What is Investments and Gearing?
The purpose of investing is to save by building up asset wealth for your future.
- This type of savings/investment can be carried out in a variety of ways, using different assets such as:
- Ordinary savings account
- Term Deposits
- Managed Funds
- Investment Property
- Direct Shares and Exchange Traded Funds (ETF’s)
- Combination of all, or some, of the above
These are the major asset classes that are available to anyone who wishes to save/invest, either inside, or outside of super.
Along with the strategy of directly using your excess savings to invest in the above asset classes, if you are the type of person that is happy to leverage these investments by borrowing monies directly, or indirectly, in a variety of ways, such as borrowing against your home/investment property, borrowing through a Margin Loan or borrowing in the form of instalments that are self funding, then gearing is an additional option that you should consider.
There can be tax advantages when gearing, but at the same time there can be risks associated as you are also responsible for the repayment of a debt.
Therefore, appropriate advice needs to be sought before any such decision is made
Why do I need this?
You need to save and invest for your future. Whether you gear to help expedite that growth or not, is up to you and your risk tolerance to this type of investing. Hence the importance of discussing your options with a professional Financial Advisor.
At FOFM, we believe that it is important to understand that a major part of your future options will be determined by your savings/investments decisions. No-one can help you, except yourself. You need to set up a Savings/investment plan that does not affect your lifestyle, but allows you to put money away, to accumulate over a period of time, ideally the longer the better, which will give you better choices in the future.
What happens if I don’t have it?
If you don’t save, or don’t put a savings plan in place, you will not improve your personal situation. Saving requires you to sit down and work out an appropriate budget, assess whether your current expenditure is excessive or not, and whether they can be curtailed, to determine if you have any money left over that can be put aside for your future wealth creation needs.
You may say to yourself that your super is your long term savings? You are right in saying this, however, there is a time gap between now, and reaching eligible super/pension retirement age which for most people will be age 60. It is important to remember that you do, and will continue , to have a life before reaching retirement age. Therefore, you will need to save for basic needs, such as:
- Saving for a home
- Buying a car
Consequently, creating wealth swill give you the option of having better choices during your working life and in retirement.
This is why you need to have a savings/investment plan in place, and if you don’t, you will most likely not have the opportunities to fulfil your full potential during your pre retirement working life, and furthermore, it could be highly likely that you would not have achieved your full capacity to save in your super either.
What will the cost be to me?
Depending on the type of investment vehicle that you choose, with, or without our advice, will determine the costs of your time of achieving your goals, which is an intangible cost, and the cost of the advice.
At FOFM we believe your biggest cost is the cost of not doing anything!
FOFM charges a specific hourly rate, which could be tax deductible to you, as an ongoing investment service. The initial meeting will be free of charge.
Other costs could be related directly to the investments that are chosen:
- Shares – there will be a default stock broker fee
- Managed Funds will have their own internal platform and retail fund manager fees
- Buying a property – the normal costs apply such as borrowing costs, stamp duty, legals etc.
These are areas that need to be researched and assessed. I encourage you to allow us to assist you and suggest you speak to our specialists.