Investopoly

Click here to read the blog online .  What if inflation remains stubbornly high for over a decade? Today, I explore the potential risks of increased inflation and interest rates, based on compelling research by US firm Research Affiliates. We delve into the historical behavour of inflation since 1970 and discuss the significant impact of low interest rates and quantitative easing on the current in...

Some people plan to give money to beneficiaries (typically children and/or charities) before they pass away, especially if they consider they have more than enough money i.e., surplus wealth. Often, their thesis is that their kids can make good use of the money now, whilst they are younger, rather than waiting another couple of decades. By that time, they’ll probably already be financially establi...

Commentators often refer to the price of property relative to household incomes. For example, it is estimated that property in Melbourne and Sydney now costs more than 10 times the median household income.  But is this really a meaningful measure because if it is, property cannot continue to grow at a faster rate than incomes (a point often made).  If prices continue to rise faster than income, ho...

All investment asset classes move in cycles. Investment returns are almost never linear. As such, investors must expect good and bad periods, which is why patience and discipline are big contributors to an investor’s success.  I suspect that commercial property investors’ patience and discipline are about to be tested. This asset class is facing a lot of challenges. However, as they say, every clo...

Many people are attracted to borrowing to invest in property because of negative gearing tax benefits. That is, the (income) loss that an investment property generates helps reduce the amount of tax you pay on your salary or business income.   However, investing in shares also offers unique tax advantages.  I thought it would be interesting to quantify and compare the taxation outcomes of these tw...

Borrowing capacity has reduced by around 30% over the past year due to the impact of higher interest rates and the increased 3% interest rate buffer that banks must use to calculate your borrowing capacity. This was eloquently depicted in this chart by CBA in February 2023.  I wanted to explore the common strategies that people can use to safely maximise their borrowing capacity.  How to borrow sa...

The unrefuted trend in all investment markets is mean reversion . It means that a period of below average returns is always followed by a period of above average returns. It is my thesis that investment-grade property in Melbourne looks attractive compared to other markets and that there are several economic tailwinds that may result in the median house prices doubling over the next decade.  The m...

I was listening to Morgan Housel’s new podcast recently (which I highly recommend by the way), and he said something along the lines of; once you define your investment philosophy, you won’t be distracted by any noise that doesn’t align with it.  It really resonated with me.  Success with investing is more about avoiding mistakes than anything else. Therefore, having a clear, well-defined (evidenc...

Most people struggle with knowing how to invest their money. Do they upgrade their home, contribute more into super, buy an investment property, invest in the share market, or something else?  In fact, this common challenge was the reason that I decided to write my book, Investopoly . I knew that if people understood the fundamental financial planning concepts (i.e., the 8 rules outlined in Invest...

Every few months, there’s a story online about an investor in their 30’s that has amassed a property portfolio of 12 properties…and how you can do it too.  Firstly, we shouldn’t be impressed by the number of properties that someone owns, as it doesn’t tell us anything about their wealth (equity). Boasting about the number of properties you own is like a business boasting about the number of employ...

Everything you must know before you refinance: https://www.prosolution.com.au/ebook/ =================== Share markets have been highly volatile over the past couple of years. Markets fell by circa 30% when Covid hit in March 2020 and then proceeded to boom until the end of 2021, fuelled by government stimulus and zero interest rates. However, markets fell by circa 20% in 2022 after central banks...

Typically, you need a budget of circa $1.5 million to purchase an investment grade house (investment property) in Melbourne, less in Brisbane, and a lot more than $1.5 million in Sydney. Of course, not everyone can afford this budget, so I wanted to discuss how to buy the highest quality property possible within your budget.  This blog will still be useful even if you do have a budget of $1.5+ mil...

eBook Download: https://www.prosolution.com.au/ebook/ We are all aware that central banks around the world have been hiking interest rates to reduce inflation back to normal levels. The US economy, and particularly the labour market, have been more resilient than most expected. This means the US central bank might have to hike interest rates higher than in other jurisdictions to tame inflation. A...

Ensuring your accountant collaborates with your financial advisor is important, as they will be able to discuss and workshop ideas to improve your financial position. However, in my 20+ years of experience, this collaboration almost never occurs, unless they work in the same firm.  Theoretically, there shouldn’t be any impediments to these two professionals working together. Practically, it doesn’...

It is stating the obvious that private school education is expensive. If you are uncertain whether you would like to send your kids to a private school, I thought it would be interesting to consider some alternatives and put the costs into perspective.  The public versus private school decision is a very personal one influenced by many considerations, including financial. I acknowledge that many f...

It has certainly been a wild ride for property investors over the past 6 years.  In 2017 and 2018, the banking regulator demanded banks reduce the volume of interest only loans, particularly to investors. The media called this the “interest only cliff” and predicted that many borrowers would face financial stress when loan repayments switched to principal and interest resulting is higher arrears a...

It is often debated which is a better investment, property or shares. It is my thesis that property is an okay investment, but not as good as shares. However, when you factor in gearing (the ability to borrow to invest), property becomes a wonderful investment – better than shares.  Property versus shares The main advantages of shares (compared to property) include:  §  You can outsource the manag...

I’m a big advocate of value investing . If you buy high a quality investment for fair price and hold it for the long run, you can’t help but make a lot of money. But if you can buy the same quality asset cheaply (below its intrinsic value), then it’s likely that you will make even more money. This is what value investors attempt to do.   You can adopt a value investing approach with many asset cla...

It has been very well reported that many mortgage holders will soon be paying much higher interest rates when their fixed rate terms expire. It is estimated that $478 billion worth of fixed rate mortgages are due to expire in 2023.  In addition, borrowers may also have to navigate the end of an interest only term, which typically apply to investment loans.  This blog sets out our advice on how to...

It is often suggested that it’s a lot more difficult for people to buy their first property compared to many decades ago. It is true that property is a lot more expensive. However, I would like to suggest that in many respects, buying a property today is easier than it was many decades ago.  I would like to start by highlighting the main advantages that property buyers enjoy today compared to many...

Good cash flow management is by far the most important practice that you must master to be successful at building wealth. I realise that it’s not a particularly popular topic, but bear with me, because it’s an easy thing to master if you know how. It won’t take you much time, and you will feel more empowered and in control as a result.  You can’t expect to build wealth if you spend all your income...

In 1905, George Santayana wrote; “Those who cannot remember the past are condemned to repeat it.” That’s why it is always worthwhile to reflect on the past year to identify any lessons that we can learn. Below I share the investment lessons that I believe last year taught us.   Review of markets in 2022 Firstly, let’s review what returns various asset classes generated in the 2022 calendar year. ...

This was the third most popular podcast episode in 2022. My aim for this topic was to give investors an insight into the strategic process that I follow to develop a holistic, long-term financial plan for my clients. The topic obviously resonated with people. I hope you enjoy it and here’s a link to the blog in case you want to read it (instead of listing to the podcast).  My new book is available...

This was the second most popular podcast episode in 2022. My aim for this topic was to educate investors about the fact that investing a little bit each week, fortnight or month is much better than investing on an ad hoc basis. You may have seen the idea that improving something by 1% each day for one year results in a 37x improvement – small, regular improvements create massive results over the l...

This was the most popular podcast episode in 2022. The idea behind this topic was to share some basic economic principals to help people understand economic commentary, political rhetoric and so on. The topic obviously resonated with people. I hope you enjoy it and here’s a link to the blog in case you want to read it (instead of listing to the podcast).  My new book is available for pre-order now...