How to invest $1000/PM?

[Bangers]

Ever since being on Somersoft I've changed alot of things, searching through my threads reveals a few things such as Inability to save, Car loan and lack of IP. Now they all fixed (big thanks!), I'm in my first IP and my budget is at the point where I can have $800 a month absolutely free. In 3 months my HECs finished, which will put this at almost $1300 a month. This is after paying bills and the 1st IP.

I'll definitely be looking at using this $1300/per month on my 2nd IP in the short term. However, at the moment I'm not to keen to purchase my 2nd IP due to Interest Rates and also because I only just recently purchased my first. I'm finding I sitll have a lot to learn.

The question I pose, for one looking to have a balance portfolio, what could be an area I look at investing in for the next 12 months? Would a Managed Portfolio be a simple and affective way? Or should I just keep throwing it into an ING?

At the moment I don't have cash savings. Is this something an avid investor should definately have? Or should I continue to focus on the First IP by paying as much off as I can?

I used to have a few shares (sold to fund deposit for 1st IP), and although Day Trading interests me (or even short term trading) I don't have the time at the moment to focus my energy onto the stock market.

Thanks,
Matt

 

[FrankGrimes]

Good on your for making the turn around and congrats on the first IP. Well I guess you really have 3 options -

1. Buy IP2
2. Buy Shares / Managed funds
3. Put in ING / Offset account

No one here can really make the decision for you, all are valid options but really depends what you’re comfortable with.

1. IP2 is a good option. You have enough income to cover it and from memory you are fairly young. So you could really do far worse than buying a quality IP and holding for the next 10-20 years. Fix the rate for the next 3-5 years and just forget about it.

2. Shares have had a bad run since the start of the year, some people think the world is going to crash and others think it will bounce back in no time. I personally think it will be somewhere in between. I would be looking at something low cost and diversified; this isn’t really the time to be taking huge risks. Dollar cost averaging into and index fund or LIC would be a good option. There are plenty, if you are interested in this people will be able to offer suggestions.

3. This is the conservative option (not that is anything wrong with this). There is no point putting your money into ING when you have a mortgage, you might as well just chuck it on your offset account until you decide on option 1 or 2. This is really a short term / medium term option. Above are more long term.

Probably best to get an idea of your goals - then take action based on this.

 

[BayView]

In a word: CONSOLIDATION.

Because you have recently bought the first IP, I'm assuming the LVR would be rather high right now?

If it is more than 80%, and with more rate rises looming, and uncertain economic times predicted, I would be using the available funds to hammer down the loan and get the LVR down to a safe level; say, below 70%.

You could do it via an offset against the loan you have now if that is possible with the loan you have, or pay money straight into the loan, provided there is a redraw which will allow you to get to the funds if required.

And, you said you have no savings? These two options will give you less interest per month on the IP loan, but will still provide you with some ready cash in the event of an emergency.

And, if the economy proves to be ok, or the rate rises drop, you will still be in a good position with some increased equity to invest in IP no.2.

Some people believe in never paying down any loans on property; especially IP's. I don't agree with this; although IP debt is tax deductible, it is still debt. The less debt you have compared to equity and cashflow, the stronger your financial position is, and generally, lenders like this for further lending too.

 

[Bangers]

Are extra repayments into the IP1 Loan deductible? I'm guessing they go towards Principal, so let me answer my own question by saying no?

Yes my LVR is extremely extremely bad (100% loan). Thank you for that suggestion. I'll definitely have to pop into Wizard and have the offset account (which I'm sure has fees :s) activated.

 

[BayView]

Are extra repayments into the IP1 Loan deductible? I'm guessing they go towards Principal, so let me answer my own question by saying no?

Yes my LVR is extremely extremely bad (100% loan). Thank you for that suggestion. I'll definitely have to pop into Wizard and have the offset account (which I'm sure has fees :s) activated.

Extra payments go straight into the principal, and they calculate the interest from there.

Only the interest is tax deductible.