Investopoly

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...

  An understanding of basic economic principles will set you in good stead to understand financial commentary, political rhetoric and make your own assessment of economic risks and opportunities. That is not to suggest you need to become an economic expert but understanding some basic principles will go a long way.     The foundation of economics: the law of supply and demand  The law of supply an...

Many investors consider future trends when making investment decisions. Popular examples of investable trends include the growing demand for green energy, mainstream adoption of electric vehicles and cybersecurity.     The thesis is that if you can correctly spot/predict a trend in the early stages, then you can invest in the companies and sectors that are best positioned to benefit economically....

Some investors have been spooked by the RBA hiking interest rates by 0.75% over the past two months, particularly since it has spent the past two years telling us that rates would not rise until 2024. Higher interest rates at the same time as rising prices (inflation) are a two-fold blow for household budgets. Where are interest rates heading? The banks predict that the cash rate will rise by a fu...

Our goal is to inspire our people to adopt a holistic approach when making financial decisions. That's because financial decisions often include several interrelated considerations and consequences, including financial planning, cash flow, taxation, borrowing and so on. Also, taking a holistic approach ensures no opportunities or risks slip between the gaps. Often, the best way to make a poin...

Most people are familiar with the saying that “time in the market is more important than timing the market”. It is very true that holding a quality investment for many decades will mask imperfect timing. However, for some asset classes/investments, timing can be very important. Most markets move in cycles Most people understand that markets move in cycles . To generalise, an asset class can be ove...

I think we need to be prepared for the possibility that the next couple of years might be a bumpy ride in terms of the economy, financial markets, interest rates and so forth. The media thrives on higher levels of uncertainty, so be prepared for plenty of doomsday predictions and lots of negativity. The silver lining is that negative sentiment almost always creates attractive long term investment...

A lot has been written about the good fortune of baby-boomers in that, overall, they have enjoyed a long period of economic, share market and property market prosperity. Whilst they haven’t enjoyed the full benefit of compulsory super (which only began in 1992), other assets such as property has certainly compensated for that. This means an inheritance tsunami will hit the next generation over the...

I find it ironic that the two common financial mistakes that people make are (1) not investing i.e., procrastination or (2) doing too much i.e., turning over investments, changing their mind and so on. Of course, not doing anything is an obviously bad thing as nothing comes from nothing. I wrote about this in March . But, sometimes reacting, changing, tinkering, selling, buying and so on can be eq...

When it comes to building wealth, the truth is that unremarkable actions completed consistently for many years (decades) produce remarkable results. But because these actions appear unremarkable, people tend to overlook their importance. Also, sometimes, people are tempted to undertake intense and often risky “investments” as a shortcut to make up for past inaction. Unfortunately, this approach ra...

A common property investing rule-of-thumb is that you should “buy property and never sell”. That’s because prices always trend higher over time which means you benefit from compounding capital growth . Of course, the rule-of-thumb should be adjusted to include “buy quality property and never sell” to ensure you maximise investment returns. But the reality is, that sometimes the smartest thing to d...

A few weeks ago I wrote a blog about the one thing that stops most people from making the most of their financial opportunities including making regular investments. It was my thesis that a lack of context is the main cause. Having a long-term plan provides you with the context required to make mistake-free financial decisions. It is difficult to work out what investments to make (and when) if you...