Recommended Strategies, Borrowing to Invest, Dollar Cost Averaging, Diversification and more!
You are at the stage in life where the decisions you make now will have a crucial effect on your lifestyle for the rest of your working life and the kind of retirement you will end up enjoying (or enduring).
So let’s take a look at the details on how Ethica can help you create more wealth to support your ideal lifestyle. Aside from Superannuation (which you can read more about here), here are some structures, techniques and strategies we can discuss with you to help achieve your goals over the next ten to fifty years.
Complete our online form to book in a complementary consultation (valued at $595) to discuss your goals and current financial situation so the Ethica team can get your wealth creation strategy underway and working for you.
Investment Loans - Borrowing to Invest
Borrowing to invest is a long established strategy that can enable you to take advantage of certain tax savings while investing more than you would have otherwise been able to.
Dollar cost averaging
We’d all love to buy shares when the market is low and sell them when it’s high. But unless you happen to own a reliable crystal ball, you’ll need another approach. Dollar cost averaging is about spending a set amount of money purchasing shares in multiple ‘buys’ over a period of time, rather than buying them all at once.
This way, you don’t get stuck buying all of them at a high price. You overcome any short-term volatility by ‘averaging out‘ the cost of the share over multiple purchases. You get some of the benefits of investing at low prices, while limiting the cost of purchasing at peak prices.
Diversification is a vital part of any sound investment strategy. It means investing in a variety of different types of investments so that you spread your risk across totally different types of investments and different classes of assets, rather than putting ‘all your eggs in one basket‘. In general, there are four basic types of asset:
By diversifying your investment and spreading it across multiple different types of assets you can ‘smooth out the bumps‘ – if one asset performs badly, another will perform better, giving you more consistent earnings from year to year, rather than wild swings up and down. It’s important to diversify your investment across different classes of assets as well as diversifying within those asset classes.
Using the appropriate tax and investment structure
Making sure that you have the most appropriate tax and investment structures can have a big effect on your bottom line. This is particularly the case for business owners, but can apply to investors too.
Structures are the vehicles that are available to carry out business – for example, your business could operate as a sole trader, a company, a partnership, a family trust or another type of trust. There are advantages and disadvantages to all structures such as these.
At Ethica, we will work in collaboration with you, your solicitor &/or accountant so that we can provide the best possible advice for your existing structures or help you create the most appropriate investment structures to meet your goals.
This particularly applies to health insurance. There are a few things to consider here. The government applies an additional Medicare Surcharge to individuals earning more than $84,000 or couples earning more than $168,000 if they do not have a minimum level of private health insurance. Those with private health insurance can claim a 30% health insurance tax offset (though most health insurers pass this saving on in the form of lower premiums rather than you having to claim it at tax time).
Anyone (such as your spouse or children) who takes out private health cover before their 31st birthday will receive lower premium rates for life. Given these factors, it’s worth taking the time to review your health insurance with the Ethica team to ensure that you are maximising your entitlements.
When creating wealth for yourself it is always good to remember those who are less fortunate. Corporate and individual philanthropy has become more popular in recent decades and many charities have tax deductible status allowing any donations you make to be tax deductible.
If you are selling an asset, which may have large taxable capital gains, you might consider a charitable gift whereby the government effectively funds half of your donation through the tax deduction available.
If doing your bit to help others is important to you, it is now possible to set up your own charity or foundation to carry out good works and leave a lasting legacy.