Webinar: Tips for borrowing to invest successfully

We’re living longer and our kids are experiencing the challenges of establishing themselves in a world of higher house-to-wage ratios. Our over-leveraged governments have responded by cutting back on spending in health, education and social services as well as super tax breaks that encourage us to save. The upshot is, we have to rely on ourselves for a comfortable long-term future.

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We’re living longer and our kids are experiencing the challenges of establishing themselves in a world of higher house-to-wage ratios. Our over-leveraged governments have responded by cutting back on spending in health, education and social services as well as super tax breaks that encourage us to save. The upshot is, we have to rely on ourselves for a comfortable long-term future.

So, the big question is: how do we do it? NAB’s recent webinar on Borrowing to Invest brought together financial advice commentator Noel Whittaker, REA Group’s Chief Economist Nerida Conisbee and NAB Equity Head of Sales Craig Saunders to explore some answers.

Financial investment commentator Noel Whittaker summed up the panel’s attitude to wealth creation: “I believe becoming wealthy is like a game of Monopoly. The aim is to get the most assets under your control.”

As well as diversification being key, the panel also agreed on the basic steps you need to take to get a mix of performing assets, including when to borrow to buy them.

Balancing multiple goals and strategies

Just as with any business decision, knowing what you want to achieve and by when underpins an effective strategy for getting there.

Say you want to set up a passive income stream of at least $250,000 p.a. that can keep up with inflation, pay for the kids’ education and at least a home deposit for each of them within 10 years. Plus, you want to take care of your parents’ and parents-in-law’s aged care in the near future. The strategies you’ll use to fund each goal will look quite different.

 REA Group’s Chief Economist Nerida Conisbee points out that every investment decision has good and bad points.

“Most people buy property for capital gain but some are looking for high yield,” she says, adding: “You don’t get both in the same property or region, which means really defining what you want to achieve before you invest.”

Whittaker argues that when you invest in shares, you can start with smaller sums and lower entry and exit costs compared to a good capital-gain property.

“Shares are liquid, the income can have franking credits to make it highly effective for tax purposes and you can diversify easily.”

Borrow to diversify

Everybody on the panel, including Conisbee, highlighted the importance of using borrowed funds to diversify from your existing investment sectors.

NAB Equity Head of Sales Craig Saunders runs through a list of investment classes that people often overlook: “Australians, including me, are obsessed with property. But I’d encourage you to look at other asset classes to balance out your portfolio without the initial outlay and overheads of a well-located property.”

He says the other thing to keep in mind is suitability, adding: “Remember, you’re paying interest on this, so only invest borrowed funds in assets you would put your own cash into.”

For expert tips on how to fund and choose property and financial product investments, view the full webinar Borrowing to Invest.