What would you do with this 20K?

most people only seem to buy when the market is running, but during these times you pay top dollar.. its best to buy when there is fear around.. like now and you get discounts..

Thanks crc_error. Very logical. Wish I'd investigated this sooner in my life!

Hi disco lemon.

I am a similar age to you, similar income, and similar $$'s saved up. So thought it would be good to let you know what I am doing and why I am doing it.

I have gone the managed fund with margin loan route. I have a $20000 loan with approx. $20000 of my own equity. I also keep a few months income in a high interest savings account for emergencies. I put regular amounts into my managed funds every pay day, so this reduces my LVR over time. I will probably borrow some more when my LVR gets lower. I gear because I am looking for maximum long-term gains, and also as part of a tax strategy. My LVR was about 75% when I started, but is now 50%, I am not sure what level I will keep it at in the long-term. So far the margin lending hasn't paid off, but I am confident it will in the long-run.

Most of my money is in vanguard index funds, for several reasons including low fees, it suits my basic investment philosophy, I'm too lazy to bother with investment property, I am not willing to stretch myself financially to buy a suitable home for myself, and I think that average sharemarket returns suit my goals of building wealth over the long-term. I automatically put money into my fund each payday. I think managed funds are good because you can add small amounts regularly. From my own research I found that buying ETF's or direct shares costs too much in brokerage for buying small regular amounts.

My goal at the moment is simply to build up long-term wealth in the most efficient way possible. I try to be sensible with my spending and not to waste money. I don't know exactly what I want to do in life yet, a lot can change when you are young, but when I do know it would be good to have money to do it.

well put bella.. you would also find that getting a property costs alot upfrount, this cost needs to be considered in your calculations, and you will find that the lower cost in funds, and their general higher return, geared at say 50% will get simular results to property geared at 80%. Most people forget that the $20,000 stamp duty can be added into a fund and earn money as well, not like in IP where its lost.

I'm not sure if you mentioned you invest into the fund regularly, but this is also what I would do, not just put money into the margin loan. getting units regular basis will average your way into the market. Uness you want to keep the funds for market crashes and buy then!

Nice work Bella.

A 50% LVR looks pretty comfortable right now, and you've proven your strategy of contributing more to "bring down your LVR"... it might make more sense to think that you are increasing your equity rather than reducing the lender's.

In terms of market timing, nobody can say that 5800 is a worse time to invest in the ASX than 6800 six months earlier. There might be earnings downgrades ahead (industrials) but there might also be earnings upgrades (resources). Are these factored in to the current share prices???

I've started to put money back into the market, but I'm not diving in. I increased my holdings by about 10% over the last 2 weeks, and might do another 10% in the next month, eg if I can get United under $11 or Westpac for $21.50.

Thank you so much Bella, for your post. I too am unsure of what to do with my life as yet, & am looking at building wealth for the long, long term. Many friends are buying up their first pieces of real estate, & its tempting to be swept up in the excitement & follow suit. But at this point of my life, I simply can't justify the higher expenses associated with IPs.Thank you also for reccommending Vanguard - I'll definitely look into their funds.

hi

with a small amount of money i have found small property syndications

are good showing high return with moderate risk

20 k invested should bring 8-10 k over 6 months X 2 times pa

your 20 k can turn into 38 k in the first 12 months pre tax

by compounding your returns you can go along way with this method