Some Sound Advice!

Hi All,

I have been around this forum for a few years on and off, I forgot my old account details so had to create a new one. I have worked on TA for trading for awhile but would still consider myself a complete beginner as I haven't put anything into practice. Spent a considerable amount of money in the past on a subscription service only to watch all my money disappear on dead trades.

Anyway I'm very keen to get back into it and take 100% control of my trading, however I need to do the sensible thing first and pay off my $16000 CC. I have about $30,000 in cash as well, so my questions are;

Opinions on;
1. Is it better to use my cash and pay of the card completely and be done with it, or;

2. Continue to pay down the card making extra repayments but invest my cash?

3. If I invested the cash should I invest it all in a managed fund or a portion of it?

The money sitting in an online saver just seems a waste if its going to sit there for another 12 months, I suppose I want to make sure I'm making the most of the money. I don't know maybe just sitting it in a saver is the best thing?

My goal in the long run is to reduce my debt and start building some wealth before retirement, if I retire at 65 I have 25yrs to make some good decisions.

Thanks in Advance
Linc

In my humble opinion the only good debt is low interest debt on property that is either a ppor or a decent yielding rental....so get rid of the ccard debt as a no.1 priority.

CanOz is spot-on IMO: Get rid of the cc debt and take it easy with the rest.
Have you calculated how much interest you're paying on the cc debt? Compound interest even, as it most likely takes you over a year. Do yourself a favour and brush up on the basic Maths of interest and compound interest. I won't be surprised if you end up with 20% or more.

So, your trading with the $16,000 would have to guarantee a higher return than 20%
Sure, some extremely savvy traders will achieve that; there may be even a LIC or two promising those numbers. But it'll be more realistic to assume you'll earn 10%, if you're very good, or lose it slowly if not so.

It's your call.

+1 Canoz.

I'll answer in the same way I've replied to these types of posts before.

"If I were talking to a friend in your position asking me for an opinion...this is what I'd say..."

a) Definitely pay off CC. Don't try and do anything fancy. Take $16k, pay it off today, close the account and get a debit card. Are there any other little debts? Clear them too. Congrats, you're debt free (not counting mortgage, if any)

b) Keep the remaining money in your online saver and consider that an emergency fund.

c) Build that up more if it's not enough to cover at least a few months expenses. You are obviously able to save, as you've already built up $30k.

You can do (a) and (b) before COB today (or tomorrow, if you need to transfer your online saver money overnight). (c) Wouldn't take you long at all, I wouldn't think.

You're 40yo. After completing the above, then come back to the investing questions, from a really good vantage point. I know it will seem like you're delaying doing something good that you really want to do, but just do it anyway. Later on, if you regret doing it...come back and let us know. You're only putting it off a few months anyway! And if you do regret it, you can always go back straight back into debt again (you won't!). Give it a go!

On the investing...keep it basic, keep it simple. I've seen these sorts of questions answered here with much more complexity than what the poster needs to attain there goals. You'll need a plan and a discipline far more than you'll need a fancy trading system (not that you mentioned that, but I'm just getting that bit in there).

Anyway, that's my opinion (not advice) of course. Though I doubt you'd find a good financial advisor who'd disagree (and then they'd be wrong, anyway).

When you're cashed up a little again for investing...go get some decent, independent financial advice (to make sure your insurance and other needs are also being looked at). Read some of the basic books (any of those basic Paul Clitheroe, Noel Whittaker, or I imagine barefoot investor is similar - though I don't know). And get some direct financial advice for yourself (as mentioned). A book called, "Mind over money" (out of print I'd imagine) said something that stuck with me: "you only need to be average to do very, very well". Something like that. Anyway, it's true. The point being, many people don't even do 'average'.

Side note to end...these days you can start investing in funds like Vanguard for $5k and $1k ongoing...or you can start straight away by salary sacrificing into super. Talk to your financial advisor about the best ideas for you. Just wanted to point out that you don't have to wait until you have heaps of money to invest (when you're ready to start investing).

Final note: you've got (you said) 25 years before retirement. You have a goal - to build wealth for retirement, and you want to do it wisely ('make good decisions'). That's awesome!

Yeah thanks for the replies, just to be clear I'm not currently tradio and nor do I intend to. I was more just curious as to the best options with my available cash. Pay downthe cc or ppit it in a fund or a combination.

Cheers

Sounds like some decent advice, I'm a newbie and should probably start with getting some general advice as well, if anybody cares to give it.

1) I am at the tipping point where I think financial planners are a complete scam. I have just paid over a thousand bucks for advice and essentially got the following advice. Although a and b might've some validity, the audacity to collect $1000 to recommend me to himself is quite frankly disgusting.

a) I should change my super provider (I am not a tax resident of Australia so my future mandatory contributions may be null. and even with his beautiful graph it only shows a 50k difference over 30 years. ( I'm almost certain he recommended it because of kickbacks, the fee for this super alone would offset any gain)

b) I should cancel my life insurance w policy with said super as it will not pay out if I am a tax resident overseas.

c) I should seek out a expat financial accountant ( He recommended himself through another company)

d) I should seek out personal Insurance ( He recommended himself through another company)

e) He gave me very overall pros and cons of buying shares vs buying a second investment property. Without leaning in any particular direction of which in a followup email said he could give me more recommendations if i sign up for his ongoing financial services.


2. I am therefore going it alone (except for tax accountancy) and this forum. Alarm bells are ringing and there is a good chance I will become the poster boy for what not to do.

3. I am 33. Have an investment property (purchased and lived in then moved country) worth about 400,000. With a loan of about 220,000 at about 5% with about 110,000 cash sitting in an offset. My total experience in shares is watching all of the videos on the ASX website and mucked around with a practice account. I can afford to spend about 9-10 days a month solidly spending time on this. The only shares I actually own is by the super that is managed by a fund. At this stage I would like to invest approx 9% of my yearly wage each year to offset the fact that I no longer making any super contributions and would like to supply myself with ample Captain Morgan and a seaside shanty to retire in, oh and I guess pay for my newborn's future education, blah blah blah..

taslinc said:

Hi All,

I have been around this forum for a few years on and off, I forgot my old account details so had to create a new one. I have worked on TA for trading for awhile but would still consider myself a complete beginner as I haven't put anything into practice. Spent a considerable amount of money in the past on a subscription service only to watch all my money disappear on dead trades.

Anyway I'm very keen to get back into it and take 100% control of my trading, however I need to do the sensible thing first and pay off my $16000 CC. I have about $30,000 in cash as well, so my questions are;

Opinions on;
1. Is it better to use my cash and pay of the card completely and be done with it, or;

2. Continue to pay down the card making extra repayments but invest my cash?

3. If I invested the cash should I invest it all in a managed fund or a portion of it?

The money sitting in an online saver just seems a waste if its going to sit there for another 12 months, I suppose I want to make sure I'm making the most of the money. I don't know maybe just sitting it in a saver is the best thing?

My goal in the long run is to reduce my debt and start building some wealth before retirement, if I retire at 65 I have 25yrs to make some good decisions.

Thanks in Advance
Linc

Click to expand...

G'day Linc,

Great replies for the membership as always. Allow me to reinforce...

Yes, yes, yes, pay off CC straight away as already mentioned. Any interest saved is surely making the most of your money. If you need a CC, pay if off every month without delay!!!

In general, my rule of thumb for making the most of my money is a balance of diversification and by that I mean and not in any order:

Property
Cash
Equities
Art/Collectibles
Super

I don't mean that there is an equal amount in each asset class but you get the idea.

Of course within these there is also diversification. With equities...

Managed funds; there are Closed Funds like LIC's or Open funds where you chip in to kick start then add on a monthly basis.

Direct share investing: Blue chips, 2nd Tier or Speculative. Income or Growth etc...

Obviously with cash, interest rates aren't all that crash hot but having some dry powder to swoop in on opportunities as these arise is, IMHO, a must so keep some cash for that rainy day.

You've said you have lost money on dead trades via a subscription service. Were you being reasonable or going all out with the trades and do you know about position sizing?

Getting finances in order is no mean feat as it's a whole mine field out there but if you can nut your goals out on paper, be realistic, don't be fooled into thinking you can be or beat anyone else, or that you can make a squillion overnight, you'll be putting yourself in good stead in making the most of your $$$ and setting yourself up for a nice retirement.

Happy investing!

Kingbob3 said:

Sounds like some decent advice, I'm a newbie and should probably start with getting some general advice as well, if anybody cares to give it.

1) I am at the tipping point where I think financial planners are a complete scam. I have just paid over a thousand bucks for advice and essentially got the following advice. Although a and b might've some validity, the audacity to collect $1000 to recommend me to himself is quite frankly disgusting.

a) I should change my super provider (I am not a tax resident of Australia so my future mandatory contributions may be null. and even with his beautiful graph it only shows a 50k difference over 30 years. ( I'm almost certain he recommended it because of kickbacks, the fee for this super alone would offset any gain)

b) I should cancel my life insurance w policy with said super as it will not pay out if I am a tax resident overseas.

c) I should seek out a expat financial accountant ( He recommended himself through another company)

d) I should seek out personal Insurance ( He recommended himself through another company)

e) He gave me very overall pros and cons of buying shares vs buying a second investment property. Without leaning in any particular direction of which in a followup email said he could give me more recommendations if i sign up for his ongoing financial services.


2. I am therefore going it alone (except for tax accountancy) and this forum. Alarm bells are ringing and there is a good chance I will become the poster boy for what not to do.

3. I am 33. Have an investment property (purchased and lived in then moved country) worth about 400,000. With a loan of about 220,000 at about 5% with about 110,000 cash sitting in an offset. My total experience in shares is watching all of the videos on the ASX website and mucked around with a practice account. I can afford to spend about 9-10 days a month solidly spending time on this. The only shares I actually own is by the super that is managed by a fund. At this stage I would like to invest approx 9% of my yearly wage each year to offset the fact that I no longer making any super contributions and would like to supply myself with ample Captain Morgan and a seaside shanty to retire in, oh and I guess pay for my newborn's future education, blah blah blah..

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Hi Bob,

My above post still holds.

Read your post on Elite traders. With regards to pointers, there is a ton of knowledge within this forum. Take your time and most definitely use the Search function. Lots of info re. books to read, trading etc to be found.

All the best with it.

Thank you all so much , I feel kinda stupid but sometimes you just need the obvious yelled in your face.

I' paying the ccard out tomorrow I felt crap for spending my savings but I since realise it's for the better. The money I would have been paying on dead interest will now go straight back into my savings.

I'll revisit direct investing in 12 months.

Thanks again champs!

CanOz said:

In my humble opinion the only good debt is low interest debt on property that is either a ppor or a decent yielding rental....so get rid of the ccard debt as a no.1 priority.

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What about low interest debt on stocks that pay more in divis than the interest cost? Franking credits on top and claim the interest expense on tax.

taslinc said:

Thank you all so much , I feel kinda stupid but sometimes you just need the obvious yelled in your face.

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...Oh, absolutely - you are not alone! I've mentioned a mis-spent youth before...part of that was not listening to good advice!

taslinc said:

I' paying the ccard out tomorrow I felt crap for spending my savings but I since realise it's for the better. The money I would have been paying on dead interest will now go straight back into my savings.

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...Yay! I am so glad to hear that. You will feel great. You should even go out to dinner with champagne/good wine and celebrate - with your cash money. Why not? It's worth a celebration. Remember it as the time you decided to never play with that kind of debt, again.

You've made an impressive decision...you are no longer part of the status quo

Craton said:

Hi Bob,

My above post still holds.

Read your post on Elite traders. With regards to pointers, there is a ton of knowledge within this forum. Take your time and most definitely use the Search function. Lots of info re. books to read, trading etc to be found.

All the best with it.

Click to expand...

Thanks, Oh Elite traders! That was almost a year ago. Really still only getting my feet wet, I'm cautious by nature and what amazes me is the amount of people in this industry that promise you they can make you a millions effortlessly. The amount of people that just hand over cash in blind faith must be staggering. However like in most industries there are usually great, intelligent people with the yearning to pass on their knowledge to those eager to learn, Its just a matter of pairing the right master to student!!

taslinc said:

Thank you all so much , I feel kinda stupid but sometimes you just need the obvious yelled in your face.

I' paying the ccard out tomorrow I felt crap for spending my savings but I since realise it's for the better. The money I would have been paying on dead interest will now go straight back into my savings.

I'll revisit direct investing in 12 months.

Thanks again champs!

Click to expand...

Fantastic, good to hear re. CC.
A little debt clock you might like to look at, note the CC debt. Its currently falling: http://www.australiandebtclock.com.au/

Also agree, go treat yourself (and that special someone).

Kingbob3 said:

Thanks, Oh Elite traders! That was almost a year ago. Really still only getting my feet wet, I'm cautious by nature and what amazes me is the amount of people in this industry that promise you they can make you a millions effortlessly. The amount of people that just hand over cash in blind faith must be staggering. However like in most industries there are usually great, intelligent people with the yearning to pass on their knowledge to those eager to learn, Its just a matter of pairing the right master to student!!

Click to expand...

No probs mate and nothing wrong with being cautious especially in the current climate.

Yeah, the scam artist trade is alive and well right across the board. The more educated, the more we spread the word then we sheeple will be well armed to see through a scam, spin doctoring and the "too-good-to-be-true" story. All the emotions like greed and the ego all play against us when we seek that quick road to wealth.

There are quite a few members here that have been very generous with their advice and I thank them all sincerely.

Oh and don't forget that the student will eventually become the master in their own right one day.