Overcome the fear
A couple with a young child don’t want to make the wrong choices
NAME: Jennifer and Toby
STATUS: 32-year-old married couple with a two-year-old daughter, Emily. QUESTIONS: How do we accelerate our wealth? Should we continue to build our savings in our 100% mortgage offset account or should we invest in a portfolio of listed shares, ETFs and bonds? What is the outlook for our two Perth properties?
ANSWERS: Pay down your property debt and diversify your wealth into other investments. Don’t sell your Perth properties and consider buying a place in Hobart.
With so many investment experts giving different advice on what financial path to take, Jennifer and her husband are stumped about which way to go. “We work hard and hence feel we have a lot to lose if we make the wrong decision at this point in our lives,” she explains. She says the fear of making the wrong investment decision means they have “analysis paralysis”. They read lots about investing, crunch the numbers, weigh up the options but don’t do anything.
Jennifer and Toby moved to Perth 10 years ago to tap into mining boom. “We want to make hay while the sun shines,” she says. They found well-paid jobs and saved hard. So far they have survived the bust that rocked the Western Australian economy in 2015 but has since levelled out.
Several years ago they bought an investment property in a popular Perth suburb, paying off the interest-only loan. Last year they bought a three-bedroom townhouse to live in but expect they will upscale to a bigger home in five or so years. They are also thinking of moving back to Hobart one day to be closer to family.
What is the best strategy for their savings? At the moment they concentrate on maximising the balance of the 100% mortgage offset account to effectively “save” 3.95% on the loan on the principal place of residence. But would they be better off investing in shares, ETFs and bonds? As they have a long investment horizon, they can benefit from performance that historically outstrips property over time.