It’s now time to diver­sify

Si­mon al­ready has three prop­er­ties, so ...

Money Magazine Australia - - ASK PAUL -

QIam hop­ing you can guide my wife and I in the (for­tu­nate) sit­u­a­tion we are in. We are both 45 with two chil­dren, aged 8 and 11. I earn $120,000 a year and my wife earns $88,000. We have been lucky enough to pay off our home over 15 years and it is now worth

$1.4 mil­lion.

We have two in­vest­ment units: one worth $500,000, on which we owe $160,000, and the other worth $350,000, on which we owe $275,000. We have $20,000 in an off­set ac­count on one of those loans. We also have a $30,000 loan against a $180,000 share portfolio.

We have been putting money into ASG for the chil­dren’s ed­u­ca­tion since they were born. This will largely cover their school fees but we re­alise there will be other costs as­so­ci­ated with their ed­u­ca­tion. I have $280,000 in su­per­an­nu­a­tion and my wife has $130,000, both in in­dus­try funds.

We re­alise we are in a good sit­u­a­tion but would re­ally like to make sure we don’t tread wa­ter. Ideally it would be great to cre­ate enough wealth so we can work for en­joy­ment rather than feel­ing as if we have to do it.

We had been think­ing about investing in an­other res­i­den­tial prop­erty but have also had the idea put to us of cre­at­ing a self-man­aged su­per fund to per­haps in­vest in a mix of com­mer­cial prop­erty and shares. Is there a strat­egy you would rec­om­mend?

I do like the “quiet achiever” ap­proach, Si­mon, but I don’t think luck has much to do with your sit­u­a­tion. You have saved hard over the past decade and a half and de­serve the suc­cess you have achieved to date.

With a home and two other prop­er­ties, I do think the time has come for some di­ver­si­fi­ca­tion. Yes, you could keep buy­ing prop­er­ties and this may work out well, but I just don’t like see­ing peo­ple with all their eggs in one basket.

So I quite like the self-man­aged su­per fund with ex­po­sure to com­mer­cial prop­erty and shares. But I do want you to check the costs of es­tab­lish­ing and run­ning an SMSF. I have one, and it is not cheap to run, but it does give me the abil­ity to make my own in­vest­ment de­ci­sions.

The abil­ity to gear into a small com­mer­cial prop­erty with a long-term view and then add some de­cent qual­ity shares ap­peals to me, as it re­ally does im­prove the di­ver­si­fi­ca­tion in your portfolio.

Con­grat­u­la­tions to you both. You are in a great po­si­tion and cap­i­tal­is­ing on this by con­tin­u­ing to save and in­vest, while spread­ing your risk, has got to be a good plan.

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