Investopoly

As you are aware, the RBA has aggressively hiked rates by 3% p.a. over the past 8 months, so variable home loan rates are now more than 5% p.a. (and investment loans approaching 6% p.a.). Fixed rate borrowers have avoided these higher interest rates. However, a lot of fixed rates will begin expiring next year. As such, many borrowers are facing much higher (40%+) mortgage repayments next year.  Th...

I was interested to watch this YouTube video produced by ETF manager, BetaShares which compared the differing views of Warren Buffett and billionaire fund manager, Ray Dalio.  Both men have been some of the most successful investors over the past 50+ years, yet they have opposing views regarding investing in gold, which I find very interesting.  How well has gold done?  As depicted in the chart be...

The Albanese government’s first Federal Budget last month was a bit of a fizzer in that there wasn’t much in the way of changes that affected investors and superannuants.  However, subsequent murmurs by politicians’ hint at proposed changes that the government may be contemplating. In particular, I wanted to address these potential super changes and how they may impact you.  Higher super contribut...

CoreLogic data indicates that property prices in the 5 largest capital cities have fallen by 7.1% since May, when the RBA started hiking interest rates. Sydney has seen the largest price fall – down by around 10%, and Melbourne has fallen by 6.7%.  But it’s not all bad news. House prices in Brisbane, Adelaide, and Perth are still materially higher than they were a year ago .  I wrote a blog in Mar...

There are many large and powerful institutions that have a vested interest in rising property prices. But all levels of government (i.e., federal, state and local) probably have the most to gain, as I’ll explain in this blog. This leads to two important observations.  Firstly, the government is the main contributor to housing affordability pressures i.e., making housing less affordable.  Secondly,...

I recently appeared as a guest on The Australian newspaper’s Money Café podcast , where we discussed the FIRE moment. The acronym stands for Financially Independent, Retire Early , which involves living as frugally as possible, investing as much as possible so that you can afford to retire as soon as possible.  A listener that works in the mental health sector wrote into the show to say that she w...

A common question I receive is how much should I invest in property? That is, how do you know when you have enough, and should you start investing in other assets?  It’s a good question because it invites people to consider their goals and develop a long-term strategy to achieve them. I set out some of the factors that you should consider below. But ultimately, it really depends on personal circum...

Calendar year to date, the stock and bond markets have produced some of the worst returns on record, which is unusual because bonds and stocks are typically negatively correlated. In fact, this has only happened two times over the past 96 years, as illustrated in this chart . Even gold, commodities and property have lost value this year. It’s really been a horrible market for investment returns. ...

The very first article that I wrote for a magazine was published 19 years ago! No wonder I feel old. The article was called ‘Unlimited finance…’. My thesis was that investing in high yield properties, doesn’t magically extend ones borrowing capacity allowing them to invest a lot more.   Some investors believe targeting high rental yielding investment properties will allow them to borrow a lot more...

Borrowing capacity has probably never been tighter in the 20 years since I started ProSolution! This is delaying investment plans for some clients. However, my expectation is that this is temporary and an easing in borrowing capacity might not be too far away.   How borrowing capacity rules have changed over recent years  In 2019, the banking regulator, APRA told banks to include a ‘serviceability...

One of the most interesting things I do is meet many investors every week (i.e., prospective clients). It is something that I have been doing regularly for almost 20 years, so I’ve literally spoken to thousands of investors.  It is interesting because it provides me with the opportunity to reflect on peoples past investment decisions with the benefit of hindsight. There are some common themes. Peo...

An investment property’s total investment return will consist of rental income plus capital growth. I have written about the importance of maximising capital growth many times. However, often investors are tempted to focus attention on income (when selecting an investment property) too, as they seek to minimise the cash flow cost of holding the investment property. I propose that this is a mistake...

Often people wonder whether they should be doing more with their cash savings other than leaving them in a savings account. This blog discusses some options and highlights some considerations with each option.  Of course, the information contained in this blog is not personalised advice as it cannot consider your unique situation and goals. As such, you should always consider obtaining personal in...

I wrote a blog in May warning investors to prepare for lots of bad news, uncertainty and market volatility. My thesis was that rising inflation, supply chain issues and rising rates would cause economic pain. Unfortunately, my prediction was correct, and we should expect the volatility to continue for many more months to come.  It is possible that all you may see are risks and problems at the mome...

A Goldilocks investment strategy means that you are making the most of your financial opportunities without overdoing it and taking unnecessary risk. That is, your level of investing is exactly right (i.e., perfectly balanced).   Underinvesting means that you risk not having enough investment assets to enjoy a comfortable retirement.   Overinvesting means that you have taken unacceptable risks whi...

 Commentators often refer to the price of property in Australia relative to household incomes. They highlight that property prices have risen two to three times faster than household incomes. They conclude that property growth cannot exceed income growth perpetually.   Obviously, this is unsustainable at a macro level. I’ve written about the factors that contributed to property price growth over t...

I believe that most people have a very similar tolerance for investment risk.  Most people are comfortable achieving a long-term annual return of 7% to 10% if the risk of losing money is very low. In short, I think most people have a low appetite for risk – they prefer to take as little risk as possible and invest in a “sure thing” if the return will be enough for them to meet their goals.  What i...

 Most people would say that finding a good financial advisor has always been a difficult task. Ten years ago, most financial planners received commissions for remuneration, so clients had to navigate endless conflicts of interest. Thankfully, investment commissions no longer exist. The challenge is now finding an advisor with well-rounded experience.  Commissions are banned – it's more about...

If Australia slips into a recession, it will mostly likely be the RBA’s fault. They have completely botched the management of interest rates to the detriment of borrowers, the economy, and the bond market. Here’s why…   In its defence  Firstly, in the RBA’s defence, is has been navigating uncharted territory over the past 2.5 years. There was a lot of uncertainty about what damage a once-in-a-life...

Queensland announced changes to land tax in its state budget in February 2022. On 12 July 2022, it released more detail regarding how these changes will be implemented (see here ).   Queensland land tax to rise substantially for interstate investors  Essentially, when determining an investors land tax liability, the Queensland government will consider the value of landholdings in Australia (exclud...

 Superannuation returns for the 2021/22 financial year were mostly negative. However, we shouldn’t forget that the previous 18-month period (i.e., mid-2020 to the end of calendar year 2021) was stellar, so we must keep a longer-term perspective.  And the winner is…  The table below sets out investment returns for the largest 8 industry funds based on a Balanced investment option (data provided by...

In mid-2021, I wrote this blog: “Don’t buy a property in this market…” because, at that time, many property buyers were over-paying for property just to get into the market. I call it the FOMO premium , for lack of a better term (more about this below). My thesis was that since it’s never wise to allow fear (e.g., FOMO) to influence financial decision making, it was better to not buy property in 2...

You must invest in residential property primarily to benefit from the power of compounding capital growth. Any tax benefits (negative gearing) are merely a positive consequence of this investment, not the reason for it. That said, of course it makes sense to maximise your taxation deductions wherever possible.   Make it easy for yourself Maintaining accurate and complete taxation records is necess...

 It’s been well documented that property prices rose significantly over the course of 2020 and 2021. According to the Real Estate Institute of Australia, median house prices in eastern capital cities rose between 30% to 40% over those 2 years.   However, unfortunately apartments underperformed compared to houses in a big way. I wanted to discuss why this occurred and consider what growth prospects...

  Banks will usually offer higher interest rate discounts to new customers to win their business. But, of course, the banks never offer these higher discounts to existing customers, unless they ask for them.   Whilst this has always been the case, it is noteworthy that interest rate discounts have increased substantially over the past 10 years. This means the gap between what interest rates existi...