If you had $100k what would you do?

Hello all,
At 29 I have almost paid my home off and I have 1 investment property and 80k in shares
With interest rates so low, I'm looking at borrowing 100k to invest to build some income and capital.
Through shares. The 80 I have in shares is basically to buy shares low and sell high. I have done well
Over the year but now it's time to look beyond of trading.

For long term growth and to build and income what shares would you invest in.
Eg with tls (Telstra) if you had 50k of shares at a purchase price of 5.25 how much divedend would you get in a year

At the moment the economy has not been as good as it was, allot of companies out here are reporting higher revenue with higher cost and margins are decreasing while growth has slowed down

I look at all these fundementals and I ask my self this. For the time is risk outweighing the return?

psailagroup said:

Hello all,
At 29 I have almost paid my home off and I have 1 investment property and 80k in shares
With interest rates so low, I'm looking at borrowing 100k to invest to build some income and capital.
Through shares. The 80 I have in shares is basically to buy shares low and sell high. I have done well
Over the year but now it's time to look beyond of trading.

For long term growth and to build and income what shares would you invest in.
Eg with tls (Telstra) if you had 50k of shares at a purchase price of 5.25 how much divedend would you get in a year

At the moment the economy has not been as good as it was, allot of companies out here are reporting higher revenue with higher cost and margins are decreasing while growth has slowed down

I look at all these fundementals and I ask my self this. For the time is risk outweighing the return?

Click to expand...

Hi mate, first of all, many congrats for having such a strong savings ethic to get you to such a sound financial position early in life. I am sure it will stand you in good stead over the long run. While I can't give you any personal advice, I can offer some thoughts as I am of a similar age and in a fairly similar financial situation. Some points you might consider:

1. If you are on a high tax bracket, do you really want a lot of extra income? I'd prefer to invest in companies which keep my money and grow it at rates far better than I can grow it myself. So I tend to look at companies which have a lot of capacity for growth in a generally slower growth environment. For example, TLS has barely grown its earnings per share over the last 5 years. While its shares have performed well, the intrinsic value of the business may not have changed all that much.

2. When I look at leveraging, I generally look at gearing into property over shares. This is mainly because (a) the rates are lower (b) as long as you are servicing your loan, there are no margin calls (c) I don't see day to day price movements so I am not as stressed about my equity buffer and (d) I can get higher LVRs which improves the ROE from the investment. During the GFC I got burned using leverage on shares whereas my investment properties sailed through unharmed. I don't have enough time for day to day monitoring so my personal preference since has been to fund equity investments with just equity. The companies you are buying are generally leveraged anyway.

3. I generally look to deploy funds when things look down and save hard when things are looking strong. For example, while I have enough capacity at the moment to buy more investment properties I feel the market has run a bit strongly and there isn't much value at present. So instead, I am building a war chest which I can deploy when the market inevitably slows or plateaus. My personal bias at the moment is towards equities / cash as a result.

Anyway, just some reflections on how I am thinking about things at the moment. Make of them what you will and all the best!

coolcup said:

2. When I look at leveraging, I generally look at gearing into property over shares. This is mainly because (a) the rates are lower (b) as long as you are servicing your loan, there are no margin calls (c) I don't see day to day price movements so I am not as stressed about my equity buffer and (d) I can get higher LVRs which improves the ROE from the investment. During the GFC I got burned using leverage on shares whereas my investment properties sailed through unharmed. I don't have enough time for day to day monitoring so my personal preference since has been to fund equity investments with just equity. The companies you are buying are generally leveraged anyway.

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my own input would be gear in shares if you want but I would not take a share based loan, more withdraw from your home loan if you can and invest that money: less fees, and no margin calls which are a killer: forcing to sell usually at the worst time
but DYOR obviously
Good luck

qldfrog said:

my own input would be gear in shares if you want but I would not take a share based loan, more withdraw from your home loan if you can and invest that money: less fees, and no margin calls which are a killer: forcing to sell usually at the worst time
but DYOR obviously
Good luck

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Just make sure it is structured such a way that the interest is tax deductible. Check with your accountant how to properly use the "redraw" facility tax wise.

skc said:

Just make sure it is structured such a way that the interest is tax deductible. Check with your accountant how to properly use the "redraw" facility tax wise.

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indeed +1

Well, after the blow and hookers, I'd probably waste whatever's rest.

psailagroup said:

Hello all,
The 80 I have in shares is basically to buy shares low and sell high. I have done well
Over the year but now it's time to look beyond of trading.

Click to expand...

Don't change what's worked/is working ?

I do not believe equities are the most suitable vehicle for income.

psailagroup said:

Hello all,
At 29 I have almost paid my home off and I have 1 investment property and 80k in shares
With interest rates so low, I'm looking at borrowing 100k to invest to build some income and capital.
Through shares. The 80 I have in shares is basically to buy shares low and sell high. I have done well
Over the year but now it's time to look beyond of trading.

For long term growth and to build and income what shares would you invest in.
Eg with tls (Telstra) if you had 50k of shares at a purchase price of 5.25 how much divedend would you get in a year

At the moment the economy has not been as good as it was, allot of companies out here are reporting higher revenue with higher cost and margins are decreasing while growth has slowed down

I look at all these fundementals and I ask my self this. For the time is risk outweighing the return?

Click to expand...

Buy another house dude - seems to be working for you at the mo?

Leverage up your 80k in a margin loan and max sure the tax structure is right... Sounds like financial planner talk to me.

The good thing is that if you borrow to invest your broker will make double and your bank will be happy to extend your loan!

Buy low sell high - if you want leverage buy options. If you want income the costs of the loan will be harder to cover. Plus you'll have the loan on your head while you are navigating the market.