LVR = 0%
Well if congratulations is in order then "Congratulations Jo"
But is this smart?
I do understand from what I have read that Monopoly has fulfilled her life needs and so can appreciate that she is not inclined to take on any risk that might alter the status quo . . . however:
To reach this position Monopoly, as stated did take on some risk.
In order to build a portfolio one does need to take on debt. Imagine trying to buy a home/ investment property or other assets with an LVR = 0%
It would take huge resources and for most will take an inordinate amount of time to save up / accrue the amount of money needed.
Clearly 99% of the Australian population would never achieve even one property with an LVR = 0%
Most people will buy a home with a 10% (or slightly more) deposit. They might then rely on CG over the long term and regular capital payments to reduce the outstanding debt.
Everyone seems happy with this level of debt and the risks associated with taking on that debt.
The next step might be to simultaneously acquire investment property/s as a means to gaining more CG through gearing. Once again borrowed money and greater risk is required.
The next step might be to diversify and extend the portfolio into shares, with or without debt depending on SANF and the investors 'risk profile'.
Eventually over time and through CG there might be sufficient equity to pay down the all the debt . . . yes you might need to sell some assets to do this.
This might then result in LVR =0% and sufficient income from the remaining assets to fund the required lifestyle. Simultaneously, on this basis there should still be continuing CG on the asset base in the future years.
From what I have read, this seems to be similar to Jo's situation with an LVR = 0%.
Most investors come to me with a specific goal and time frame in mind. They request $XYZ per year net by a certain age, or within a certain time period.
Also they have finite resources to employ to achieve the result.
A realistic plan within various risk profiles will achieve the result. Each individual investor will choose the plan (AND Risk Profile / SANF) that fits their individual requirement.
LOE is just one of the plans that might be suitable.
This entire debate seems to be about many individuals stating their level of comfort about whether a certain risk profile is valid or not.
Mainly these in the building stage are saying that they see a need for debt / leverage / risk profiling to achieve their result within a time frame.
Then there are these that might over time already acquired a reasonable portfolio and or in fact be retired. Their attitude is why risk what you have already worked so hard to achieve. (Forgetting perhaps the leverage it took to get them there in the first instance.)
And then there are the actual retirees who are comfortable with their level of income, (Especially now in times of low inflation) and might then advocate a zero or very low risk strategy. (Yes all the way to LVR = 0%)
Each person, preferably after educating themselves will choose an appropriate strategy . . . it is not really appropriate for anyone to impose their belief systems which are based on their own circumstances / wants and desires on anyone else.
Is LOE still an applicable strategy? Yes of course it is . . . for these who might desire a certain result.
Is LVR = 0% smart?
Aside from paying more tax than is necessary and aside from the wastage of what the LAZY $$$$$$ could do, yes it is very applicable to these that choose to live according to that result.
Perhaps the real questions might be:
1) What are the risks associated with employing a LOE strategy.
2) What are the risks associated by NOT employing a LOE strategy.
Somewhere I think there is half a book written on these
Steve