Start paying off debt or start buying shares?....or both?

Hi everyone,

Thanks to this forum and the advice of all forumites I have managed to build up a portfolio of a few properties in the last 5 years or so which has already been more than I ever thought I would achieve and I am truly grateful for this.

I have in no uncertain terms been told by my broker that it's time to settle down for a little while and let time do it's thing for a couple of reasons. Firstly to lower my LVR and secondly because he feels that finance would be impossible for me to obtain for further acquisitions at the moment.

I tend to agree with him so the question I have is this:

1) Is it better to directly start paying off my property debt to lower my LVR via my offset

or

2) Buy shares and keep contributing weekly to the share fund (as well as reinvest the dividend) and make no extra repayments to the property debt. The theory is that the share investing will get me more ahead as a % rather than just paying off debt?

If the share market was the way to go would people be able to share how they are doing it? How to buy? Where to buy? What low cost funds to buy? People to perhaps speak to?

Basically advice for a newbie on how to do it.
I know nothing about the ASX and share investing.

Thank you

GLAM

 

Hey GLAM,
What's the time frame and end goal? Do you want the shares to eventually pay debt, to supplement income, provide growth or other?
Many questions should be asked and then ideas could be forthcoming. Me telling you what I am doing is no help to you unless we have similar requirements.

 

No body can tell you what is best.

Leaving money in the offset account gives a guaranteed tax free return at the interest rate. The stock market gives and unknown return (positive or negative.

For low cost funds check out ETFs that track broad indexes. You buy these through a broker.

 

What are your goals? Are you looking to further increase your asset base?

If you want to educate yourself (long term shares investing), I can't think of a better way to start than attending this seminar:
VIC - Peter Thornhill in Melbourne 24th June 2017

It should go a long way in overcoming ones fears about investing in shares, which is what typically prevents alot of people from moving forward.

Also start spending some time in the Other Asset Classes forum, in particular the Peter Thornhill, Listed Investment Companies and ETFs threads.

 

Depends on your risk profile.
Things could go well or they could go bad, your call on how far you want to push it.
Also depends on your abilities to get out of trouble if you get into it.
Some people can step up a level and meet the challenge and other will just fall apart and die.

 

Thanks guys,

The goal would be to start paying off as much debt as possible for 3-5 years and the reassess, so as broad as it sounds it's hard to put it any other way when I don't know exactly what or how to do it.

Thanks for the advice Jack. I will start with your recommendations and see where it takes me.

Cheers

GLAM

 

Not wishing to be ageist but it depends on your age and life priorities. A more mature investor may have different priorities in comparison to a person in their 20s or 30s. I believe in a balanced approach. Aggressive with my Super, balanced with my share investments, and letting time do it's thing with my IPs through cosmetic renovations.

 

Have you paid off your home loan?

 

I am 39, wife and two kids

PPOR not paid off yet. This is the first debt I want to pay off which is the main reason for my question.

Y-Man, what you have said is pretty much the kind of thing I am looking for. So it is possible which is good to hear.

Is it something worth speaking to a broker about or do you do most of your own thing? I would love to sit down with somebody trustworthy and pay them for their time over lunch or in an official capacity. If anybody knows of anybody like this in Melbourne or Geelong they could recommend please let me know.

I'm a little apprehensive about approaching and speaking to brokers as I don't know enough to weed out the ones that are legitimately giving me the right advice for my situation versus the ones that are recommending shares based on their limited knowledge or dare I say it biggest kickbacks

Cheers

GLAM

 

If you haven't paid off your home then you would want to look into recycling of debt so you pay down the non-deductible debt and reborrow to invest which creates deductible debt.


If you want to get some advice on shares you need to speak to a licenced professionl - financial planners.

There are no kickbacks to financial planners anymore, other than for insurance.

 

Personally, I think paying off or fully offsetting PPOR debt is better than trying to do shares. Especially if you can access debt recycling strats.

 

I'm not qualified to give advice but I think more information is required to suggest anything further.
How are your ips structured? Joint names, all in your name or a few in each name?
Do you both work? Tax Bracket? Are your loans io or p&i? Time frame until io expires? Does your broker believe that you will be able to extend io terms? Do you have any smaller loans which could be totally paid off in 5 years?
How is your personal cashflow?

 

Hi @GLAM. This is debt recycling with shares.

Anyway... i'm in the same sort of situation you are, I could buy again but would have to buy with Liberty.
I have debt on my home too. The image here is how to debt recycle, convert non deductible debt to deductible debt using shares.



Do try to come to the Peter Thornhill event as mentioned by @Jack Chen. I'm organising it. I found Peter easy to listen to, I went to see him in February (based on talking to 2 other forumites) and as a result I thought everybody should really hear the message.

Therefore I organised events in Brisbane and Melbourne as a result.

Anyway, Peter's message starts with:
1. Spend less than you earn.
2. Borrow less than you can afford.
Get this right and you are off to a great start.
And goes on from there.

This event is cheaper than the same event held by Sydney uni. And perhaps get your wife to come too so she can learn (discounts if 2 or more tickets purchased). Yes, it costs money to attend and if there's enough takers i'll possibly make some money out of it. But that's not really my motivation for running it. Its really just to try to get Peter's message spread. Because he has had people who saw him 20 years ago and they still solidly follow his message. And they have gone through bad times and have come out strongly.

Anyway, for me, re: Melbourne, just not making a loss would be great!
The link for the event is also in my signature.

Btw. He doesn't normally present in Melbourne, he normally only presents via The Sydney Uni Centre for Continuing Education.

 

Darn! I am out of the country when the event is on.

Will there be another Melbourne event this year?

Thx for the advice

GLAM

 

I'd say NEVER invest in something you don't understand. (I think Warren Buffet said something along the same lines). That is not to say: "Don't invest in shares"......just don't do it until you have educated yourself.

 

Possibly come up to Sydney in that case then.