At age 30, risk is a friend

Q

I’m 30 and in March I finished my PhD with a personal loan of $26,000 at 14.69% interest. I earn about $80,000 a year as a nurse and have been focusing on paying off the debt. My work is casual but plentiful and my expenses are low. I anticipate making the final repayment in early 2019.

My financial education as a child was negligible and I don’t want to get into this situation again. I am very comfortable with a high level of risk and I want to build a portfolio I can retire on but recognise that cash flow assets mean lower growth. After paying off the loan I’m considering getting a margin loan for exchange traded funds to then use as partial equity for an investment property. Is this wise? I’m considering a 45/45/10 split into growth, cash flow and cash ETFs. Is this the best strategy?

Good job, David. Completing your PhD is a fantastic achievement, so well done.

You may not have received much financial education in your youth but you certainly have picked it up. I can only agree with paying down the 14.69% interest on your loan. That is such a simple but effective strategy. Where else could you earn 14.69% on a dollar invested?

We are also in complete agreement about risk. At 30, risk is your friend. It was the same for me at 30. The risks I took, mainly in starting a business and gearing into investments, paid off over the decades. Now, at 63, risk is my enemy and I use diversification to protect my assets. So, yes, in your situation I would regard a loan to invest in an ETF as worthy of consideration. Do take care about the level of gearing and seek advice if you need it.

Once you build equity, I also have no problem with the concept of using that to buy property. But what I am most pleased about is your significant achievement with your education. This will lead to higher earnings.