Guaranteed return

Discussion in 'Share Investing Strategies, Theories & Education' started by Bran, 27th Jun, 2016.

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In current times, would you invest in a 7.5% return over other asset classes (guaranteed)

  1. Yes

    27 vote(s)
    71.1%

  2. No

    11 vote(s)
    28.9%
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  1. Nodrog

    Nodrog Well-Known Member

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    As per @Bran's initial post:
     
    Nodrog, 28th Jun, 2016
    #21
  2. Tekoz

    Tekoz Well-Known Member

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    What are the investment instrument examples that gives you larger than 15% ?
     
    Tekoz, 28th Jun, 2016
    #22
  3. HUGH72

    HUGH72 Well-Known Member

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    Nothing which isn't leveraged unless we go in a time machine back to the 70s or 80s.
     
    HUGH72, 28th Jun, 2016
    #23
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  4. Phil82

    Phil82 Well-Known Member

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    I've been struggling to decide lately if I kust pump all of our extra funds into our mortgage or do I invest. For now we have decided to go with paying the mortgage down. it's always in the back of my mind that I work in an industry thats had a massive decline(I'm a coalminer in the Illawarra ). Although if gfc #2 comes along we will use our redraw to buy shares. Until then I think we will continue to knuckle down with the mortgage. I am worried I will get left behind if I don't invest now though as I am 34 already.
     
    Phil82, 28th Jun, 2016
    #24
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  5. barnes

    barnes Well-Known Member

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    Property investment overseas before 2003. Now - nothing. :(
     
    barnes, 28th Jun, 2016
    #25
  6. Heinz57

    Heinz57 Well-Known Member

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    34 - just a baby. Keep knuckling
     
    Heinz57, 28th Jun, 2016
    #26
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  7. Tekoz

    Tekoz Well-Known Member

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    @barnes & @ @HUGH72 yes, that does make sense.

    I've never seen anything like that before that is guaranteed in Australia.

    Thanks for the confirmation.
     
    Tekoz, 28th Jun, 2016
    #27
  8. Tekoz

    Tekoz Well-Known Member

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    Hence he ask about the possibility for securing the early retirement here mate.

    Perhaps Nathan Birch way can be used here to accumulate Investment property portfolio.
     
    Tekoz, 28th Jun, 2016
    #28
  9. Marg4000

    Marg4000 Well-Known Member

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    I'll vote yes, on the condition that you are putting the money into an offset account against your PPOR.
    Marg
     
    Marg4000, 28th Jun, 2016
    #29
  10. MTR

    MTR Well-Known Member

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    USA property:)
     
    MTR, 29th Jun, 2016
    #30
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  11. Sackie

    Sackie Well-Known Member

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    Yeah the no leverage condition is depressing me. Can't do it. The thought of not leveraging my money at all is like taking a sledge hammer to my head.
     
    Sackie, 29th Jun, 2016
    #31
  12. Sackie

    Sackie Well-Known Member

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    When will you start teaching your usa strategy..i'm all ears:)
     
    Sackie, 29th Jun, 2016
    #32
  13. Steven Ryan

    Steven Ryan Well-Known Member

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    Unless the returns are fully franked, might be better to put the money you were going to invest directly into your offset account.

    7.5% after tax becomes 4% at top marginal rate.
     
    Steven Ryan, 29th Jun, 2016
    #33
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  14. Bran

    Bran Well-Known Member

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    I'm 47% personal tax rate, and I'm not sure if my maths is correct - I might need 8.5% (but this isn't fully franked).

    Can anyone help me with the maths?

    My PPOR rate is 3.99%
    Personal tax rate is 47%
    What yield do I need to be in front?

    Edit - thanks Steven, that was my maths. I figure i need to beat that, and have a 'risk margin'
     
    Bran, 29th Jun, 2016
    #34
  15. The Falcon

    The Falcon Well-Known Member

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    Why you would even run this exercise without the debt being deductible (easily fixed!) is beyond me.
     
    The Falcon, 29th Jun, 2016
    #35
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  16. Marg4000

    Marg4000 Well-Known Member

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    8% approx to break even.

    Add on what margin you want for risk.
    Marg
     
    Marg4000, 29th Jun, 2016
    #36
  17. inspiredbyprop

    inspiredbyprop Well-Known Member

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    OK using the same example I posted earlier, let's assume NAB is paying 8% fully franked dividend.

    Fully franked dividend means that NAB had paid 30% tax before paying out the dividend.
    For your scenario, you will need to pay an additional 17% (47-30) on top of the dividend at end of financial year. 17% * 8% = 1.36%.

    Hence the net return for you will be 6.64% (8-1.36) which is higher than your 3.99% home loan.
    or for every $1 in your investment, it's helping you to pay off the mortgage by 2.65% faster than if you put the money into offset account.

    Hope it helps. But pls correct me if any mistakes.
     
    inspiredbyprop, 29th Jun, 2016
    #37
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  18. Bran

    Bran Well-Known Member

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    Glad I hold some NAB then - btw, it's still cheap IMO ;)
    Thanks!
     
    Bran, 29th Jun, 2016
    #38
  19. Bran

    Bran Well-Known Member

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    The offset money is used to pay down deductible debt, with parallel borrowings then to invest. But still, 100k (say) in debt to buy shares, when there is 100k non-deductible debt still owing is the question.
    Unless i'm missing something?
     
    Bran, 29th Jun, 2016
    #39
  20. The Falcon

    The Falcon Well-Known Member

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    Ah yes, but you are overlooking why debt recycling works in the long term. Capital growth. Its not a simple yield story and takes years and years to work. Or not.
     
    The Falcon, 29th Jun, 2016
    #40
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