Hey - Would love to hear some feedback on my current investments

Hey there,

I'm glad i've came across this website as i've been looking for something like this for quite some time! I'll try not to waste to much time here on my first post, but i have made a bunch of investment decisions over the past 2 years since i began investing and would like to know what some more experienced people have to say, considering my limited knowledge i'm just curios if you think my financial advisor has is steering me in the right direction, i feel comfortable but just want to pay it on the table.

As mentioned, i have 3 main investments, including:

My own personal portfolio (4 company / shares + 1 CFS managaed fund) valued at around $20,000

Macquarie Bank Fusion Fund loan = $140,000 (4 years left)

Macquarie Bank GP100 loan = $150,000 (5 years remaining)

between the 2 investment loans, my interest is around $30,000 p.a excluding dividends from the GP100, since the fusion is reinvested (the fusion fund is 3 managed funds including the asian market, global property + australian shares) so overall it will come to around $25,000 at a guess.

Now, in saying all of that.. I'm only 21 and have a stable income of over $100,000 so these demands can be met, but id like to know if there are some other investment strategies you think i should be looking at, at my age? any advice you would recommend me to read into..

My ultimate goal is to start an investment business ranging from all sorts of products, but i guess everyone has to start somewhere.

Thanks for your time! :-)

to begin with....21 and a stable income of over $100,000 well done mate, don't know what you do but I should be doing it!

Really there are only 2 strategies in Australia that efficently build wealth:

1) borrowing to invest
2) contributing to super via salary sacrifice

your doing the first one and given your age the second wouldn't be high priority for you I'm sure.

looking at what you've got I'll make the assumption that you either don't own your own home or have very little equity built up in your exising one. Which is why you have invested in the Macquarie funds as they offer 100% investment loans.

I generally don't like these Macquarie funds and similar products as they generally have higher fees and often poor returns. However as there would be no other way for you to borrow to invest your limited to these type of products which generally offer a 100% capital guarrantee.

so your advisor has done the right thing by you, borrowing to invest is a good strategy, but given your lack of equity to borrow against he has advised the next best product. Ideally you would borrow against your house or have a margin loan against a portfolio of shares.

so what could you be doing better?

1) build up your portfolio of shares and managed funds through regular contributions. why? this will build up your equity over time and enable you take out a margin loan at some stage. a margin loan will give you more flexibility over what you invest in and is often a much lower cost option to these protected 100% investment loans. just as a guide they with generally lend against blue chip shares up to a LVR of 70% so on a portfolio worth $50K they would lend you up to ~$115,000.

2) contributing funds to super. why not contribute a small amount each year? say $5,000 via salary sacrifice? After tax it would probably only cost you $3,500 and the compounding effect over time would be considerable.

I like to tell my clients who fit in the 18 - 25 bracket the following as a rough guide:

$1,000 pa contributed to super via salary sacrifice for 40 years, will give you a future benefit of ~$100K (in todays dollars) and after tax it will have only cost you ~$28K.

to get the same benefit over 20 years you would have contribute $4,000 pa (in todays dollars) at an after tax cost of ~$56K

& finally to get the same benefit over 10 years you would have to contribute $10,000 pa (in todays dollars) at an after tax cost of ~$70K

so do you want to pay $13.50 pw now or $135 pw when your 50?

to achieve your ultimate goal you need to be a financial planner, as that's what they do. but you'll have to take a big pay cut initially to get into the business.

Hey,

Thanks alot for your input! That makes alot of sense of everything you have mentioned there! I know my age and income doesnt really match up, but would you believe it, i work in the mines! But love my job and am currently studying to ensure a secure career within the industry for the medium term, finance is something i wish to branch out into in the coming years.

I did salary sacrifice $80 a week into super, and as my dad has always mentioned, money you dont see, you dont miss. But since my accountant has advised me to lower that to $50, not much of a difference and as you noted, it will make the world of difference at the other end of the timescale.

You really hit the pinpoint with my limited equity to borrow against, i do not own a home as of yet which is why this 100% capital protected loan was the best option given my situation, and both the Macquarie loans are protected at maturity which does have its benefits, but of course you pay for the privilege.

I'm familiar with margin loans and will look more into them as time continues and my current portfolio is worthwhile to get a decent loan amount as there are several companies i wish to invest further in, but just dont have $50,000 lying around haha.

I bought into the T3 option which im sure your aware of have rolled over into Telstra shares, but they are my only blue chip shares, the other companies being CEntennial Coal (my company, which have returned over 100% for me) Queensland Gas Company (also 100%+) and a new one i came across Rivercity Motorway group, doing the cross city tunnels in Brisbane, of course all being a long term hold.

I did make the mistake of taking a punt on Rams Home loans too! Some grand plan that was! But i've cut my losses and moved on, thankfully it was only $1100 i lost, couldve been alot worse!

In your opinion now, what do you think my best option is? Investing into more shares, i wouldnt consider myself a day trader as i plan to hold onto these investments for quite some time, or do you think property should be my next investment?

Thanks for your time, i really appreciate it! :-)

with a name like crusher I should have known you were in the mines.

Your dad is a smart man and should be listened to your first mistake was taking financial advice from an accountant.

when your weighing up who you should take advice from, think of it like this....If a Financial planner & an accountant were in a car, the accountant would be looking at the rearvision mirror and the advisor would be looking out the windscreen. so who do you want driving your car?

use an accountant to do your tax return, thats pretty much all there good for (I'm not going to popular after saying that lol)

Shares or property hmmm well considering the sharemarket has had it's worst performance in 20 odd years and property is slowing down considerably but yet to collapse, I'd go with shares as they represent the best buying opportunity for long term investors.

The 4 major banks represent good buying opportunities, but don't expect a good capital gain anytime soon. but with a fully franked dividend of ~7% they would be positively geared at the moment if you borrowed to invest into them. and after all money in your pocket is worth more than a paper gain.

Young gun

I can sense some bias there...
I'd say it depends but it could also be that the accountant is looking through the windscreen and the financial adviser is looking at his commision...

Cheers

Of course the first thing people said to me when i mentioned a financial adviser was "they will only tell you to invest in this because of their commisions" but i have come to know that my advisor has my best interests and goals 100% priority.

My accountant also has, as ive asked alot from him and learnt alot, and it helps with the 2 companies working together, so i can arrange meetings with both to discuss where i am up to etc.

Hi Crusher,

This is a common misconception that advisers are here to flog you something.
This probably stems from the tv advertising of industry funds who don't have many advisers recommending their product (yes, their advertising is flogging product and not advice).

If you have the time, inclination and education you won't need an adviser (same as a lawyer, accountant and doctor).

Cheers,

Dan

Well done Crusher!!

May I say firstly up that your dad sounds like a smart cookie
I'm sure that you know that already.

You're already diversified but why no direct property investment?

Hey Jacque,

Yeah dads not to bad.. He did make a few mad investment decisions, putting over $100k in the market around Oct-Nov last year, lol so he's not to happy about that! But life goes on.

Anyway, thanks for your comment. I asked my Financial Adviser that question "at my age, and income etc.. should i be in shares, or buy into property?" he strongly recommended the market for me, but thats not to say im not interested in property. My next 'big' investment will be property, but i know very little about it all, any tips?

Thanks mate

Hi Crusher

The reason most FP's won't recommend direct property (as opposed to listed trusts etc) is pretty simple- they don't obtain a commission from it. They're more likely to advise managed funds as this is where they make their money. Simple but true. Ask your FP and you'll soon see what I mean.


As far as property goes, it's really up to a few things:

1. Your budget- to ascertain this, speak to a good independent broker or your preferred lender

2. The type of property- residential (house or unit) commercial or industrial

3. Your cashflow- after tax is the most important, as there's many on paper tax deductions that can make a big difference to your bottom line.
Also allow a buffer of at least 1% interest rate rise as you just never know what the future's going to bring. Be conservative with your figures.

4. SANF- In other words, if you're not comfortable and your investment decisions keep you up at night, then reconsider. We all have differing risk levels and you need to decide what's right for you at this point in time.

Hope this helps.