Build wealth for long term

Emma’s $180k in­her­i­tance will help ...

Money Magazine Australia - - ASK PAUL -

QI’m a 30-year-old sin­gle mid­wife earn­ing $110,000 a year. I co-own an in­vest­ment prop­erty with my brother – it’s worth $500,000 with $490,000 ow­ing on it due to the drop in the Perth prop­erty mar­ket. The cost per fort­night is around $300 each as the rent doesn’t cover the mort­gage. This is fi­nan­cially com­fort­able for me.

Re­cently I in­her­ited $180,000 that is now sit­ting in my off­set ac­count (my brother and I have sep­a­rate off­set ac­counts). My plan is to leave the money there and, in one to two years, use it as a de­posit for an apart­ment to live in.

How­ever, I would like to use some ($5000$10,000) to in­vest in a share port­fo­lio, ideally one that I can add money into each pay. I don’t re­ally know much about shares and would like a di­ver­si­fied port­fo­lio to build long term – i.e., an ini­tial in­vest­ment of $10,000 and then a fur­ther $200 from each fort­nightly pay. Do you have any ad­vice on how to in­vest more wisely?

Good on you, Emma. Ob­vi­ously the down­turn in the Perth prop­erty mar­ket has not helped you but, as you say, this is not a fi­nan­cial stress for you. Mar­kets are cycli­cal and time plus pop­u­la­tion growth should pro­vide de­cent re­turns.

Yes, I like your idea of buy­ing your own apart­ment in a year or two and get­ting ex­pe­ri­ence as a share in­vestor by start­ing a small port­fo­lio. There are a few ways you could go here.

You could choose a few shares and buy them cheaply us­ing an on­line bro­ker. Each time you build up to, say, $1000 you could add to one or two of your hold­ings, or buy a dif­fer­ent com­pany. The ASX has a free on­line share course that would help you here.

Or you could choose a low-cost ETF that in­vests in shares in Aus­tralia or around the world and add to it. Or you could go with a man­aged fund with a reg­u­lar in­vest­ment fa­cil­ity, where funds are au­to­mat­i­cally in­vested via a di­rect de­posit.

I do like the idea of you build­ing a share port­fo­lio. How­ever you choose, it will not only build wealth over time but will also build your knowl­edge.

The big plus of be­ing 30 is that you have years in front of you to cre­ate wealth. By sav­ing and in­vest­ing, pay­ing off your prop­erty, buy­ing an apart­ment and build­ing your su­per as you are now, time and com­pound re­turns will do the rest.

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