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  1. Post
    #1

    Investment direction/help/suggestions/financial checkup

    Hi guys

    Looking for some direction/sense of where and how I need to invest, and perhaps a sanity check/pointers on if I'm in the right direction.

    At present, I have the following financial situation:

    Employed, living in house owned by partner (2.5 years) and contributing to mortgage. Name not on title. No personal debts.

    Simplified monthly budget looks as follows.

    Income
    • 5.4K per month in the hand.

    Outgoings
    • $1.5K into joint account to pay for house and food etc... House value approx. $375K contributing half mortgage payments. My equity in house should be 50% less $80K initial deposit paid by partner. I'm reducing this $80K over time by contributing to renovations and repairs.
    • $1.5K into "Growth" Investment account of $110K - return over last three years 9.12%
    • $1.5K into Cash savings of $110K spread between term deposits and on call - interest rates 2.1 - 3.65% Max term 240 days. Around $5K is readily available to cover large payments without penalty, approx $40K is on call to cover emergencies with penalty, and rest is in in various term deposits.
    • $0.5K into Harmoney - 1K total invested with expected RAR to land around 10 - 11% - expect to continue this to approx $5K invested, then review performance, maybe take this out to $50K total invested but would appreciate advice.
    • Contributing to "Growth" KiwiSaver of $55K - contributing 7% of total salary in (3% employer, 4% self) - return over last three years 9.38%. Got into this a bit late, so have suffered accordingly.

    Yes this leaves bugger all to come and go on, but seems to work. Of the $1.5K cash savings I drop $500/month into a short-term savings that I can call on if I get short, the rest gets locked up. Realistically, my "disposable" varies between $400 and $900 a month on fuel, personal insurances, phone etc...

    Simplistic modelling suggests net worth of approx $1'000K by 2028, but not much variation on this can be achieved by tweaking current investment mix (+/- 1 or 2 years tops by tweaking contributions...). Goal is to achieve $1'000K net worth ASAP then make a decision on retiring, changing jobs or keeping on with what I'm doing.

    I pick up occasional consulting work which is split three ways, 1/3 to me, 1/3 to a quasi-business account and 1/3 is reserved for the taxman. This income has been negligible as I can't divert too much time from full-time work, and this has not been factored into net worth or income.

    Advice on investment mix is appreciated, do I need to take on more risk, is there anything obvious I'm missing? Am I excessively exposed to a risk I haven't spotted?

    I'm looking for a "where now" kind of answer, is this the best I can do or are there options I need to consider?

    Thanks in advance.
    Last edited by =cJ=; 20th March 2019 at 5:05 pm. Reason: Paid, not payed, partner didn't seal the deck of a ship...

  2. Post
    #2
    From a quick glance, maybe reconsider that extra 1% employee kiwisaver contribution? Take control over where your funds are invested past the minimum to get full benefits from it.

    Cash savings of $110K
    If you're already doing long term investments, maybe relocate some of this into shares/bonds.

  3. Post
    #3
    It could be wise to plan for some kind of drawdown within the time until the 2028 you mentioned given how economic/credit cycles go. Why not talk to an adviser who can help you determine what your risk tolerance is, and so forth? It sounds like between your investment account, kiwisaver, (and potentially harmoney) your port is fairly aggressive. Maybe a tax adviser could help you save a few more %.

  4. Post
    #4
    =cJ= wrote:
    Hi guys

    Looking for some direction/sense of where and how I need to invest, and perhaps a sanity check/pointers on if I'm in the right direction.

    Thanks in advance.
    Firstly good work on being disciplined and sticking to a budget and getting used to getting by on “bugger all” in did this in my 20’s it really helps with being able maximise how much you pump into investments.
    Also great you have modelled and planned all this stuff too, I do the same – keep track of everything month to month, forecast out the future etc.

    So starting with that have you cut your investments by high / medium / low risk? I think I put property and conservative funds in low risk, most shares / kiwisaver / managed funds / harmony in medium and then growth funds + kiwisaver / private equity etc in high. This will give you a view of how stuff is split, see how it aligns with your personal risk profile. I’m 15% high risk, 20% medium, 65% low – I have bit of rental property though so it skews it to low.

    Now cut your investments by how much is in NZ and how much overseas. Your property is in NZ, probably a lot of your kiwisaver is, maybe think about branching out into some internationally based ETF’s. Spread the risk a bit.

    Depending on your appetite for risk, get rid of or minimise the term deposits, your investment horizon is probably long cause I assume you’re still quite young, so you can afford to take some more risk. Likewise once your mortgage gets to a level you are comfortable with then start paying it off as slow as possible – divert the extra funds to investments.

    All I can think of for now, hope this helps.
    Last edited by stacrafty; 20th March 2019 at 5:08 pm. Reason: no need to qoute full post

  5. Post
    #5
    also in your modelling of where you will be at X year its good to be a bit conservative, the 9% might not be sustainable, maybe take 3/4 of that or something. The 9% is reflective of a ~8-9 year bull market where everything has gone good.

  6. Post
    #6
    If you've got 110k cash and mortgage, put it into the mortgage.

  7. Post
    #7
    bradc wrote:
    If you've got 110k cash and mortgage, put it into the mortgage.
    Not yet I don't, current partner owns house and I effectively pay market rent to her.

    Once I can protect my investment I'll focus on dept repayment more, but this has to be done in conjunction with a relationship property agreement.

    stacrafty wrote:
    also in your modelling of where you will be at X year its good to be a bit conservative, the 9% might not be sustainable, maybe take 3/4 of that or something. The 9% is reflective of a ~8-9 year bull market where everything has gone good.
    My modelling takes current return and subtracts 2-3 percentage points off this. It doesn't take into account inflation that well either, so I have to take some of the outputs with a grain of salt. It's a rattling good fit I'd say...

    teelo7 wrote:
    From a quick glance, maybe reconsider that extra 1% employee kiwisaver contribution? Take control over where your funds are invested past the minimum to get full benefits from it.

    If you're already doing long term investments, maybe relocate some of this into shares/bonds.
    I took a look at bonds, and couldn't find much that was better than a TD, is it worth riding the sharemarket directly when compared to say managed funds? Haven't really been able to find a definitive answer on this, hence the managed growth find which is heavily focused on equities. Good point about the KiwiSaver

    stacrafty wrote:
    Firstly good work on being disciplined and sticking to a budget and getting used to getting by on “bugger all” in did this in my 20’s it really helps with being able maximise how much you pump into investments.
    Also great you have modelled and planned all this stuff too, I do the same – keep track of everything month to month, forecast out the future etc.

    So starting with that have you cut your investments by high / medium / low risk? I think I put property and conservative funds in low risk, most shares / kiwisaver / managed funds / harmony in medium and then growth funds + kiwisaver / private equity etc in high. This will give you a view of how stuff is split, see how it aligns with your personal risk profile. I’m 15% high risk, 20% medium, 65% low – I have bit of rental property though so it skews it to low.

    Now cut your investments by how much is in NZ and how much overseas. Your property is in NZ, probably a lot of your kiwisaver is, maybe think about branching out into some internationally based ETF’s. Spread the risk a bit.

    Depending on your appetite for risk, get rid of or minimise the term deposits, your investment horizon is probably long cause I assume you’re still quite young, so you can afford to take some more risk. Likewise once your mortgage gets to a level you are comfortable with then start paying it off as slow as possible – divert the extra funds to investments.

    All I can think of for now, hope this helps.
    Not as young as I act, but I've got a few years left in me ;-) Thinking 20 - 30 year investment horizon is where I want to sit, if I can justify the returns/extra time contributing.

    At present, my thoughts were I'm working on splitting as follows:
    • 30% Cash - low risk
    • Up to 30% Harmoney - medium risk
    • 30% Growth find - high risk (this is exposed significantly to US and European markets)

    Long term I want to move to a spread which will look more like this (ish...).
    • 10% Cash - low risk
    • 10% Bonds - low risk
    • 10% Shares - medium risk
    • 20% Property - medium risk
    • 20% Harmoney - medium risk
    • 20% Growth fund - high risk
    • 10% Shares - high risk

    Eventually I want to be moving to no more than 10% of net worth in any investment class with an even spread across risk classes, which is where I start to run out of ideas, as figuring out ten (ish) different investment classes is stretching my creativity somewhat... I was looking quite seriously at investment property, but I think I'll be sitting that out until the tax landscape's a bit clearer.

  8. Post
    #8
    Is your entire portfolio in NZD?

  9. Post
    #9
    Timmi wrote:
    Is your entire portfolio in NZD?
    Yes, some exposure to overseas markets, but all NZD.

  10. Post
    #10
    I'd get some USD bonds or similar

    sprinkle some gold as well.

    It feels like you're more focused on making money than protecting what you have, so you might want to roll play a few negative situations as a thought experiment

    NZD/USD .30
    global interest rates 10%


    I'm not a professional, so take it for what it's worth

  11. Post
    #11
    Timmi wrote:
    I'd get some USD bonds or similar

    sprinkle some gold as well.

    It feels like you're more focused on making money than protecting what you have, so you might want to roll play a few negative situations as a thought experiment

    NZD/USD .30
    global interest rates 10%


    I'm not a professional, so take it for what it's worth
    stress testing is a good thing

    depends on he cuts back on his work hours or whatever how easily he can resume them at the same income, that will factor in how much risk he can take.