Parking funds in ETFs or LICs until the property market recovers

Have a go at the share market timing simulator, every attemp I had or made my mates have ended up worse then if we didn’t click the mouse once bar two times.
Rather then constantly buying and selling, paying tax on profits, double the brokerage etc, why not hold, receive dividends, re invest and let compounding do its thing.
Im a lazy dividend investor though so take what I say with a grain of salt

 

Investing in the stock market, like property, should be long term to ride out peaks and troughs. Five plus years.

To invest short term, as you propose, is akin to gambling. You may win, you may lose. Can you afford to lose a big proportion of your savings?

Better to stick to term deposits and pay the tax. Paying tax means you are making money. Better, if you have any loans, put it into an offset account.
Marg

 

and tax free too in case of PPOR, Its a decent risk free return on your capital.

Contributing maximum in super is another no brainer for me, that is a straight saving of (Marginal rate - 15%) on your sacrificed component.

 

Actually it wouldn't be tax free because the interest on the investment loan would decrease which would lead to a higher profit and then higher tax.

If it was the main residence loan being offset then yes interest free

 

yep should have made it clear.

 

I'm only planning to sell at a profit. If I couldn't then I'd be investing until I could and yes that could mean investing for longer than planned.

 

I believe investing is the best approach and it is a long term one. It is something I plan on starting but these funds are needed to buy my next property. But yes if my plan doesn't work then I will be investing for longer and will enjoy decent dividends

 

Does anyone have any charts that show correlation of the big four vs resi property? Ie if they are highly correlated and you wait for bank stocks to increase in value but at the same time an asset you are going to leverage into increases 2-3% youd need 10-15% return on your stocks to break even. But by then your property you want has increased further etc etc.

 

Careful with leverage, it’s a beast that bites.
In a rising market it’s your friend in a falling your worst enemy.
Many who spent their lives saving a deposit on a $1m property purchased last year in parts of melb would now of lost their lives work if they were forced/had to sell.

Also in terms of returns from property vs stocks, I’ve worked it out roughly, I can get the same income from a circa 200k invested in the big four as I did investing 650k on a property 5 years ago. Yes capital growth, property has outperformed but moving forward will that be repeated? My crystal ball says I don’t know lol

 

I certainly agree with you in regard to the use of debt @Silverson. Many have been badly burnt. With shares the effect is seen almost straight away whereas with property, I think it is more of a case of a slow burn.

A number chose to leverage with property as there is a view it's easier to do that than with shares. It is possible to leverage shares up to 75%. Simply have a look at LVRs in the list of approved securities for a margin loan. Real pain ahead if it goes pear shaped though.

I was stressed out when I did have a margin loan despite the gearing not being large but I totally avoid debt now.

 

Even with the appearance of inconsistency ,200k invested in a 4 way split on the semi big 4 banks compared too a 650k property does make standalone blue chips attractive and have the power to multiply x--10--..Just depends on if you worry about numbers as a lot within investment sites seem to do..

 

Not advocating one or the other but query for the thread is someone trying to make a capital gain in bank shares so they can then sell and purchase a PPOR. If there is a high correlation it seems like it would be a net loser even if timed well in the sell side.

The leverage im referring to is for a property purchase as PPOR compared to non leverage for shares which is what the poster was asking about. If you take on a mortgage at a level you are comfortable with and plan on living in it long time i see minimal risk.

 

Debt recycling sounds really interesting but I think the market is not a rising one. I need to read more about as I still don't completely understand how it works...... I do however love the idea of investing rather than speculating. I'm starting to wondering if I should continue down this path and invest instead of buying a home. I could then reinvested dividend income and take advantage of compounding. I wonder if I would be better off long term? Has anyone done this?

 

You can use debt with shares just don’t sign up to margin loan
Draw money out of your properties and pay the 4% and never face margin called, I been doing it for years with great success

 

PandS are you talking about money already paid into a loan? If I'm starting again I won't be ahead in repayments at least not for a few years.

 

Yeah equity out of your properties
But starting out no leverage just invest your saving

I start out in shares land didn’t know much many years ago in my 20s, I bought Telstra and bankwest shares no leverage just my saving by stroke of lucky I cashed out Telstra at $8.50 and bankwest some where around $3.50
Telstra I paid $3.50 for it and bankwest 2.20
Ball park figure not exact.

That enough for me to pay 20% for my home then the rest is history, once I have properties I keep drawing money out and invest in the stock markets and over the years it paid off my properties then heap of dividend - and I used the same formular till today.

Simple and effective and don’t get too greedy.

Over the years I keep learning more and more and try to refined my filters and techniques
I still has not stop learning, I find new thing to read, whatever people write on the market bad or good I read them all, I ain’t scare of bear nor I cheer the bull

My aim is to be an informed investor and prosper in all cycles.

If you Have something specific you can PM me I been in this thing since 20s, though I know little in my early years it more luck than skills but these days it more skills than luck through lot of reading and experience.

 

Thanks PandS, I've always invested in property but in a small way. The homes I brought have been to live in but I've been lucky to make decent money from those sales. I've a always been interested in the stock market but no real experience till recently...

 

Is the interest on a personal home loan tax deductible if used to generate an income investing to create income from dividends? Someone told me this is an old scheme and not to do it unless i want a big ATO fine.

 

If you borrow to invest in income producing assets the interest is deductible under s8-1 ITAA97.

 

Thanks TerryW but would that mean a separate loan for investing as opposed to using a property loan? Especially if the property loan is not for an investment property?