Financial planner Neil White talks about his first investment and what he'd do with $20,000 to invest

Neil White is director of Australian Financial Planning Network and a representative of Consultum Financial Advisers.
What would you do with $20,000?
Put it in three or four specialist Australian share funds - two growth and two value funds. The funds I would look at would be AMP Equity Fund, Challenger Orion Australian Share Fund, Perennial Value Share Trust and Perpetual Industrial Fund.
I would also look at using it for an investment property or some other tax-effective investment.
What was your first investment?
In 1980 I purchased my first home, in Ascot Vale [in Melbourne] - it was not considered an attractive area back then but it ended up being a fantastic investment.
What's your investment philosophy?
Never try to shoot the lights out. Be patient. The best investments are usually boring. Buy boring - boring usually works. Also, don't be afraid to borrow. You have to borrow to build. It's also important to gather experts around you and legitimately minimise your tax.
What are your current investments?
I have a two-bedroom investment property, a number of managed funds, a range of tax-effective investments, direct shares and superannuation. It is very similar to what we typically recommend to clients. Which brings me to another tip: if you are dealing with a financial planner, ask him or her what they invest in as this will give you insight into what they may be advising for you.
What's your best call?
I have done really well in property and I 've been very successful in my managed funds. My current home would be hard to beat as a best investment. I boughtit in 1998 and it has doubled in value.
Worst call?
I bought a block of land at Ocean Grove [near Geelong] in 1982 for $6000 and sold it five years later for the same price, then watched as the market skyrocketed. That was a big lesson for me. My lack of patience and lack of cash flow at the time led to a very valuable lesson.
How much property do you own?
My home and an investment property.
Do you have a mortgage? If so, are you accelerating payments?
Yes, I have a small mortgage and I am accelerating payments. Debt can be a great motivator. A lot of people don't do anything after they have paid off the mortgage. I think you should pay off the mortgage as soon as you can but utilise the cash flow for further investment. Instead, people usually increase their expenditure once they have paid off the mortgage.
Put it in three or four specialist Australian share funds - two growth and two value funds. The funds I would look at would be AMP Equity Fund, Challenger Orion Australian Share Fund, Perennial Value Share Trust and Perpetual Industrial Fund. I would also look at using it for an investment property or some other tax-effective investment.
What was your first investment?
In 1980 I purchased my first home, in Ascot Vale [in Melbourne] - it was not considered an attractive area back then but it ended up being a fantastic investment.
What's your investment philosophy?
Never try to shoot the lights out. Be patient. The best investments are usually boring. Buy boring - boring usually works. Also, don't be afraid to borrow. You have to borrow to build. It's also important to gather experts around you and legitimately minimise your tax.
What are your current investments?
I have a two-bedroom investment property, a number of managed funds, a range of tax-effective investments, direct shares and superannuation. It is very similar to what we typically recommend to clients. Which brings me to another tip: if you are dealing with a financial planner, ask him or her what they invest in as this will give you insight into what they may be advising for you.
What's your best call?
I have done really well in property and I 've been very successful in my managed funds. My current home would be hard to beat as a best investment. I boughtit in 1998 and it has doubled in value.
Worst call?
I bought a block of land at Ocean Grove [near Geelong] in 1982 for $6000 and sold it five years later for the same price, then watched as the market skyrocketed. That was a big lesson for me. My lack of patience and lack of cash flow at the time led to a very valuable lesson.
How much property do you own?
My home and an investment property.
Do you have a mortgage? If so, are you accelerating payments?
Yes, I have a small mortgage and I am accelerating payments. Debt can be a great motivator. A lot of people don't do anything after they have paid off the mortgage. I think you should pay off the mortgage as soon as you can but utilise the cash flow for further investment. Instead, people usually increase their expenditure once they have paid off the mortgage.
When do you plan on retiring?
Probably never! Really, I am the poster boy for my generation (aged 51, baby boomer). I will probably start to work fewer hours but remain in the game. I don't want to leave something I love if health and circumstances permit me to continue.
How's your super looking?
Good. My investments are good and if I put it all together it's fairly significant. I also have this business.
What's your No. 1 financial tip?
Find an expert to help you. And it's important not to confuse information with expertise, because they are very different. Expertise is not just academic; it's having a practical understanding of how things work. By all means do it yourself but get the foundations laid down by an expert. The best test is for your readers to ask and answer the following question: "Do I have clearly written goals?" If the answer is yes, congratulations - you are the equivalent of 3 per cent of Harvard University graduates. People these days go to the internet and think they have all the information they need - but true expertise comes from practical experience over a number of years.
Source: The Age, Melbourne Australia

Prime Minister John Howard considers rent relief for tenants caught in Australia's housing shortage

Prime Minister John Howard has confirmed he is considering rent relief for tenants as landlords increasingly move to rental auctions in the tight housing markets.
While the Prime Minister stopped short of promising direct rent relief yesterday, he argued that one of the problems was the failure of state governments to release more land, driving up the cost of housing.
However, some landlords are leaving the real estate market to take advantage of the federal Government's superannuation changes and to avoid spiralling state property taxes.
One option could be to pressure the states to release more land when Mr Howard next holds talks with the premiers, and to maintain the political pressure to reduce stamp duty and other property taxes.
Speaking in Perth yesterday, Mr Howard said he was aware the problem was placing pressure on families.
"I am conscious that rents have got up in different parts of the country," he said.
"Other people have put views to me about rental assistance ... we are considering those things, I am not going to say any more.
"In some parts of the country state governments have been far too slow at releasing land and that has contributed to the shortages."
According to the Reserve Bank, rents rose faster last year than they have in the past 15 years, and the bank has predicted rents will rise even higher this year.
Around one-third of Australians rent with the balance split between those who own their homes outright and those with mortgages.
Opposition Leader Kevin Rudd said rising rents was another pressure point for families.
"There is no silver bullet for this. But we've got to begin by recognising there is a problem," he told Southern Cross Broadcasting in Perth.
Rents could rise up to 30 per cent in the next three years as strong migration and the lack of building activity cut into the amount of available rental accommodation.
Economic forecaster BIS Shrapnel expects Sydney rents to rise by about 30 per cent by mid-late 2009 followed by Melbourne and Brisbane with 20 per cent rises. Adelaide, Perth and Canberra can expect rents to increase 10-15 per cent in the next three years.
Vacancy rates for residential properties fell in almost every capital city in the three months to September with the trend expected to worsen in every city except Perth, according to the Real Estate Institute of Australia.
While both Sydney and Brisbane's vacancy was 1.7 per cent in the September quarter, Canberra had the tightest rental market at 1.1per cent - well below the national long-term vacancy rate average of 3 per cent.
REIA president Graham Joyce expects the rental crisis to intensify with the lack of housing affordabilty forcing traditional first home buyers to stay in the rental market, and investors deterred by flat housing prices.
Source: The Australian

Reverse mortgage industry under fire from niche banker with axe to grind

Financial planners have come under fire for pushing products such as reverse mortgages for commissions, but a peak industry body says the claim is unfounded.
The reverse mortgage industry body has labelled claims by Members Equity Bank that seniors are at risk from commission-hungry financial planners as unwarranted.
Members Equity Bank head of work business Tony Beck last week warned planners would push reverse mortgages in order to pocket the commission.
"Reverse mortgages combined with salespeople in search of a sales commission is a dangerous mix," he said last week.
[Members Equity Bank are a niche bank grown out of superannuation fund membership, so they naturally have a vested interst in the customer base of the reverse mortgage industry. They seem to be saying that their market base is too stupid to make up their own minds as to the value of a reverse mortgage to them.]
Kieren Dell, executive director at Senior Australians Equity Release Association of Lenders (SEQUAL), hit back, saying the comments are an unfair assumption and that the cost of sale and service is built into the product like many other financial products.
"Any investment service that you might go to see a financial planner (about), you need to understand the remuneration structure, and make sure you have someone you can trust," Mr Dell said.
"The danger seems to me making a statement saying 'don't go to financial planners because they are just going to rip you off', is that people will not go and get advice.
"And certainly from a reverse mortgage point of view, these are products that have complicated outcomes for people, we insist people get legal advice and we strongly encourage people to get (qualified) financial advice."
Reverse mortgages are a popular choice for seniors who are cash-poor looking to "unlock" the equity of their main asset - their home.
It operates the opposite way to a home loan - instead of the loan amount reducing as repayments are made, interest is applied to your loan, which is secured against the house.
Australians who fully own their own home can borrow against the value of their home to create money for their retirement.
A study of the reserve mortgage market by Trowbridge Deloitte found the average loan size of a reverse mortgage was $53,300.
Mr Dell said this meant commissions were very small and unlikely to drive sales, and he was confident about his lenders' conduct and performance.
"One of the parts of our code of conduct for our lenders is that they have to clearly disclose all the fees and charges," he said.
"That is a condition of membership of SEQUEL."
Commissions have been a long-time concern for many people involved in the financial planning business.
The Institute of Chartered Accountants says financial planners should move away from commission-based remuneration and towards a fee system that is more closely linked to the services provided.
Regardless of commissions, reverse mortgages have become increasingly popular, with the number issued doubling in the past 18 months.
SEQUEL estimates the total value of reverse loans written to the 12 months to June 2006 is more than $1.1 billion, and this is expected to surge in coming years as it becomes a more mainstream product for those heading to retirement.
The Australian consumers' association, Choice, said there were some disadvantages as a reverse mortgage could limit financial options.
"You may not have enough money left to fund moving into a retirement village," Choice said.
"The value of your estate may be much less than anticipated because the debt increases over time."
Choice noted that the loan was taken as a lump sum it could affect the eligibility for Centrelink payments.
It also warned consumers to be cautious when signing a contract as they could be hard to interpret.

Source: AAP

Home mortgage rates to stay on hold

Consumer spending has slowed in Australia, further easing pressure on inflation and the possibility of interest rates this month and through the year.
Investor confidence in the Australian dollar also took a hit after official figures released yesterday revealed a fall in home building approvals, along with the spending slowdown.
The Aussie is down almost 3 per cent since last month's Consumer Price Index showed the first fall in prices in eight years.
Although the Reserve Bank has its first meeting of the year today, any announcement on interest rates will not happen until tomorrow -- and then only if rates change.
The 0.3 per cent lift in monthly consumer spending in December to $18.45 billion was below economists' expectations of a 0.5 per cent rise.
In response to three rate rises last year, debt-bound households have curbed their spending.
CommSec chief equities economist Craig James said the economic data meant the RBA would have an easy decision in keeping interest rates steady at 6.25 per cent.
"The economy has clearly softened in response to the rate hikes delivered over 2006 with new figures on building approvals, retail spending, jobs and activity in the services sector all decidedly soggy in the latest month," Mr James said.
The TD Securities-Melbourne Institute inflation gauge also released yesterday showed inflation was unchanged in January as petrol prices fell.
The average family is spending about $157 a month on petrol -- down from almost $200 a month in June and August.
The RBA lifted rates in May, August and November last year to curb inflation, which was running above the central bank's target band of 2-3 per cent.
Macquarie Bank interest rate strategist Rory Robertson said the RBA would be thrilled with the clear deceleration in consumption growth and unemployment being at its lowest level in three decades.
"The Australian economy is in a really good place," he said.
Mr Robertson said the next interest rate move was so far off it was impossible to make a meaningful call on whether it would be up or down.
He said the April CPI numbers, tracking the first three months of the year, would be the next litmus test for inflation and interest rates.
Mr James said the good news for retailers was that, as interest rate fears receded, consumer confidence and spending would increase.
"Some retailers were forced to cut prices in the last three months to get consumers to part with their hard- earned dollars," Mr James said.
"While major retailers have reported healthy sales in recent months, the key question is how much of the rise was at the expense of bottom-line profits."
Australian Bureau of Statistics figures showed a 0.7 per cent rise to $53 billion in retail turnover in the December quarter.
The Australian dollar closed at US77.33, down marginally for the day after recovering from a sharp turn when the data was released.
In mid-January the Aussie hit a high of US79.8.
Source: Herald Sun

The ten biggest mortgage myths that prevent home buyers homeowner owning their homes sooner.

Myth #1. A big brand bank home loan is better than a mortgage from non bank lender.Most people don’t like the major banks, but this myth prevents them from capitalizing on the mortgage opportunities in the growing non bank area.
Myth #2. A bad credit history means you can’t get a home loan.It is better that you have clear credit when you apply for a home loan because it improves your chance and options. But there are great loans for people with bad credit, and they can get better as your credit improves.
Myth #3. To get a home loan at the best mortgage rates you need a 20 per cent deposit.A 20% deposit on a home loan is a wonderful start, but today 100% home loans are there for the taking for people with excellent credit.Even for the self employed with no income checks we have up to 95% mortgage loans!
Myth #4. 100 per cent mortgage finance or a no deposit home loan means that you need no money for the transaction yourself.Buying property has other costs besides the home loan. These costs include stamp duty and Mortgage insurance, and you should allow around 5% for these costs for a high lend mortgage loan.
Myth #5. The lowest mortgage interest rate means the best loan deal for me. This is rarely the case. Low rates usually mean loss of valuable flexibility and higher fees and charges, or open ended fees and charges increases.
Myth #6. A lower fixed mortgage interest rate is a better deal than a higher variable rate.The truth is that market forces set the interest rates, and people that have fixed their rates in the last 10 years have lost money. If the fixed interest rates are lower now that is because the people that know are betting that variable rates will be falling.
Myth #7. Your car loans and credit cards can’t be rolled into a new home loan. We can do 105% loans today and higher, so a small amount of personal loans can be consolidated even into a new mortgage, but at a higher interest rate. We don’t however recommend this strategy.
Myth#8. Mortgage insurance is compulsory and can be around 2% of the loan amount.Non conforming lenders offer mortgage home loan finance with no mortgage insurance, so these may be a better option for you.
Myth #9. A standard variable rate loan on a principal and interest repayment is the best way to pay off a home loan.The best way depends on your financial goals and your money management skills. Most people who want to get ahead and have the income and desire to buy investment property are better off using a line of credit facility. This is an interest only facility with minimum repayments.
Myth #10. Its better to leave your mortgage with the bank.Yes, refinancing has costs that you must bear. If the borrowers are the same, these costs are kept to a minimum. But refinancing your loan to a non bank lender can save thousands in rates and fees and charges over the life of the loan.