- Why Invest?
This chapter will explain why everyone needs to have an investment plan and the 3 ways to create wealth: Fixed Interest, Property and Shares
- The Basics of Investment
Similar to the first chapter of Peter’s book.
This will also include specific property and share and investment terminology and provide insights into what causes shares and property to increase in value.
We will also explain how the market values investments and how shares in particular, are constantly re-valued on the market as well as what drives the share and property markets
- History - How the investment landscape has changed over the years
We will describe how the markets came to exist and how they have changed – including the impact of how deregulation of local and overseas markets in the 1980s has changed the financial landscape in Australia,providing more investment products and strategies to the average investor.
- History - Past performance
Property: Statistics and graphs on the past performance of the property market, including capital cities, houses vs units.
Shares: Share market performance (at sector level) and compare this to other investment classes (cash/fixed interest)
- Investment Cycles (Economic Clock)
An explanation of how investments are interrelated with the business cycle, including how the economic clock works, the property cycle and the share investment cycle.
- Where to do Research
A list and explanation of resources and websites on where to find data:
Property: e.g. ABS, RP Data, realestate.com.au, domain.com.au, onlinenewspapers.com, property magazines, etc
Shares: e.g. ASX, brokers, financial planners, independent research houses (Morningstar, Huntleys etc), Smart Investor and Money magazine, etc
- Understanding the Tables and Statistics
Property: An explanation of how to interpret commonly produced tables in daily newspapers and magazines e.g. Australian Property Investor. This will also dispel common misconceptions including median price as an exact measure of all property movements.
Shares: An explanation of common terms used in the share tables.
Explaining that published data is historic and may not be reflective of the current value.
- The Risks of Investment (volatility of investment returns, asset allocation)
A discussion of what risk is… (variation of return) and how it is measured as volatility of returns. We will also demonstrate how volatility differs between shares and property and within the sectors of each asset class.
- Expected Returns
We will outline the difference between capital gains and dividends/rental yield.
Property: Discuss the average return expected on various investment types: on Units, Houses, Offices, Retail, Industrial property types – including an explanation of the variation of return based on a number of factors including location, economic cycle.
Shares: Present the differences in average returns that an investor can expect to receive from stocks in different sectors, and at different stages of their lifecycle.
- The importance of having the appropriate Investment Structure
We will discuss the importance of investing in the correct structure for their financial situation. This will include buying in the name of an individual, partnership, joint venture, syndicate, trust, company, Self-Managed Super Fund.
- Costs of Investing
Outline the costs of buying, holding and selling property and shares
Property: Stamp duty, bank fees, conveyancing fees, ongoing rental property expenses, interest, land tax, real estate agents’ fees, advertising
Shares: Brokerage, advisory fees, management fees, bank fees, interest, capital gains tax.
- Market Participants and Facilitators and where to obtain Investment Advice
An explanation of the role of the various participants and facilitators:
Property: Real estate agents, property managers, conveyancers/lawyers, buyer’s agents, mortgage brokers.
Shares: Stock brokers, financial planners, fund managers, companies, overseas investors
- Managed Investments
Property: Discussion of purchasing property as “set and forget” e.g. REITS, defence housing
Shares: Discussion of purchasing shares through Managed Funds, Managed Investment Schemes, ETFs, LICs
- Trading vs Investing (including investment timeframe and expectations)
Property: Discuss the difference between renovating/developing versus buying and holding.
Shares: Discuss the difference between investing for capital gain and income over the long term and trading (buying and selling) regularly for smaller quick profits in the short term.
This will include how much time is required, the impact of commission costs on profits, and whether trading suits their investment profile.
- Financing your Investment (Margin Lending vs Investment Loans)
The difference in LVRs between the two asset classes.
Property: Discussion of fixed v variable, interest only v principal and interest, line of credit
Shares: Difference between margin loans and investment loans, and an alternative to investing in shares that uses instalment warrants.
- Taxation Implications
Property: List of ATO expenses that are deductible, depreciation
Shares: REITS (deferral of tax liability on distributions?)
Discussion of tax variation, negative gearing, trading vs investing (CGT vs income) – and how the ATO may view their situation to assess whether they are a trader or investor.
- Legal Issues (sophisticated v retail offerings, cooling off, contracts)
Property: contracts including cooling off, deposits, conditions, auctions
Shares: Ensuring they are dealing with a licensed financial business/adviser, ownership aspects (custodial vs own), CHESS holdings (HIN vs SRN), share registries, general vs personal advice
- Buying Overseas Investments
Property: Implications of purchasing property overseas e.g. tax, management of the asset
Shares: What markets can be traded overseas, trading and investing in shares listed overseas.
Tax, brokers, fees, currency considerations and arbitrage considerations.
- Scams and Schemes
Property: To avoid scams and swindles, ensure they are dealing with a licensed agent, QPIA, be wary of “education” seminars e.g. Henry Kaye, Westpoint
Shares: How to confirm that they are dealing with a licensed and qualified financial adviser/business. Discuss some of the big scams in recent times including HIH, Storm Financial, Opes Prime, Bernie Madoff
- Questions to Ask (Broker or Agent)
Property: Top 20 questions to ask a real estate agent, mortgage broker, property manager
Shares: Top 20 questions to ask a financial adviser
The theme is that they should have BOTH property and shares in their portfolio.
- Case Study
An illustration of what an ideal (balanced) portfolio will look like for investors at different stages of their lives (5): 20-30, 30-40, 40-50, 50-60, 60-70.
- Where to Next: Website/Blog
We will introduce and direct our readers to our website that will act as a gateway to further resources and will provide updates to the links and statistics outlined in the book.
- Advanced Investment
This chapter is for people who wish to go beyond the basics. We will outline the various advanced investment choices available to investors within property and shares, including options (property and shares), CFDs, warrants, futures, foreign exchange and bonds.
- BONUS CHAPTER: Top Picks 2014 to 2020
Property: Top 5 suburbs from each capital city
Shares: Top 5 investment themes for the future – including the top stocks to invest in now to capitalise on these themes until 2020.