Investopoly

According to the ATO, over 70% of people engage the services of a tax agent/accountant. However, according to Blackrock , only 15% of Australians have a relationship with a financial advisor. I believe that many people would benefit from having both. In fact, to crystallise the most value it is imperative that they have a close working relationship. To make my point, I would like to share some rea...

Over the past few weeks I have seen a couple of financial plans produced by firms that have experience in providing advice on investing in residential property (i.e. not the traditional managed fund/shares type advisors). Unfortunately, the quality of the advice was very poor and not worth the fees paid in my opinion. It upsets me to see people pay several thousands of dollars for financial advice...

All the clowning around in Canberra last week is likely to have increased Shorten’s chances of winning the next election. Given the ALP’s proposed changes to negative gearing and capital gains tax, will these policies spell the end for property investor? Why the change? According to the ATO[1], approximately 2 million Australians invest in property and 61% of them claim negative gearing benefits....

I typically strongly recommend to property investors to never contribute any cash into an investment property acquisition. I’m not suggesting that you should blindly borrow more and therefore pay more interest. What I am suggesting is that if you have cash to contribute towards an investment that you do so indirectly using an offset account. Contribute cash into the offset instead Instead of contr...

Whilst historically ATO audits were targeted at big business and the wealthy, this has changed. Now more than ever, individuals, business and self-managed superannuation funds are at risk of being selected for an audit, investigation or review. The Tax Commissioner, Chris Jordan has confirmed the ATO has been instructed to undertake random audits targeting over claiming of business expenditure and...

Last week, I highlighted some evidence that indicates investment-grade apartments in Melbourne are perhaps intrinsically undervalued. The topic of this week’s blog is all about whether a house or apartment makes a better investment, specially: 1. If your investment budget is $1.3 million or more, should you invest in one house or two apartments? 2. If your investment budget is in the range of $700...

I wrote this blog in February suggesting that I thought investment-grade apartments were intrinsically under-valued. Well, according to Jarrod McCabe, director of Wakelin Property Advisory , “the investment-grade apartment market in Melbourne is showing signs of growth this year”. My view that apartments are intrinsically under-valued has become even stronger over the last 6 months and I would lik...

Some interesting information and data has been released this week which I would like to discuss with you. Variable mortgage rates will probably rise soon Interest rates that apply to interbank lending have increased significantly since the beginning of the year. These benchmark rates are used to set the banks borrowing costs. This benchmark rate has increased significantly compared to the RBA’s ca...

Are you a spender or saver? Do you find it hard to stick to a budget? Do you find it difficult to save towards a goal? For some people, saving money comes easy to them. For others, it’s like pulling teeth. You might need to adopt a different investment strategy depending on your answers to the above questions. Success requires some income Surplus cash flow is oxygen for any financial strategy. Wit...

Employers must contribute 9.5% of your salary (up to a maximum of $20,050 p.a.) into super. But should you make additional super contributions? This is a question I’m asked regularly. Of course, like many financial planning matters, the answer does depend on your individual circumstances. However, there are some fundamental concepts that help us understand whether additional contributions are goin...

Over the past two years lenders have been incrementally increasing interest rates on investment loans and loans with interest only repayments (as opposed to principal and interest). As the chart below illustrates, the average interest rate margin between a principal and interest home loan and an interest only investment loan is now 1.04% p.a. As recent as January 2016, interest rates for these loa...

Tax is most people’s largest lifetime expense! Therefore, it is not difficult to understand how taking proactive steps to minimise your taxes can produce significant financial benefits. Different taxes will impact you at different stages of life depending on the wealth you have accumulated i.e. types of investments, amounts and ownership structures used. The common mistake that people make is that...

Financial stress is a terrible thing. I’m sure everyone reading this blog has stressed out about money at some point in their life. But the thing is, stressing about money doesn’t change the outcomes. Instead, it just ruins your day. So, am I suggesting that you should never worry about money? Not really. I believe that if you are doing all the  right things  then it will all work out well in the...

Over the past couple of years there have been many changes that have dramatically reduced your borrowing capacity. The Financial Services Royal Commission, government has put pressure on the banks to reduce investment lending and a directive to tighten lending standards just to name a few. If you are unable to borrow then your only alternative is to invest your after-tax income/savings… and that i...

Over the last few weeks we have been working closely with our advisory clients assisting them with end of financial year tactics. I provide a list below of some of the tactics that we have been implementing. It is worth taking a couple of minutes now to see if you can benefit from any of these. Additional tax-deductible super contributions If you are under 65 and generate some taxable income (i.e....

The Productivity Commission released its  draft report  this week into the efficiency of the Australian superannuation system. Its findings are concerning, and all Australians must take an active role in choosing the most appropriate superannuation fund for them. If you don’t, the Productivity Commission suggests it could cost you between $61k and $407k, depending on your age. What the productivit...

The ultimate aim of investing is to build wealth. Current and future tax liabilities can have a significant impact on your ability to build wealth. Simply put, the less tax you pay, the more money you keep for yourself. Therefore, taxation is a major consideration. That said, tax consequences should never drive investment decisions alone. Tax is one of many considerations so its important to not b...

In this episode I discuss some of the financial life hacks that my blog subscribers have shared with me. A list of these life hacks and related links are contained on this page: https://www.prosolution.com.au/financial-life-hacks-list/ My new book is available for pre-order now: Pre-ordering the book will help me get it into bookstores. So please do me a favour - please consider pre-ordering now -...

I know. You have probably seen lots of news about the Royal Commission and the financial advice horror stories. I don’t plan to rehash anything that’s already been said. The only thing I will say is that the publication of these horror stories is a very positive thing. At a minimum, it encourages people to educate themselves about their advice options and maintain a healthy level of scepticism (no...

A few clients this week have asked me if it’s a good idea to invest a large sum in the share market at the moment (for a variety of reasons e.g. as super contributions, a gearing strategy and so on). I told these clients that I have some real concerns with it – not because I don’t have faith in the stock market – but because of the difference between actual versus compound returns. As these charts...

You loan structure can have a big impact on your success as an investor. How you structure your loans can influence on your interest rates, borrowing capacity, cash flow, taxation liabilities and so on. Four years ago I wrote this blog which included 7 loan structuring tips and I wanted to update you on a few matters. In this podcast I discussed: Funding a property owned in one spouses name only L...

I am a big believer in having balance when it comes to managing money. That is, it makes no sense saving ever dollar and always “going without”. After all, none of us know how much longer was have on this planet so we must make the most of every day. However, by the same token, it’s equally silly to spend all our income without any thought towards saving for tomorrow. We need to do both. It’s abou...

In this episode I discuss how do you get better value for money from your income protection insurance? I discuss: the importance of cover the key features of a contract why agreed value is better than indemnity value why I don’t recommend getting cover inside super (be warned) How to select a provider Why “quality” is so important and what quality refers to Some tips to reduce the cost of cover. I...

We have all read the horror stories in the newspapers or seen them on television: Mum and Dad put their trust in a financial advisor. The advisor ‘sells’ them an investment that paid him a substantial commission. The investment was poor quality. Mum and Dad subsequently lose their life savings and the advisor goes unpunished. A new story like this comes up every few months. It’s frightening and ve...

Evinced-based investing (EBI) is an approach that you can use to invest in either property or shares (and other asset classes). This process makes investing feel a whole lot more secure because its more transparent, you aren't making guesses and you have a lot more confidence that your investments are going to work! Evidenced-based investing refers to the process of adopting a set of rules to...