Re: New Super - pay cut?
 

Originally it was a line of credit against properties I bought in the 80,s,this was to avoid margin calls.This also scared the crap out of me and nearly sent me bankrupt in the early 90,s when asset prices fell and interest rates were high.

Then margin loans were used to reduce property motgages,they were at a slightly higher interest rate but bought me sleep at night.IE instead of 200k on a property which was secured by say a 250k property and 100k of shares,it became 150k on a property and 50k margin loan.I use Suncorp ,for years they gave me rates on a margin loan at mortgage rates.Always pay 12 months interest in advance,the tax deduction and peace of mind.If the shit hits the fan I always had the interest paid for 12 months and a further 12 months in term deposits.The GFC was a bit scary so now I have 3yrs interest payments in an e-account.Then of course positively geared as quickly as possible,when the shit hits the fan cash flow is always the undisputed king,and always will be.

I'm back to square one now,Suncorp suffered badly during the GFC due to their securitisation,the money dried up and they charge 7.4% for IA loans.I thought this was a bit steep so took the loans back to a line of credit and then fixed that for 3 yrs @4.95%.The margin loans still have money owing to be kept open.Suncorp still offer loans at the cheapest rates,I think Commsec etc charge around 8-9% but their web sites will tell you.

Obviously house prices have risen since the 80's,and share prices also.I am now geared at around 20% debt 80% equity,it provides a very comfortable retirement.You need to think in 30 yr terms because it is true,time is money(compounding).You then need to realise that money easily comes and easily goes.For me the daily moves on the ASX are more than average annual income.For the mega rich,the moves are in the billions,thus Bill gates has 2 billion shares in microsoft and they drop 50 cents in a day,goodbye to $1 billion,obviously they rise 50 cents,hello $1 billion.

Work out why the first million is the hardest,and why the millions begin to come in seconds and you are beginning to understand what Einstein said "compound growth is the 8th wonder of the world'.

Look at it this way if you have $10 million and lose half of it in a crash you don't have a problem(depending on debt levels).If you have $500K in super and lose half in a crash,hello deep shit.

To begin to u/stand putting it together take westfield as an example $20 billion of debt @ say 7% interest.Outlay $1.4 billion.$40 billion of assets to secure that debt @ around 6% income $2.4 billion in income,ecstasy.You need balls bigger than the universe to do that (the sleep at night test).

I hope you and others reach that level,trust me, it ain't for the faint hearted and it can scare the crap out of you.It is also the most fun you can have with your clothes on,and sometimes off but don't tell the cook that.

Good luck.Because the harder you work in the financial knowledge field,the luckier you will be.

Geordie downunder

Re: New Super - pay cut?
 

I would have thought property investing was less scary and risky?
Similar tax advantages plus depreciation. If you do it right it will not only bring positive cash flows but also capital growth. Just like stocks.

Re: New Super - pay cut?
 

No matter, the pay. But the super is in the best quality.

Re: New Super - pay cut?
 

Erm,last property I bought cost 100k,worth around 400k now.That would've bought 15000 CBA shares,worth around $1.1 million now.

Income from property around 18k with a lot of holding costs.

Income from shares 15000 x $3.61,work it out for yourself.No holding costs,and the tax advantage of franking credits.Of course 1 piece of information proves nothing.

Look at the index,$500 invested in 1980 is now around 5000,so 10 times as much.(all ords).I think a house bought in 1980 could also be worth 10 times as much,so equal on cap growth is perfectly reasonable.As I said holding costs,rates,insurance, repairs,management etc etc,1 up to shares do you think.

Liquidity,I need 100k in the morning,easy sell some shares and still have an income producing asset.How long to sell a house,or of course increase the m/gage by 100k. 2 goals to shares,2-0?

Real growth comes from reinvesting dividends.Pointless to reinvest all rent in a property,a $2million house in a 400k street is not worth 2 million.Using the DRP for shares,doubling your holding every 12 yrs roughly then your CBA shares are now around 60000,(15-30-60).Worth say $4.5 million,and income of 60000 x $3.61.Plus franking credits still no holding costs. 2 fingers to a depreciation schedule?

Again using the index the accumulation index gives the value of $1000 invested in 1980.The bank index excluding REITs is around 55000,so they are worth 55 times as much,3-0 to shares?I think the all ords acc index is around 38000,I don't diversify so don't look at that one.

The risk is a strange one what you see as risk I see as great comfort,and vice versa.Watch shares every day and it is scary,up and down,up and down.Look at them on a once in 12 months mood and they are surprisingly stable.

More explaination of risk could be thus,you bought CBA at a record high in nov 2007,$62K for 1000 shares.You bought the index @ $68000 for an ETF (cheapest way to buy them).The index went down to $31000,your CBA shares went down to around $24000.The index went back up to the circa $50000 now.Your CBA shares are circa $72000 now,could you watch that happen,trust me it can be gut wrenching until you realise it is normal.

The real test of bottle is, you buy CBA for $72000.There will be a crash in the future,shall we say it starts tomorrow.You watch your shares fall by say 40%,now they are worth $42000.The thing that drives you is wonderful Rothschild advice from around 300 yrs ago 'the time to buy is when the blood flows freely on the streets.Do you buy more @ $42 when all the news is terrible and everybody is screaming sell.You haVE NO IDEA IF $42 IS BOTTOM,IS THE BLOOD FLOWING FREELY ENOUGH.

Or do you capitulate and sell,(buy high sell low,the usual thing that happens).

I think it is great fun,remember people can and have killed themselves after losing money.It ain't for the faint hearted.Would that be the reason why less than 1% of the population own 1000 CBA shares directly.They all own them in their super fund,largest company in OZ by market cap.

Good luch

G/D/U

Re: New Super - pay cut?
 

1. If you have a redraw account on your owner-occupied home mortgage, and redraw from the account and transfer it directly to your share brokerage account, can you claim an interest deduction on that portion of the loan which was redrawn to purchase shares?

2. Can you negatively gear on shares, if your dividend income including franking credits not enough to offset the interest on your margin loan used to buy shares? Can you claim it against your ordinary income such as salary?

Re: New Super - pay cut?
 

I like your approach. Whilst considering this I was thinking for those who wish or need to use super, what if they could use margin lending against their existing super balance. Something like the NAB Super Lever. Rather than remain dispondent with the dismal growth of their managed fund they could leverage their super into larger holdings in ASX companies.

Re: New Super - pay cut?
 

Think of it as an investment in your future

Re: New Super - pay cut?
 

I agree with you on one thing... 1 piece of information proves nothing.

The problem with the Shares investment approach is that it is more risky, and I agree with Commonwealth on that..
Especially when this happens: CBA shares
http://www.abcdiamond.com/images/CBA...-2007-2009.jpg

An investment property need have no holding costs, and also gives an income. Although only about 33% work this way.

A property can go down in value, and you may lose a percentage. Or it can go up and you can gain a percentage. But in general the changes are minor, and not scary.

Shares can scare the living daylights out of the holder, unless you have hindsight and know exactly what will happen in the future.

You need to know exactly what you are doing with shares, take CBA for example...
http://www.abcdiamond.com/images/CBA...-2005-2013.jpg

but then, if you bought 15,000 CBA shares on 26/02/1993 for $101,550 they would be worth $1,030,950 today.
A $100,000 house in 1993 could be worth well over a million now, depending on location.

Re: New Super - pay cut?
 

You didn't understand a word I said did you.That is where the risk is,not knowing what you are doing and refusing to see reality.I said it hit top in nov 2007($62),as your graph shows,it fell to $24 (march 2009).What happens next is it went up to around $74 today.What happens after that is when the next crash comes a 40% drop will be normal,just as I said.Do you shit yourself and sell,or do you buy more at a low price.The discipline of buying after a fall is obvious,set yourself a target of buying after a say 35% drop,when they are all running around bleating about catching falling knives.You don't buy them at a high when they all run around shouting the boom is going to last 30 yrs buy,buy ,buy.

Then obviously buying at a high does no harm in the long term,$10-20-30-40-50-60 $70,they were all record highs,you had the experts coming up with the crap that you have come up with,'what happens next"it is too risky:eek:: rofl:

What happens next is they think they had better give their money to the thieves in the financial industry,it is too scary to think and follow reality.

As for the stupidity of a house could be worth $1 million,it could,at least 99% of them aren't,not the right location.Every share in CBA or any other company is worth the same,regardless of the location of the owner.

As for house prices don't fall much,that statement of stupidity never ceases to amuse me.A house is not put up for auction every day,a share is.

As I said,look at the share price on an annual basis,not a daily basis,,they are remarkably stable.From memory CBA has had 2 negative years in 22.How many negative years has property had?

Need I go on,you'll still refuse to see reality.Put up a graph from 1991 to date,those short term graphs make falls look huge,they are difficult to pick up on a long term graph

geordie downunder

Re: New Super - pay cut?
 

1 yes

2 yes .But you invest to make money,not for tax reasons. 20 yrs ago they were $7.40.today around $74,10 x as much.If we could predict the future in 1993 and you were given a cast iron guarantee they would be worth 10 x as much would you say"not for me,the deal has to be sweetened with tax deductions".

Today is exactly the same,they may be worth 10 x as much in 20 yrs ,they may be worth 5 x as much in 20 yrs,they may be out of business,nobody knows.the deal is exactly the same,what has tax got to do with it.Tax legislation can change,the underlying performance of the company is the driver of prices

G/D/U

Re: New Super - pay cut?
 

Why turn such a simple thing into such a complicated thing?

Re: New Super - pay cut?
 

Because some people are stuck with super & with such a margin product for super they can leverage their $50k into $250k. Doesn't seem too complicated.

Re: New Super - pay cut?
 

If you want to be leveraged at 5 to 1 go for it,too risky for me.Keep away from markets and use options,higher leverage,greater returns, smaller costs and no locking money up until a condition of release is met.

A normal margin loan will advise not to be leveraged at greater than 2 to 1,I would advise the same.They will lend at 3 to 1 but you could then be called next day if it is a down day and the loss exceeds your buffer (5% is normal)Markets start falling and short selling and margin calls really turn a small loss into something unstoppable,it keeps falling,as we have just gone through.Govts banned short selling in financial stocks to arrest that decline,they make up around 30% of the ASX,4 companies.

You can of course use a stop loss,which is also a stop profit on a quick drop and climb (bank stocks thurs and fri),and useless in the same case if a price plunges through your stop.

If you are happy with it,go for it.

Geordiedownunder

Re: New Super - pay cut?
 

I totally agree with you :)

Leave that to those that do know...