A typical investment strategy life cycle [video]

What is more important to do first? Contribute into super or buy an investment property? How will investing in property help you fund retirement? What can you do (invest in) to minimise the risk of running out of money in retirement? These questions all relate to your investment strategy.

Most of these questions can be answered by acquiring an understanding of a typical investment strategy life cycle. Watch the 8 minute video below and I will take you through the order in which many successful investors build wealth for a comfortable retirement.

Here’s a summary of what the below video covers and some links to more information

Click here to view/print the ‘retirement strategy life cycle’.

Below is a summary of the important steps as discussed in the below video (I recommend that you invest 8 minutes and watch it):

  1. In your 20’s & early 30’s: Buy property first – the first thing a young person in their 20’s or 30s should do is buy an investment-grade property. There are two reasons for this. Firstly, it allows you to invest more sooner i.e. higher leverage as you can typically borrow 90-95% of a property’s value. Secondly, an investment-grade property provides most of its return in compounding capital growth – see here why that’s important.
  2. In your 30’s & 40’s: Upgrade your home and buy investment property/s – the priority in this phase is asset acquisition. You will naturally have some lifestyle goals such as upgrading your home to better accommodate your family (read this blog). The goal in this phase is to accumulate sufficient assets that will provide a robust amount of capital growth over the next 30 to 40 years.
  3. In your late 40’s & 50’s: Repay/offset debt, contribute into super and invest in other assets such as shares – during this phase you should focus more on reducing liabilities and boosting your super balance. As you approach retirement, you should have a greater focus on generating more passive income (rather than capital growth).
  4. From 60: Draw an income stream from super – hopefully you should have sufficient super to fund the first portion of retirement (at least the first 10 years). You can do this by drawing a regular income from your super account (see here). It is likely that this income will be tax free.
  5. 10 to 20 years post retirement: Divest of property assets – when your super balance is getting low, you should consider selling an investment property (if necessary). Since you purchased the property 3 to 4 decades ago, it should have generated substantial capital growth (if you invested in the right asset).

I hope this summary has given you a greater understanding of how an investment strategy works.

If you have any questions whatsoever, or if you would like to discuss your investment strategy with me, please do not hesitate to reach out to us.

Financial planning checklist

 

This is not a “one size fits all” investment strategy

The video sets out the typical approach that successful investors employ. However, of course, there are often subtle but important variations to one’s strategy that are necessary to accommodate differences in financial situations and goals. Therefore, whilst the above approach might be appropriate for your circumstances, it should not be viewed as a “one size fits all”. Be careful implementing a strategy without first seeking advice from an independent financial planner.