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  1. #1
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    Default What would you do with $1200 a fortnight to invest?

    Hi all,

    My wife and I have worked very hard to eliminate debt except our mortgage. We are now in the fortunate position to have and stick to a solid budget which allows us adequate blow money each to spend every fortnight. We have now found ourselves in the wonderful position of having $1200 a fortnight to invest and save. We want to really up it a gear and want to be very far ahead in the next 10 to 15 years and enjoy our later years in life choosing what we would like to do. Has anyone got any advice for us on how to achieve our goal of being wealthy beyond our dreams? I am a very mature 29 year old and my wife likewise is a very mature 31 year old. We get out and do our thing but are very conscious of our financial limits. Where do we start? The share market? Anything other ideas? We both save towards Kiwisaver but this is at the minimum. We also have $3500 of emergency funds stashed away for if Mr Murphy comes knocking. Any wisdom or advice you can pass on would be great.

    Regards,

    Glenn

  2. #2
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    Glenn

    I'd suggest saving that $1,200 per fortnight for the next year (or two). If you can, apply those savings to an offset mortgage to save on interest. Spend the next year investing in your education. If the stock market is the way you want to go:

    1. Choose a sector to research. Ideally one that you think you have a competitive advance in (for me Oil and Gas)
    2. Read as many investor presentation, quarterly reports and financial statements you can.
    3. Read Sharetrader and Hotcopper daily. There are a few very good posters that you can learn a lot from.
    4. Spend some time learning about technical analysis, but not to much
    5. Read One up on wall street - Peter Lynch
    6. Finally only invest what you (and more importantly your wife) can stomach loosing

    The stock market is an easy way to loose money.

    I'm 27 and began buying shares about 4 years ago. I lost a large amount of savings as a result of the GFC, essentially because I didn't no any better. Yet I look back at this as being incredibly valuable. The learnings were priceless and I've made it all back and much more.

  3. #3
    Senior Member Halebop's Avatar
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    Hi Grosslee,

    Well done on getting yourself a financial plan!

    First, and this may not seem very appealling when you are itching to get ahead, but your emergency fund is not big enough should you suffer a sudden and expensive hardship. Financial advisors suggest differing amounts , typically 6 to 12 months income. Up to you but I'm guessing $3,500 would not cover even a month of income for you and your wife?

    The good news is this gives you plenty of time to consider your options and not rush into investments that you may regret later.

    You probably already know the basic investment options - residential property, managed funds and self managed investments (Cash, Bonds, Shares Etc) are the common starting points. Because you also have a mortgage, early repayments and the certainty of saving "x" interest is also an option available to you.

    Whatever you choose you are probably young enough to be reasonably aggressive with your risk profile. This doesn't mean you have to borrow to the hilt but could be something as simple as building a portfolio of 10 or so growth company shares.

    I'd also suggest reading up on investment basics - there are plenty of options out there and probably a search on this forum would highlight some reading options.

    Good luck!

  4. #4
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    Quote Originally Posted by grosslee View Post
    Hi all,

    My wife and I have worked very hard to eliminate debt except our mortgage. We are now in the fortunate position to have and stick to a solid budget which allows us adequate blow money each to spend every fortnight. We have now found ourselves in the wonderful position of having $1200 a fortnight to invest and save. We want to really up it a gear and want to be very far ahead in the next 10 to 15 years and enjoy our later years in life choosing what we would like to do. Has anyone got any advice for us on how to achieve our goal of being wealthy beyond our dreams? I am a very mature 29 year old and my wife likewise is a very mature 31 year old. We get out and do our thing but are very conscious of our financial limits. Where do we start? The share market? Anything other ideas? We both save towards Kiwisaver but this is at the minimum. We also have $3500 of emergency funds stashed away for if Mr Murphy comes knocking. Any wisdom or advice you can pass on would be great.

    Regards,

    Glenn
    First - repay your mortgage. You can always raise another in an emergency, or to invest. If you repay then raise a new mortgage for investment, interest is tax deductible. (A tax effective mortgage) You will be taking no risk and not increasing your taxablre income, which you will do soon enough when you start investing.

  5. #5
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    First up, congrates, you have got yourself into a good position and looking to improve it.

    Start by paying down your mortgage, preferable via a revolveing credit or offset account so you can redraw when needed. This builds up your emergency fund and means you have cash ready to go when you are ready to invest.

    Then decide if you want to go the DIY route or use a manager. If DIY, you need to learn before you jump. you need to diversify so at least 3 shares and build up to 10ish. You also need reasonable size holding or your transaction costs will be too much ($30 per trade) so say 3 x $10k to start and building up to 10 x $10k over time. Until then, you might want to dip your toe in the water with some index funds (managered funds or listed like TENZ) or with some safe bets like the utilities (many will disagree eg. CEN vs TPW or TEL)

    Are you in Kiwisaver? Make the most of the government subsidy (but not any more as it is locked away will 65+) while it is there.

    One thing you don't mention is Kids. Your wife is getting to that age so consider what will happen if she takes a year off work at the same time as expenses increase! That emergency fund may start looking a bit light if you have ever prices buggy, cot, change table, clothes ..... before. I am not saying this is an issue, you just need to ensure that what you do is flexible - you dont want to leverage into shares and have to withdraw just as the market tanks.
    Free delivery worldwide with Book Depository http://www.bookdepository.co.uk

  6. #6
    FEAR n GREED JBmurc's Avatar
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    Quote Originally Posted by fungus pudding View Post
    First - repay your mortgage. You can always raise another in an emergency, or to invest. If you repay then raise a new mortgage for investment, interest is tax deductible. (A tax effective mortgage) You will be taking no risk and not increasing your taxablre income, which you will do soon enough when you start investing.
    I have to agree with FP and the other posts all good info...I guess what would help is how big your leverage in mortgage debt is i.e is it 90% debt or like ours 45% and of course your appetite for "risk" and experience in the likes of the share-market......

    Personal me and my partner 5 yrs older than yourself bring in a good 140k p.a household income with a baby on the way so it's good to have 70k in silver bullion in saving's when the misses goes on maternity leave as well as low-nil credit debts and some spare cash..
    With 55% equity in our 1.1m house I have had a 100k loan to invest into the market through a company along with my own capital funds.(we use are personal income to pay the interest only loans company & home) ..goal is to grow the companies capital funds 100% p.a (which I have done 2 of the last 5yrs)

    The goal is of course to pay down the mortgage debt faster from the profits from the share trading company... most likely going to try and pay down a large amount of household debt by also increase the company debt which can be writing off against my company tax..

    -Now this is a higher risk set-up..during the GFC the companies values decreased but still had to keep paying the interest and costs
    -I had many years experience in the market as well as spec building etc before the above set-up...
    -Too get to 100% p.a I do invest in the small Micro-jnr cap shares which are also higher risk
    Last edited by JBmurc; 17-03-2012 at 04:07 PM.
    "With a good perspective on history, we can have a better understanding of the past and present, and thus a clear vision of the future." — Carlos Slim Helu

  7. #7
    Senior Member Lego_Man's Avatar
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    Quote Originally Posted by JBmurc View Post
    Personal me and my partner 5 yrs older than yourself bring in a good 140k p.a household income with a baby on the way so it's good to have 70k in silver bullion in saving's when the misses goes on the DPB as well as low-nil credit debts and some spare cash..
    Umm, what? The DPB is not for parents who stay at home for lifestyle reasons...

  8. #8
    FEAR n GREED JBmurc's Avatar
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    Quote Originally Posted by Lego_Man View Post
    Umm, what? The DPB is not for parents who stay at home for lifestyle reasons...

    I mean maternity leave
    "With a good perspective on history, we can have a better understanding of the past and present, and thus a clear vision of the future." — Carlos Slim Helu

  9. #9
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    Hi Glen,
    as has already been stated, well done for getting yourself into this position. I wanted to raise a periphery subject (and I have no interests to disclose here) that hasn't been raised by yourself or the repiles so far. Just my opinion. Some may consider it a dirty word, but the benefits of Insurance may appeal to you when you have such a solid income. Working in health perhaps makes me more conscious of the complete s__tstorm of a health related 'rainy day/ month/ year/ lifetime'... and how exposed we are despite ACC and WINZ, unless already attuned to the hardships of poverty. Spend a day or two hanging around a major hospital reception area and you will see what I'm writing about, especially the afternoon when folks are being discharged home. Obviously many are over 65 with the thin cushion of a pension/ super... but there will be some eye wateringly young and formerly high functioning people staring down the barrel of a permanently changed life. And a WINZ income that will not cover their HP and utilities, let alone their existing mortgage. Humbug!
    Insurance comes in all shapes and forms, so DO NOT get rushed into any policies without going to interview (thats right, they work for you) at least 3 brokers and becoming familiar with the basic options of what can be covered and what stand-down and pay-out periods seem appropriate. I see insurance as an expense that I will hopefully never need, but in the worse case scenario gives a breathing space my investments cannot yet produce. By the way, my extended family and many colleagues think I'm a fool to be insured! As noted above, just an opinion.

  10. #10
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    Very good post moocher. It is something people forget. If I remember rightly it is dearer to buy while in your risky teens/ twenties but tapers off until 45 or so then increases again. So the danger period mortgage/kids etc when in thirties it is cheap enough.

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