Show notes – How to Build a Diversified Investment Portfolio – Aligning Personal Goals with Timing, Age & Inheritance (Ep. 270)

Emma has a great question: “I am early thirties and my husband late thirties, we have two young children. We recently made our forever home purchase in Seaholme around a year ago (not many in Melbourne know where that is but Cate will!) $2+ mil.Our mortgage is approx $880k, mostly offset. I love the area and all going to plan we stay here forever, no plans to upgrade. Our combined income is just over $500k per year (gross) I work part time and will increase my income when kids go to school. We own an inner city apartment that is rented at $900 a week and will sell when kids are out of childcare. We have cash savings that could enable a deposit on an investment property.  My husband has purchased multiple properties in the past, (mostly smaller interstate properties) and our PPOR is my first property purchase. I have always been into shares and have done quite well for us investing pre home purchase. My default thinking has been 100% share investment after buying the PPOR however perhaps an investment property is the way to go first. My query is timing, now or wait?”

Alignment of investment timing with personal financial stability is crucial for several reasons.

• Financial stability determines an investors ability to manage and sustain and investment, particularly in volatile markets.
• It also puts an investor in a stronger stronger position to absorb any unexpected costs or economic downturns that might affect their investment.
• Factoring in time and compound growth, an investor has some positive outcomes to look forward to, and Dave talks our listeners through some realistic modelled projections.

“And this is why starting early is so advantageous.”

Emma has also asked for the Trio’s thoughts on shares vs property and what would be a good diversification mix. Emma has a background in shares and has done well. Starting off with diversification first, how should this consideration be factored into an overall investment strategy? From superannuation to asset allocation, there are many important considerations for investors to canvas. Tune in to find out…

How does a person’s age factor into an investment strategy? Mike dares to answer… but there is a common theme…. TIME.

What role does property play in property investment, and how does it compare to shares? Dave shares another fantastic example of leverage vs cash. Over 10, 20 and 30 years, the outcomes are astonishing.

Shares versus property… Mike is in the hotseat, but Dave details the pros and cons of each too.

But canvasing a balanced strategy; for someone who is ambivalent and not particularly swayed towards either property or shares, the Trio have a few thoughts about how investors can achieve a balanced strategy. Dave’s key points include;

• An initial focus on securing a home and acquiring 1-3 investment properties as soon as possible,
• Opening a focus to shares, whilst maximising super contributions in the early days
• Retaining the ability to continue paying down any existing debt
• Timing share investments when rental cash flow becomes positively geared, and
• Maintaining a healthy balance of both asset classes

Cate’s knowledge of Melbourne’s inner-west shines through, but she reminds listeners that there is more to property strategy than just circling capital growth prospects. Assuming Emma is circling capital growth, Cate has some local insights to share.

What advice does Dave have for those who are anticipating inheritance and/or bonuses? Research suggests that this can impact negatively on people’s diligence with budgeting and investing

Gold Nuggets:

Cate Bakos’s gold nugget: These listeners are young and they are thinking pro-actively about investing. Time is their best friend!

David Johnston’s gold nugget: What jumps out for Emma and her husband is the fact that they have been investing since a young age. Dave marvels at their diligence, and reminds listeners that this couple are in a great position because they started young.

Mike Mortlock’s gold nugget: Mike reflects on the shares vs property discussion and he challenges our duo to consider the power of leveraging.