Need casual advice for investment :)

LHypa on 11/07/2019 - 12:06

Hi there,

I'm a 27 year old long time lurker of Ozbargain and it's definitely helped me through uni, my business and beyond. I've recently sold up and come into a bit of money after everything (roughly a million dollars) and looking at different investments to solidify some cash flow from this. I'm very fortunate that I own my own home and don't have any desire to own investment properties!

I currently have setup the money in short term deposits earning roughly 2% due to the government guarantee on deposits. I recently saw an excel spreadsheet from an Ozbargain highlighted thread that compared different banks interest paying rates and that sparked this desire to earn more. People talked about Ratesetter rates and Vanguard Funds. I'm quite a safe and cautious person by habit, but really am just asking for some general ideas on investment from the people of this fine community which I will go and research some more even if it is just a link to that spreadsheet I mentioned. Thanks :)

Financial

Comments

  • brad1-8tsi on 11/07/2019 - 12:24
    +4

    Do you need income or growth?

    You obviously aren't dumb so read and research. Learn how to read an annual report.

    If I was 27 & had $1m:

    1) Add the max tax free ($25k) to superannuation allowable in a growth or high growth mix with an industry fund.

    2) Split investments between direct shares and indirect equities such as ETFs or managed funds. Be very aware of management fees.

    3) Have half in overseas markets / half in AU.

    4) Spread it over property, infrastructure, finance, etc.

    5) If you don't understand how the company makes money then don't buy in.

    6) If you have investments in quality companies they are still quality even if the markets drop. Don't panic and sell. They will recover eventually. I've done so well out of buying additional shares when others were selling out in a panic. Flight Centre, Macquarie bank, WestPac, Cochlear and Sol Pattinson. I've had some stinkers too so be prepared to sell if it appears management has lost the plot or market disruptors suddenly ruin the strategy.

    Good luck. Don't rush in. I think there will be a correction on the local market this year.

    • p1 ama on 11/07/2019 - 13:05

      I think there will be a correction on the local market this year.

      What makes you say that?

      • Changskies on 11/07/2019 - 14:12

        Its literally everywhere. House market is heavily dependent on ofc, the local economic climate which is quite concerning since all alarm bells are going off from what I see. Its time to save, wait for the dip / recession, cherry pick your road to riches

        • [Deactivated] on 14/07/2019 - 08:22

          I agree, I got out in time in 2007 and made a little money throughout the GFC (hedging indexes).
          I just sold all my shares in the past month intending to buy back at 10% to 20% lower if dip occurs. Bank divs are high so I hope a crash happens before November. Of course with Trump pulling the strings IMO anything can happen.

      • brad1-8tsi on 11/07/2019 - 15:07
        +1

        housing market down
        consumer confidence down
        business confidence down
        car sales down
        less housing starts in both small residential and large developments
        wages growth very low

        Interest rates down which means bond market down which is causing people to pile into shares which is bumping the sharemarket to record levels.

        RBA have almost run out of moves.

        Government doesn't seem to have a strategy.

        Truckloads of people that haven't had shares before asking for share advice.

        It has a similar vibe to 2007.

        NB: most of the above observations are from reading various media and analyst "opinion pieces".

    • Kail on 11/07/2019 - 13:11
      +6

      I'm only a little older than OP and honestly, I am very wary of putting anything extra into Super. There is nothing to stop the government raising the retirement age before we get there, or making other problematic changes. I plan to be retired long before I can access my Super anyway.

      As for ETFs, I love them personally! I think they're a nice place to start out when investing, so worth doing some research on.

      • brad1-8tsi on 11/07/2019 - 15:13

        The gov't constantly moves the goalposts and you have to adjust your strategy with each rule change. You just have to get your head around the fact that we live longer and work longer.

        There's no reason why you can't retire or semi-retire early and do what you want. When you hit 60 (current rules) then you dip into tax free super.

        In the scheme of things, $25k per year before tax on $1m is only 2.5% locked away for ~30 years in a relatively tax effective vehicle.

      • MrBear on 12/07/2019 - 10:02

        What's the benefit of putting post tax earnings into Super? Is it because there is no capital gains at the end when you finally withdraw (at retirement age?)

        • rickb on 12/07/2019 - 13:21

          I think most people would put pre-tax earnings into Super. There is no capital gains tax when you withdraw your super. Contributions are taxed at 15% upon entry.

          • MrBear on 13/07/2019 - 17:23
            -1

            @rickb: I understand that, but people here keep saying to put his savings into super, when his funds are clearly post-tax already after the sale of his business. Which is why I asked.

            • [Deactivated] on 13/07/2019 - 18:48
              +1

              @MrBear: Pre-tax or post-tax personal superannuation contributions up to $25,000 (including employer contributions) are basically the same thing. I do mine as a post-tax contribution towards the end of the financial year. Say you make a $10,000 post-tax super contribution and are in the 37% income tax bracket. You fill in a form and send it to your superannuation fund before lodging your tax return. Your $10,000 is then taxed at 15% ($1500) within your super account. You then claim in your tax return at 37% ($3,700) and you come out in front $2,200. Not bad for putting your own money in your own super. Also, when you hit 60 years of age, you can have up to $1.6 million set up in your super as a (private) pension and all income from that pension is tax free. This is very generous and I would be surprised if this was the case by the time the op turns 60.

    • Hypa on 11/07/2019 - 15:38

      Hey Brad!

      Right now I'm looking for income! I'm looking at doing some travelling for a little while so need to supplement all of those minimal expenses until the next step.

      I definitely didn't think of the max tax free to superannuation! I'll give this a look with my super fund I've been with.

      Thanks for the advice mate :)

      • Seraphin7 on 11/07/2019 - 15:55
        +1

        If you're looking for income over and above bank interest (i.e. want some capital stability and are not chasing growth), you need to looking into various fixed interest/bond managed funds/ETFs. Be aware that there are no guarantees in these investments (you can lose money), however with appropriate diversification you should be relatively stable over the medium term.

        • Hypa on 11/07/2019 - 16:17

          Hi Seraphin!

          If you invest in an ETF's do they pay out in dividend's every quarter and you have the option to reinvest? I'm definitely tossing up the security vs money and almost always for me security will win.

          • Seraphin7 on 11/07/2019 - 18:17

            @Hypa: Hi Hypa,

            I note the Vanguard Australian Corporate Fixed Interest Index ETF (used purely as a single example) does have quarterly distributions. It also has reinvestment.

            I note the price of this ETF has been fairly stable throughout its history, but this will be largely due to the combination of stable interest rates and business conditions over that time. It had a small downturn in 2016 (from memory corresponding to some negative business sentiment) and has run up a bit in the last few months reflecting decreasing interest rates (and therefore higher bond prices).

            I'm not at all familiar with this ETF or any other ones specifically as I'm not a user of ETFs in my arrangements (I've solely used managed funds for investments other than single stock holdings) so you'd need to understand what will/won't meet your needs.

            While this is in no way a recommendation regarding this ETF or any other investment, it's performance history (both price and distribution) is a fairly "textbook" example of how you'd expect this sort of investment to behave given economic/trading conditions over the last few years.

          • brad1-8tsi on 12/07/2019 - 07:54
            +1

            @Hypa: I'm not a fan of re-investment unless the dividend is $1k+. Little dribs and drabs of share purchases get so messy further down the track. Also, you have no control over the price paid.

            If you want more equity in a company then just buy the shares and spend at least $5k.

  • toniyellow on 11/07/2019 - 12:30
    +3

    This gets updated
    https://www.ozbargain.com.au/node/445043

    You may also be talking about this
    https://docs.google.com/spreadsheets/d/145iM6uuFS9m-Rul65--e…

    If you are risk-averse enough to have been looking at the government guarantee on deposits, I would do a lot of research if you are thinking about Ratesetter, it has no guarantees.

    This is the cheapest CHESS-sponsored broker at the moment, and you get free brokerage for your first 5 from using the referral link on ozbargain https://www.ozbargain.com.au/deals/selfwealth.com.au

    This might seem boring because it is a government website, but at least they are not trying to sell you anything so the explanations are pretty neutral.
    https://www.moneysmart.gov.au/investing/shares
    https://www.moneysmart.gov.au/investing/managed-funds/exchan…

    • Hypa on 11/07/2019 - 16:10

      Hi Toniyellow!

      Yes that's the one I saw! I lost it when I was just casually browsing the highlighted threads thank you very much :)

      Exactly my qualm around Ratesetter, seems a bit too good to be true!

      • brad1-8tsi on 12/07/2019 - 08:16

        Ratesetter would be just one (very) small slice of the investment pie. You might put 1-2% there.

        You should be thinking about diversification and structure.

        My total wealth is spread like this:
        Residence: 42.5%
        Superannuation: 31.25%
        Listed shares (individual companies and ETFs): 14%
        Cash in bank: 11.5%
        Unlisted shares: 0.5%
        Netwealth: 0.25%

        Market Index do a free spreadsheet on the highest dividend stocks that's worth a look. They don't bombard you with marketing.
        https://www.marketindex.com.au/

        I've bought purely on yield before using a "Dogs of the ASX" strategy and it's not been too bad if you also weed out the companies that you know are in deep doo-doo.

        I've recently bought Nat bank & Boral based on what I liked the look of on the Market Index list (I'm trying to boost my income to fund retirement) and took a small punt on Alumina as 10%+FF is pretty compelling.

  • cypher67 on 11/07/2019 - 14:05
    +3

    No one has suggested it yet so I will get it out of the way.
    Look into getting an $80k Mercedes, they are high yield investments.

    • Hypa on 11/07/2019 - 16:10

      Haha I've been around long enough for this one! Vehicles only appreciate right? :D

      • cypher67 on 11/07/2019 - 16:29
        +1

        Not all … only the upper market ones ~$80k+.

  • JIMB0 on 11/07/2019 - 14:35
    +4

    Invest in a website/forum that helps people who have no idea about about what to do with the spare million dollars they have lying around. Seems to be quite a bit of demand for such a service.

    • Hypa on 11/07/2019 - 16:12

      Hey Jimbo!

      Sounds like a bloody sound idea, muppets like me like to get multiple opinions including the internet!

  • chumlee on 11/07/2019 - 14:40
    +1

    Invest with me.

    I offer above market returns

    • Hypa on 11/07/2019 - 16:13

      Unfortunately chumlee, I'm looking at gathering opinions and going about this myself after that so I can only blame myself if it goes pear shaped, thanks though!

  • phbk on 11/07/2019 - 16:39
    +1

    Buy my AMP shares off me. They will make you rich!

  • farknos on 12/07/2019 - 10:00

    not 100% sure what government guarantee you are talking about with you 1mil deposits, pretty sure 250k is the limit per person on this one, but i have been wrong before.

    • ozbjunkie on 12/07/2019 - 11:28

      250k per person per institution is what I read. But there is also a total per institution which means if a bank went bust it wouldn't really cover all the deposits. That's what I remember anyway…

      • Seraphin7 on 12/07/2019 - 12:36
        +1

        Correct. $250k per person, limited to $20b per institution.

        If it came down to it, the government of the day might relax these limits, but that's how it stands.

        • ozbjunkie on 12/07/2019 - 12:54

          But more than 250k per person if spread across multiple institution? Or have I got that part wrong?

          • Seraphin7 on 12/07/2019 - 14:27

            @ozbjunkie: Yes, $250k per person, per institution. $1m spread across 4 banks (all else being equal) would all be covered.

            • ozbjunkie on 12/07/2019 - 16:21

              @Seraphin7: Sweet, thanks. Now for the hard part, getting that million cash together…

    • brendanm on 12/07/2019 - 16:38
      +1

      Do people actually trust that the government would come through on this?

      • [Deactivated] on 14/07/2019 - 08:33

        The governments have been less than honest or honorable before.
        I trust it's better than no backup guarantee. Diversify if you don't want to be broke at 75yo.

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