Options for investing 40k

Hi Everyone

I'm a bit of a novice when it comes to keeping my mind open to different investments. Just wondering what investments are out there.

I'm 23 been saving the past 4-5 years, currently just have my money sitting in a online account earning 6% interest. I have no loans or outstanding debts.

I'll be looking at moving out of home in the next 12-24mths and looking at using my savings as a deposit, hoping the Perth housing market cools down a bit by then. I can't live at home forever!

I'm not chasing or expecting 20-30% returns, i'm more than happy with a solid 10% return or anything a bit more with my current 6%.

cheers

I would say split the money in 2 and buy two 20k parcels in some nice blue chip stocks, its hard to go wrong at the moment. I think BHP and ZFX are definitely worth a look, and I've put my money where my mouth is with those ones.

I think the important thing you have to do is sit down and work out the risk/reward situation, and work out the level of risk that you are comfortable tolerating. You already said that you're comfortable with steady, non-volatile returns, and I think in that respect going for a bigger blue chip is your way to go.

The two stocks I mentioned are commodities based, so they're probably not as "safe" as, say, banking stocks (ANZ is a solid gainer by the way), however I think you'll see the most growth with the stocks I mentioned as the year progresses.

If you need the $$$ in 12-24 months, do not put it in anything other than cash or similar deposits.

The volatility in investments like shares could mean you are living at home longer than you would prefer.

Getting an extra 4% return is only $1600

Not worth the risk of losing 20% - in my opinion

BSD is spot on.

Interest rates are rising. Cash is king. Real estate is in decline. Stocks have topped. Cash will be the best performing asset over the next 2 years. Plus its nearly risk free.

money tree said:

BSD is spot on.

Interest rates are rising. Cash is king. Real estate is in decline. Stocks have topped. Cash will be the best performing asset over the next 2 years. Plus its nearly risk free.

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MMM I beg to differ here. I would buy gold and silver given you live in WA. Also look at some decent miners in this area about to go into production. MMN URL and AEX come to mind.

The guy is young and can afford to take some risks. Why bother with boring old banks?

The Red Baron said:

Hi Everyone

I'm a bit of a novice when it comes to keeping my mind open to different investments. Just wondering what investments are out there.

I'm 23 been saving the past 4-5 years, currently just have my money sitting in a online account earning 6% interest. I have no loans or outstanding debts.

I'll be looking at moving out of home in the next 12-24mths and looking at using my savings as a deposit, hoping the Perth housing market cools down a bit by then. I can't live at home forever!

I'm not chasing or expecting 20-30% returns, i'm more than happy with a solid 10% return or anything a bit more with my current 6%.

cheers

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Red Baron,
Welcome to ASF, while you've probably seen some great replies please be aware that none of it should be construed as financial advice, you would need to see a qualified professional for that. Please read the forum code of conduct and posting guidelines and browse through the Beginner's section.

RichKid said:

Red Baron,
Welcome to ASF, while you've probably seen some great replies please be aware that none of it should be construed as financial advice, you would need to see a qualified professional for that. Please read the forum code of conduct and posting guidelines and browse through the Beginner's section.

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Yes good point. As always any posts by me are my opinions only, OK. That is what forumns are for. Communication of ones opinions and knowledge. Nothing more. Anything one does with the information is up to them.

Thanks everyone for their opinions.

Around 3 years ago I held shares in BHP, CBA, WBC, WPL, ALN, BSL, ERG, VBA just small $2.5k packages. Wouldn't buy that small packages again, learnt costs took away too much of the profit. Made around a 10-20% profit on most and sold them.

Looking back I wish I still had them now but oh well! On the other side I was lucky to sell ERG and VBA for a small profit.

I would like to get back into shares but feel like i've missed the boat a bit. I've also looked at a few houses in Perth just to get a feel for what I would be looking at and they have all gone 20-30k over the asking price, is crazy at the moment.

I might have to do a bit more research and reading and just keep plugging away into the online account and hope some opportunities arise.

cheers

The Red Baron said:

Thanks everyone for their opinions.

Around 3 years ago I held shares in BHP, CBA, WBC, WPL, ALN, BSL, ERG, VBA just small $2.5k packages. Wouldn't buy that small packages again, learnt costs took away too much of the profit. Made around a 10-20% profit on most and sold them.

Looking back I wish I still had them now but oh well! On the other side I was lucky to sell ERG and VBA for a small profit.

I would like to get back into shares but feel like i've missed the boat a bit. I've also looked at a few houses in Perth just to get a feel for what I would be looking at and they have all gone 20-30k over the asking price, is crazy at the moment.

I might have to do a bit more research and reading and just keep plugging away into the online account and hope some opportunities arise.

cheers

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So why bother even posting to begin with? Sounds like you get off talking to yourself.

Red Baron,

Firstly to have saved that amount of money at your age is great - well done. Secondly, since you intend to use the money in the short-term it really should only be placed in those sorts of investments - fixed interest and the like. I think you probably should keep up what you are doing.

Another point is that with that sort of deposit then you should have no problem sourcing a housing loan. There are many lenders that only require a 5% deposit, quite a few willing to take on 3% and there are ones that will lend 100% and (heaven forbid) 105%. The point is no matter what the market is like in WA at the moment you will more than likely find financing. The big variable is on your ability to service it. That is, how is your employment?

I once read on another forum that the best time to invest in your own home is when you can afford it. I think that that is pretty good advice because even though the value of your own home may dip or go sideways for a while it is your own home and there are many strategies that you can apply later on when it does increase in value to leverage your wealth accumulation. Anyway, good luck.

Adam

I'll be looking at moving out of home in the next 12-24mths and looking at using my savings as a deposit, hoping the Perth housing market cools down a bit by then. I can't live at home forever!

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Houses are like shares, great to buy when they are not overvalued, but wise to sell when they are.

Perth to me seems overvalued atm, I would not buy property in Perth now or for the next few years. The world's most isolated city, in the emptiest state, in the emptiest country in the world. If you think land is scarce or valuable there you are dreaming. Sure it is a nice city, Sydney people are moving there cause Sydney is too expensive and the mining boom is creating jobs. But....

It is a small isolated city in the middle of nowhere, interest rates are rising, Sydney prices are dropping, and the mining boom is just that, a boom - it wont last.

Rent!! use the money you save to buy shares!

A $400,000 loan at 7% is $28,000 a year in interest - what can you rent for $28,000 a year in Perth?

Alan Bond or Laine Hancocks house I bet. :grinsking

Sydney is 3 years ahead of Perth in terms of property values, learn from the decline in Sydney. If you bought in Sydney 3 years ago you'd have lost 10% and be paying higher interest rates than expected - you'd be out of pocket big time.

I give Perth another 6 months of rises then a nice 5 years of decline.

Realist said:

Houses are like shares, great to buy when they are not overvalued, but wise to sell when they are.

Perth to me seems overvalued atm, I would not buy property in Perth now or for the next few years. The world's most isolated city, in the emptiest state, in the emptiest country in the world. If you think land is scarce or valuable there you are dreaming. Sure it is a nice city, Sydney people are moving there cause Sydney is too expensive and the mining boom is creating jobs. But....

It is a small isolated city in the middle of nowhere, interest rates are rising, Sydney prices are dropping, and the mining boom is just that, a boom - it wont last.

Rent!! use the money you save to buy shares!

A $400,000 loan at 7% is $28,000 a year in interest - what can you rent for $28,000 a year in Perth?

Alan Bond or Laine Hancocks house I bet. :grinsking

Sydney is 3 years ahead of Perth in terms of property values, learn from the decline in Sydney. If you bought in Sydney 3 years ago you'd have lost 10% and be paying higher interest rates than expected - you'd be out of pocket big time.

I give Perth another 6 months of rises then a nice 5 years of decline.

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AMEN!!

What amazes me is that a 23 year old has managed to save $40K.

At 23 I was worth about minus $100 and that would have been blown on cheap alcohol and even cheaper women on the upcoming weekend if I had it.

If you have it in the bank at 6% interest, just leave it, but pay close attention to the sharemarket, look for a real good stock, in a market leader with a competitive advantage, a great brand, it makes a good profit every year, pays good dividends, has room to grow, and will be around for years, study it and wait for the right time and right price to buy it, Buy it when it is down!! Then hold onto it for the next 42 years, and reinvest the dividends.

Then when you are 65 you can impress the chicks at your retirement home with this story of how you became so god damn rich!

What shares would I recommend that qualify for this? Hmm maybe Fosters, BHP, Westfield, Woolworths, CBA. They should still be around in 42 years time.

But remember buy them cheap! Wait and be patient.

Realist.

Striking resemblance to Prospector.

Must be sisters.
$40k would be handy for a make over.

Realist.

Striking resemblance to Prospector.

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:nono:

Not quite....

Can you guess who my picture is actually of?

It aint me of course and I'm not even a fan of the guy, infact I dislike the bastard!

Realist said:

:nono:

Not quite....

Can you guess who my picture is actually of?

It aint me of course and I'm not even a fan of the guy, infact I dislike the bastard!

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If you hate him so much, why have a picture of our good old Johnny Wilkinson when he single handidly beat the Aussies in the last rugby world cup final.:screwy:

Realist said:

If you bought in Sydney 3 years ago you'd have lost 10% and be paying higher interest rates than expected - you'd be out of pocket big time.

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Totally agree.
Red baron, Im 23 too. I live on the central coast NSW about 1 1/2 hours north of Sydney.
Anyway, about 2-3 years ago two of my mates bought houses both around the $330000-340000 mark. At the time I thought that this was a bad deciscion based on what the market had done and what I thought it may do afterwards. I thought they would lose money on their investment, and they have. They would both be very (and I mean VERY!) lucky to get $300000 now IMO. They would have been better off renting and saving the money assotiated with owning a house and investing it elsewhere until the property market went down, which it was starting to show signs of doing when they actually bought
I know the exact position your in (even the same age), you want to have your own place, but I would suggest to hold off as long as it suits your situation!
I have recently bought a house in an area (on the central coast) that I feel is really starting to move ahead with local jobs, infrastructure etc and is close to schools, shops, hospital, 10 min from freeway etc. It is in a quiet street with the lake less then 100m away (see it from front yard, if built up would have views) 581sqm so plenty of room to build etc. whats more I got it for $215000 (bank valued it at $245000) as the vendor needed to sell. All this just 20 min down the road from where my mates bought a couple of years ago.

Its all about timing.
Like I said I know how you feel but if you are making your decision based on an investment value as much as an 'I want my own place' value then you will have to compromise based on the current market over there IMO.
I waited a couple of years and it paid off. I got both values mentiond above in one but I had to sacrifice the 'i want my own place' value for a couple of years in order to get it.

As realist said, your probably going to see a couple of year downturn. So if I were you I would be putting that money in other investments.
Mabey you could keep half where you have it now and half in shares so that your not taking on as much risk. that way you would always have $20000, a decent deposit indeed and $20000 potentially working extra hard for you.

At the end of the day we could all probably go on forever saying what would be the best road to go down but ultimatly you have to make the decision based on what you want, what you expect to get from it and if you would (logicaly) get that in the current market.

my

Mint Man :grinsking

If it were me? learn all the different instruments on how you can turn that 40k into 400k over the next few yrs.

i.e if you have that strong of a view on a particular stock that it will continue to rise then instead of buying shares why not trade CFD's over them?

All im saying is if you want to take the path onto wealth then you will need to learn about leverage.

"Its advantages, weakness's etc..."

Dont let the gloom factor kick in, its all about learning. If your prepared to learn and apply your knowledge you can turn that 40k into a million in no time. Others have done it, so i cant see why you cant either. If people bag you just ask them one question:

"are you a multi millionaire? if yes fantastic lets talk, if not then thanks for coming".

P.S im only 22 mate (going on 23) so dont let age deter you in anyway, 40k in savings is fantastic. Learn how to invest wisely and you will never have to work again (if you dont choose to).

Adrian

Ageo said:

Dont let the gloom factor kick in, its all about learning. If your prepared to learn and apply your knowledge you can turn that 40k into a million in no time.

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Before you get carried away with all the advice about turning 40K into a million in no time business you need to learn how to protect your capital first and foremost.It is not easy making high returns with limited risk to your capital.

Learn about money/risk management before gambling 40K away to try and make a ridiculous amount of money straight away.

Hi Red Baron,

I'd say use your 40K as a deposit for your own house. You already mentioned you wanted to move out in 12-24 months so in that case I wouldn't recommend risking your deposit money in the sharemarket.

Why wait 12-24 months anyway? Just like the sharemarket, there are always opportunities available. If you're not ready to move out, buy your property, live in it for 6 months to get the FHOG, then rent it out until you want to move in permanently. Very hard to go wrong with purchasing your own home as your first step into your investing career. Not only will you be purchasing a solid asset that is near certain to appreciate in value over time, but you will also be educated into a disciplined savings routine as you meet your monthly amortization payments. Borrow conservatively so you can get ahead of your loan quickly, then when you have built some equity look at using that to start off your sharemarket foray.

May sound surprising given that this is a shares forum, but that's what I recommend

Good Luck,

Dennis