Newbie with cash to invest

[sly]

Hi all. Well in a nut shell i am a home owner and investor. I have a very small loan on my home but owe the full value on the investment property. Together i have a LVR of a reasonably safe 60%.And the repayments are very managable. About 15% of our household income. I only got into property investing a year ago. Not the best timing but i am holding for long term gains so im not worried.

Now shares. I actually have a line of credit attached to my home of $100,000 to only be used for investing. This was to be used for another property. Im thinking now of maybe investing $10,000 to $20,000 in shares.Preferably blue chip to start with. Im thinking bank shares. This will still leave me anough money in my LOC for a property later when things improve.I am not to worried about the risk and im willing to take a chance with the money. What are your thoughts on this stratagy. i know you cant give out specific advice.Can you see any problems. i assume the interest payments can be geared just like property. Any info would be much appreciated.

 

[surfingman]

Check out Macquaire Prime accounts for leveraging and yes you can gear the interest payment for tax purposes.

I recently opened a prime account but I am not buying anything at the moment its too volatile for my liking, you need to do some research on the banks which ones can survive without capital raising and still support growth. They are all taking a beating at the moment I personally think they will continue to slide for a while yet due to massive slowing of the economy and very low investor confidence.

I would paper trade and sit on the sidelines with your cash or invest a small portion to you get a feel for the markets.

 

[sutti]

Now shares. I actually have a line of credit attached to my home of $100,000 to only be used for investing. This was to be used for another property. Im thinking now of maybe investing $10,000 to $20,000 in shares.Preferably blue chip to start with. Im thinking bank shares. This will still leave me anough money in my LOC for a property later when things improve.I am not to worried about the risk and im willing to take a chance with the money. What are your thoughts on this stratagy. i know you cant give out specific advice.Can you see any problems. i assume the interest payments can be geared just like property. Any info would be much appreciated.

I agree with the surfer, I'm still on the sidelines at the moment. Wouldn't be touching the banks at either. They're trading at something like a 40% premium (as of the start of this week) to global peers and most likely will require capital raising,

NAB to strengthen further its capital position.
National Australia Bank (NAB) has launched an institutional placement of shares to raise approximately A$2.0 billion to strengthen its balance sheet and take advantage of organic growth opportunities. The placement has been fully underwritten.

Look at the $2b NAB had to raise, and they said they were still a strong bank. Sure boys, what ever you say. There is still quite a bit of downside possible in the sector. I'm not buying there at all yet. But heck, I'm not buying anything just yet!

Maybe sit on the sidelines until the fields start to clear a little?

 

[jersey10]

Hi all. Well in a nut shell i am a home owner and investor. I have a very small loan on my home but owe the full value on the investment property. Together i have a LVR of a reasonably safe 60%.And the repayments are very managable. About 15% of our household income. I only got into property investing a year ago. Not the best timing but i am holding for long term gains so im not worried.

Now shares. I actually have a line of credit attached to my home of $100,000 to only be used for investing. This was to be used for another property. Im thinking now of maybe investing $10,000 to $20,000 in shares.Preferably blue chip to start with. Im thinking bank shares. This will still leave me anough money in my LOC for a property later when things improve.I am not to worried about the risk and im willing to take a chance with the money. What are your thoughts on this stratagy. i know you cant give out specific advice.Can you see any problems. i assume the interest payments can be geared just like property. Any info would be much appreciated.

Learn how to short.

Learn about swing trading.

From what i can gather buy and hold is going to be very hard work for a few years.

 

[mazzatelli1000]

Learn how to short.

Learn about swing trading.

From what i can gather buy and hold is going to be very hard work for a few years.

Is this the gospel according to you?
Nick Radge is an excellent trader and his style works for him - but it does not mean it will work for everyone else (looks like you are benefiting from it)

Sly, should educate himself about the markets, before any buy and hold or swing trading strategy.

 

[skyQuake]

Agree with above. The banks look cheap but as others have said, some are trading on a 40% prem to their peers in the rest of the world.

This is mainly because our big 4 are part of the last 17 AA rated banks in the world. NAB's recent capital rating might put it on downgrade watch; If any of the bank's credit ratings get slashed, its gonna hurt them a lot.

 

[sutti]

Yep, we all have our own styles. The one I mentioned works best for me. The one jersey mentioned probably suites him just fine. The foundation is really education and knowledge, you must get a bit of that first, as you said, before you invest any money in the markets.

 

[Sir Osisofliver]

Hi all. Well in a nut shell i am a home owner and investor. I have a very small loan on my home but owe the full value on the investment property. Together i have a LVR of a reasonably safe 60%.And the repayments are very managable. About 15% of our household income. I only got into property investing a year ago. Not the best timing but i am holding for long term gains so im not worried.

Now shares. I actually have a line of credit attached to my home of $100,000 to only be used for investing. This was to be used for another property. Im thinking now of maybe investing $10,000 to $20,000 in shares.Preferably blue chip to start with. Im thinking bank shares. This will still leave me anough money in my LOC for a property later when things improve.I am not to worried about the risk and im willing to take a chance with the money. What are your thoughts on this stratagy. i know you cant give out specific advice.Can you see any problems. i assume the interest payments can be geared just like property. Any info would be much appreciated.

No advice - blah blah blah insert disclaimer here

OK So you have an approved LOC correct?
And some property investments (assume neg gearing)
With 60% LVR?

You look a little heavily geared to me but hey, invest as appropriate to your risk tolerance. I'd make sure though that you have a nice little reserve of unused funds that you don't touch for investment as unused funds in your LOC to meet any unforseen circumstances.

I'd also suggest you speak to a good accountant or solicitor and investigate the options available to you with a discretionary trust structure for your investments. You as a natural person can lend your funds to the discretionary trust, and the trust then pays you for the loan. (It can give you some great advantages if structured properly. You do need to ensure however that you still have a positive cash flow in the trust or you are in danger of losing your franking credits...so do some careful projections. You might also wish to think about a dual trust structure with a corporate trustee and possibly a corporate beneficiary as well (if you can get more scratch together and the income streams require it.) Think carefully about who the beneficiaries of the trust will be and don't forget your kids (if you have any) as they are entitled to a small tax free amount every year. It's best to get these entities set up now rather than in ten years time when your share investment has oodles of capital gain built in.

Sir O

 

[sutti]

Agree with above. The banks look cheap but as others have said, some are trading on a 40% prem to their peers in the rest of the world.

This is mainly because our big 4 are part of the last 17 AA rated banks in the world. NAB's recent capital rating might put it on downgrade watch; If any of the bank's credit ratings get slashed, its gonna hurt them a lot.

Aussie banks are pretty good compared to peers. I understand and realise that our banks are in a very good shape, but in the current environment there is better value to be found else where. But you could also ask why they deserve the premium? Just because they haven't wrote down more doesn't mean they won't in the future. If they do it will do announce major write downs there would be a huge fall, this is when I would be looking to buy, banks might be cheap them. I don't really care if I miss out on a good 'bargain' in the sector though. Banking is a ****ty industry as the past 12 months have shown.

I wouldn't say they "look cheap" at all compared to other opportunities present. Just because banks did very well in the previous bull market (traded at high P/E's etc, when they traditionally trade at quite low P/E's) doesn't mean they will do well in the next.

 

[sly]

Thanks for the response guys. Yes i do have a bit of a buffer. $20,000 cash for general day to day costs and a $100,000 LOC for investing or Investment shortfalls in the event of a job loss etc. At the moment my IP shortfall is $440 per month and my Own home repayments are $700 per month. This with a 60% LVR i considered to be somewhat safe even in todays climate.I will take on board and continue to educate myself. I may still have a bit of a dabble in low numbers just untill i lose the training wheels.

Also one more quick question.When shares pay dividends.I here people say they invest it back into the purchase of shares. Is this a choice you make when you buy the shares or when the dividends are paid.

 

[skc]

Also one more quick question.When shares pay dividends.I here people say they invest it back into the purchase of shares. Is this a choice you make when you buy the shares or when the dividends are paid.

They typically send you a form when you buy your shares so you can choose whether to participate in dividend reinvestment plans (DRP) or not. Often you can choose partial participation. Once you made the choice you will be able to change it online also.

 

[Shrewd Crude]

banks banks banks

forget about banks...
if you must get them, then buy on the way up...
never by anything in a downtrend...

.^sc

 

[joeyr46]

Re: banks banks banks

forget about banks...
if you must get them, then buy on the way up...
never by anything in a downtrend...

.^sc

Best advice I,ve seen yet