Author Topic: Investing options - old lady money, indexed funds or first home deposit?  (Read 1749 times)

Anatidae V

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I'm in Australia, and I've got 3 options I'm aware of with regards to money for investing.
1. Put money into my super account. As per Australian law, my employer puts an amount equivalent to 9.5% of my income into this, which grows without taxes. Also by law, I cannot touch this unless I'm in a terrible, terrible mess, or I'm 65, which is decades away. There is a limit on how much I can add. Not sure what it is.
2. Start buying indexed exchange traded funds or an indexed mutual fund account.
3. Put money, up to $11k, in my and my partner's first home saver accounts (FHSA). These earn a 17% extra contribution, and about 4% interest rate. This can be used for our first house, or rolled into super.

Given that info... We are 24 years old, have $40k in our FHSA's, houses in Perth are about $500k and we're thinking of buying within 2 years. So far, I think we should put all we can into our FHSA's, but this doesn't provide us with much diversity. I think we have $20k in our super funds in total, and we have another $20k in cash put aside as emergency money/new car etc. Thoughts? Also if anyone has any ideas about making the most of super in Australia given I plan to attempt to quit work well before 60 (vague goal at the moment is 40).

Pylortes

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Re: Investing options - old lady money, indexed funds or first home deposit?
« Reply #1 on: October 21, 2013, 12:55:14 PM »
Not in Australia, so have a question... Do you get the 9.5% from the employer regardless of whether you contribute to the account or not? In the U.S. our 401k systems usually requires employer match only if the employee contributes.  If you have to contribute to get the 9.5% then I'd say its a no brainer to put your money there as its a great return.   If you get the 9.5% regardless of whether you contribute there or not, then you can look at other options.

I have heard about real estate prices in Australia.   Can I challenge your assumption that you need to purchase a home that costs half a million?  What are average rents for an equivalent property on the rental market?  How much would your mortgage be if you purchased?  Although I am admittedly unfamiliar with the market I have a feeling that Australia may be experiencing a housing bubble like the U.S. had a few years ago.  One way to tell is to compare the growth in wages to the growth in real estate prices.  If housing costs have far exceeded average wage growth for a period of time you may be getting towards the top of the market.

Anatidae V

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Re: Investing options - old lady money, indexed funds or first home deposit?
« Reply #2 on: October 21, 2013, 07:41:06 PM »
I think our market does have a bubble, but I don't know if it will pop... http://www.mutilatethemortgage.com/2013/10/10/were-heading-for-a-bubble-again/
You can challenge the high house price assumption, but I'm struggling with it at the moment.

Anatidae V

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Re: Investing options - old lady money, indexed funds or first home deposit?
« Reply #3 on: October 21, 2013, 07:45:47 PM »
Oh and regarding super, my employer has to put an amount equivalent to 9.5% of my pay into the account regardless of what I do. The government is slowly increasing it to 12% required over the next few years, which based on what happened with this increase, means my income will decrease at the same time.