Awaiting a global downturn...??

[Tomboy77]

Hi all,

There has been plenty of news lately of a looming global downturn, with Trump and China's trade war, Australia's reliance on China as our major trading partner, and Australia's long overdue 'pendulum swing' into a what could be another 'recession we had to have'.

So, as a new investor with very little money currently 'in the market' this has got me thinking. Should I jump in now with my investments, or wait for the possible downturn to occur, and then try to buy in at a discount? (Buy low, sell high)

MY POSITION:
I have a bit less than 10,000AUD available to me that I will be investing, I am 41 years old, and want to see what I can do over the next 20 years. I have about 270,000 equity in my home, and no other debt besides a 150k mortgage. I have 2x kids (8 and 11), a cat, a dog and a wife. (classic, standard dad ) I am the sole breadwinner for the family. I work in retail FT, low income (47k p/a). My wife is a stay at home mum.

INVESTMENT APPROACH:
Given my position as above, (I know its pretty low powered...) I am looking at getting into ETF's as a starting point. I figure if I can plug away at investing in ETF's and slowly learn about the market more in depth I will be able to perhaps take bigger positions in individual stocks as time progresses.

Meanwhile I will have the ETF's bubbling away in the background as my main 'base' to my portfolio. I figure i will be able to invest between 5-10k per year on average, by living on about 40k p/a ....

So my main point of this post is, do you guys with more experience think it is better to just jump straight in now, or wait it out, and try to buy into ETF's when the market is lower? I am looking into 'Betashares' products, like their A200, etc.

Thanks for your time.

Any input much appreciated.

 

[galumay]

Welcome to the forum, always good to see new members popping up! For what its worth here is my personal view.

There has been plenty of news for the last 20 years of a looming downturn, you would have suffered massive opportunity cost if you had listened to the economic 'forecasters'. Invest now, invest in equities if your view is truly longterm, eg you are happy to stay invested regardless of drawdowns for 20 years +.

I have never listened to any macro economics, finance news, forecasts or predictions of market direction etc. They are all just distractions to the business of investing IMO.

 

[qldfrog]

Not that i im a fan of super but for a reasonably small amount, are you not better off putting an extra 10k a year in super, get the tax advantage and leave your super in a balanced portfolio with someone else stressing when to get in or out
Obviously a good super fund ideally not a union or bank one
Sunsuper or similar
Not an advice as i know nothing

 

[Klogg]

Welcome to the forum, always good to see new members popping up! For what its worth here is my personal view.

There has been plenty of news for the last 20 years of a looming downturn, you would have suffered massive opportunity cost if you had listened to the economic 'forecasters'. Invest now, invest in equities if your view is truly longterm, eg you are happy to stay invested regardless of drawdowns for 20 years +.

I have never listened to any macro economics, finance news, forecasts or predictions of market direction etc. They are all just distractions to the business of investing IMO.

This. Much more money is lost waiting for the downturn, then in the downturn itself

That doesn't mean it's worth buying everything. But macro timing is basically a dead end

 

[PZ99]

Hi all,

There has been plenty of news lately of a looming global downturn, with Trump and China's trade war, Australia's reliance on China as our major trading partner, and Australia's long overdue 'pendulum swing' into a what could be another 'recession we had to have'.

So, as a new investor with very little money currently 'in the market' this has got me thinking. Should I jump in now with my investments, or wait for the possible downturn to occur, and then try to buy in at a discount? (Buy low, sell high)

MY POSITION:
I have a bit less than 10,000AUD available to me that I will be investing, I am 41 years old, and want to see what I can do over the next 20 years. I have about 270,000 equity in my home, and no other debt besides a 150k mortgage. I have 2x kids (8 and 11), a cat, a dog and a wife. (classic, standard dad ) I am the sole breadwinner for the family. I work in retail FT, low income (47k p/a). My wife is a stay at home mum.

INVESTMENT APPROACH:
Given my position as above, (I know its pretty low powered...) I am looking at getting into ETF's as a starting point. I figure if I can plug away at investing in ETF's and slowly learn about the market more in depth I will be able to perhaps take bigger positions in individual stocks as time progresses.

Meanwhile I will have the ETF's bubbling away in the background as my main 'base' to my portfolio. I figure i will be able to invest between 5-10k per year on average, by living on about 40k p/a ....

So my main point of this post is, do you guys with more experience think it is better to just jump straight in now, or wait it out, and try to buy into ETF's when the market is lower? I am looking into 'Betashares' products, like their A200, etc.

Thanks for your time.

Any input much appreciated.

My view is to wait it out. There will be a better time. Retail in general feels the pinch when there's a downturn. You might need that $10k as backup. Then do the ETF's when the market is lower.

Having cash doesn't make money - but it's better than loosing money

 

[Tomboy77]

Not that i im a fan of super but for a reasonably small amount, are you not better off putting an extra 10k a year in super, get the tax advantage and leave your super in a balanced portfolio with someone else stressing when to get in or out
Obviously a good super fund ideally not a union or bank one
Sunsuper or similar
Not an advice as i know nothing

Hi qldfrog, thanks for the input. I have thought about super also. I am with REST, so a decent industry super fund, and have it as balanced at the moment.

So instead of investing regularly in ETF's, you're saying I could just set up a regular additional repayment into super before tax. That would reduce my taxable income each year right? Is that what you mean by a tax benefit? And that I am getting pre-tax dollars into the market before tax is applied.....I guess that does make a lot of sense, rather than using after tax income to buy ETF's.

I still have some questions about ETF's vs boosting Superannuation:

1. Are the investments made through super (in my case a REST balanced portfolio) as effective as an index tracking ETF though? Are the gains likely to be similar?

2. Wouldn't there be a difference in the dividends aspect of ETF's as opposed to just boosting super? Do dividends happen automatically through super also, and get reinvested in the background without me noticing? Or are there no dividends included in super?

I guess what mainly makes me more interested in ETF's is that it is slightly more active than boosting more into super, (which is absolutely 100% passive once it is set up). I want to try and learn about the market, and feel EFT's will give me more reason to be actively involved.

I also like the flexibility of being able to access the money before i turn 65 if i decide to.

Thanks again

 

[willoneau]

Hi Tomboy77, VSC are taken out of your pay and taxed at 15%, so if your income tax rate is say 30% you make 15% without doing anything but as you say unable to get to until at least 60, why not do both?
Better still increase mortgage payments while rates low and learn about trading/investing, if have a re-draw facility on mortgage can use a much larger amount once you know what you want.

 

[So_Cynical]

I will have the ETF's bubbling away in the background as my main 'base' to my portfolio. ....

Welcome to ASF Tom - 10K in an ETF will bubble away at an incredibly slow rate, watching a car rust would be more exciting, as for timing - yep it's all very
strange now, uncharted waters in many ways, i'm starting to come around to thinking that there many not be a cliff to fall off with interest rates so low globally,
maybe we/the world can just stumble along for the next half decade or so.

 

[willoneau]

Learn as much as you can about the risks involved before putting your hard earned capital in the markets. Also any dividends you get from ETF's is added to your taxable income.

 

[HelloU]

random thoughts after reading ......in addition to that already said earlier (not going over any of them) .....

your wife presents opportunities for both super and investments.
the mortgage should also be considered.
i rarely see a Balanced outperform a Growth except for quite short time periods (relatively speaking).
if putting pre-tax money into super (concessional), and salary sacrifice is not a thing your boss does, then u can do this via lump sums out of your pocket (at least 1 month prior to fiscal year ending), and then fill out a REST form to tell them to treat the money as pre-tax ( and you get a tax deduction for it at tax return time).
comsec started some cheap fee etf product recently via an app using regular payments or something ...... ??
etf's generally use a trust structure so your tax return gets very slightly more complicated (if u do it yourself)

 

[Tomboy77]

Hi Tomboy77, VSC are taken out of your pay and taxed at 15%, so if your income tax rate is say 30% you make 15% without doing anything but as you say unable to get to until at least 60, why not do both?
Better still increase mortgage payments while rates low and learn about trading/investing, if have a re-draw facility on mortgage can use a much larger amount once you know what you want.

Thanks willoneau, the tax rate of 15% instead of 30% truly is enticing!!! That is essentially 15% profit before the investments within my REST account even do anything on the market!!! I mean, super is totally boring, but might still be a good way to go in many respects.

I am currently putting extra $ into mortgage redraw while I try to learn, so already got that part of things covered . I guess I just need to try and keep learning as i have only just started in the last month really.

Thanks again for your response

 

[HelloU]

message sent

 

[willoneau]

Thanks willoneau, the tax rate of 15% instead of 30% truly is enticing!!! That is essentially 15% profit before the investments within my REST account even do anything on the market!!! I mean, super is totally boring, but might still be a good way to go in many respects.

I am currently putting extra $ into mortgage redraw while I try to learn, so already got that part of things covered . I guess I just need to try and keep learning as i have only just started in the last month really.

Thanks again for your response

That sounds like your on the right track, one quick questions if you don't mind. What is your goal or what are you trying to achieve?

 

[willoneau]

tom, do u understand franking (come tax time)?

I wish my daughter did , she did her own tax before telling me and didn't get any

 

[Tomboy77]

Thanks guys,

I have looked into salary sacrifice through my employer already and it is definitely something that they can arrange easily, so no worries there. Because I am a low income earner though, I would say that any dividends earned from ETF's etc. would not make a big difference to my income p/a because I am starting from such a low point to begin with.

Cheers

 

[willoneau]

Thanks guys,

I have looked into salary sacrifice through my employer already and it is definitely something that they can arrange easily, so no worries there. Because I am a low income earner though, I would say that any dividends earned from ETF's etc. would not make a big difference to my income p/a because I am starting from such a low point to begin with.

Cheers

If I'm right the funds like some stocks pay 30% tax on dividends, if your tax rate below 30% you get back the difference.
If above you pay the difference.

 

[Tomboy77]

Hi willoneau,

No i don't understand franking come tax time (or any other time for that matter ). That's one thing I am yet to wrap my head around.

My overall goal is really to feel more like i am somewhat in control of my destiny, and that I am not just working the daily grind for no reason other than to pay my bills. As a low income earner who has never made more than 70k p/a, I am just trying my best to make small gains where I can.

So my goal is to learn as much as I can about investing, and hopefully to build a small passive income stream over time so that I can pull back on how much I need to work after another 10-20years in the full time grind!

 

[HelloU]

I wish my daughter did , she did her own tax before telling me and didn't get any

aside: an amendment is just a button press inside mygov, but if she did her own it would probably have been pre-filled by the ATO if her return was done just recently - like august (but certainly worth investigating what that is up to to get $$ back)

 

[brickwalls]

Hi qldfrog, thanks for the input. I have thought about super also. I am with REST, so a decent industry super fund, and have it as balanced at the moment.

REST? Hmmm. Did you know as of earlier this year REST is no longer an award mandatory fund. You can now swap out to funds with better performance.

 

[willoneau]

She has 10k invested made about $50 but could have claimed about $50 too as she is so low doesn't pay tax.