Is debt repayment the most effective way to save for the future?
How much do you need to save? Where should you save it? And what are the investment prospects and risks in a volatile, low-interest rate environment?
Join us today at 3 p.m. for another live web interactive with Bernard Hickey, managing editor of interest.co.nz. Please note this is a change from our planned guest speaker Martin Lewington from Mercer NZ.
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7 Comments
Amanda , I will miss another of your interactive sessions , but I have some commenrts , and some contentous issues about fees
MORTGAGE DEBT
Paying down mortgage debt is tax free saving , in the case of a Mortgage the gain is around 5 to 6% , which you cannot get anywhere on the NZX or the ASX without sharemarket risk
KIWISAVER
A GOOD IDEA........... FOR MAKING FUND MANAGERS RICH, ITS NOTHING MORE THAN THE NEW FINANCE COMPANY RORT
The return on investment in a Kiwisaver fund is likely to be around 2% to 3% after fees ( if you are lucky) and then the yield is taxed by another third. The only amount you should put in kwiwsaver is to get the tax benefits, anything over that is a waste and simply a handout for fund managers to buy their next Porsche or SUV .
KIWISAVWER FEES
Its a disgrace to see investor capital in the fund being skimmed as fees and this shoudl be a criminal offence with mandatory jail sentences .
Fees should only be taken out of actual gains , and then be limited to reasaonble % of the actual gain in any given year .
Right now the fund Managers skim off a % of the capital sum invested for "managing" the money, even when it makes a loss . This is wrong on every level and is a rort that we expect from someone like Mark Hotchin .
SHARES ARE GOING NOWHERE
Shares are not cheap right now, and I cannot name one NZX stock that is not a risk of a downside, asset valaution writedowns , or some other potential to go negative
GILTS ARE A DISASTER WAITNG TO HAPPEN
Government Bonds yield around 2% and inflation is 2% so the yield is ZERO and your yield is negative after tax. The only place you would be more certain to lose money is at Sky City or the TAB. You need rocks between your ears to invest in Gilts .
CURRENCIES ARE ONLY FOR PROFESSIONAL SPECULATORS
I have looked at currencies in view of the strong Kiwi Dollar but the Euro , Pound and US$ all seem to have problems of their own and the yields on cash in these currencies is too low to work for me
CONCLUSION
So in summary for me it looks like a no brainer , put everything into your mortgage until you have paid off your mortgage ( as my wife and I have done).
Then buy a small commercial property or another solid Auckland property in a mid -income area as an investment .
At least you can see a tangible asset unlike shares where all you get is a piece of paper , you have no clue what the managment are really up to ( Like Federated Farmers or Feltex ).
If anyone can show me a safer bet than income generating property , I'll look at it very seriuosly
WHAT ARE LEWINGTONS VIEWS ?
"'Then buy a small commercial property or another solid Auckland property in a mid -income area as an investment ."'
Presumably only if nil mortgage, hence little risk. A mortgage introduces excessive risk especially to cash flow. Otherwise listed property trusts with low gearing give a longer term yield of 6%+ with a lowisk fluctuation in price since most of them now retain profits to help reduce the borrowings.
Also these can be sold almost immediately on line and not have to wait for a buyer and pay horrendous agent fees, or the cost of losing a tenant and to find a new one. Not only that but you can do it for any sum from $1k to $1m or more per share and spread the risk across several of them.
Exactly my thoughts, however you can still discuss what you need to put in the projected %growth & %inflation columns. As far as I can see, even with housing growning slower than inflation, it is still far more effective to put your money there vs funds.
Note that this is in the personal finance section, not the ideologial finance section, so don't pillory me for promoting housing investment. It's just how it (still!) is.
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