well you are nothing like OP OP has double your cash and is 1 year younger. he also works at a bank, studies, and is a fireman so probably fit as.

  • Hotpotcorn on 02/06/2016 - 22:34

    yo mind telling me what atar u got

    • activ8newbs on 02/06/2016 - 22:38

      hey man

      i only got 89 atar.

      I went to a public school. I did 3 unit accelerated maths

      adv engl
      bio
      chem
      eco

  • exp1 on 02/06/2016 - 22:37

    Make a timeline of possible large expenses in next 5 yrs (holidays, cars, courses, etc.) set your investment horizon and determine your risk appetite accordingly.

    If I were you I'd go for a 50% actively managed share portfolio (this is for learning more than anything else), 40% ETF, 10% cash.

    However you decide to invest, just make sure you make informed decisions. Read up on everything, question people's advice - including mine.

  • drfuzzy on 03/06/2016 - 00:44
    +3

    If your studious and driven career wise - invest in yourself. Higher education and qualifications that complements your current experience will achieve the highest ROI at your age.

    If you do want to invest in an asset class, remember that only one asset class has a significant tax advantage - property. Unlike shares, bonds, term deposits there are specific incentives for owning your first home or investment property. Most importantly, CGT free (provided you live in it at least for a short while and then are not absent beyond 6 years). Secondly the first home owners grant is only attached to real estate - not shares, deposits or the like. Even if you can achieve a slightly higher return with another asset class - how does it compare with your first property on an after tax basis?

    • Devils Advocate on 04/06/2016 - 17:34
      +1

      Ever heard of franking credits? You can negatively gear shares too, not that it is ideal to do that though (same as property)

      • drfuzzy on 05/06/2016 - 13:50

        Yes, I do receive franking credits and I do negatively gear shares as well as property but I don't see how your comment is relevant.

        When I sell those negatively geared shares I will have to pay CGT. When I sell my negatively geared investment property it will be CGT free as I will also claim it as my PPOR. I can't do that with shares - you must pay the CGT.

        Franking credits are helpful but that's an unrelated point.

        • Devils Advocate on 05/06/2016 - 14:48

          I was responding to your statement "only one asset class has a significant tax advantage". If OP wants long term investing I'd take franking credits over no CGT every day of the week.

        • drfuzzy on 06/06/2016 - 10:53
          +1

          @Devils Advocate:
          Yes I see what you mean - that's a good point.
          Personally I would take the no CGT but appreciate it is an individual thing.

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