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How should a portfolio’s ratio be balanced?

I work full-time and earn $55,000. I have three investment properties worth approximately $530,000, with a debt of $75,000. I have shares valued at $56,000 and cash of $200,000. I need some advice as to whether I should develop the property investments or increase my share interests.

You’re a mystery man or woman, which makes it hard to give specific answers, but let’s just look at what we know and what we need to know.

For example, anyone helping you needs to know your age and your goals. You have left out your super, which could be a part of the wealth equation. If you’re in your 30s or 40s, the advice someone gives you is different if you’re in your late 50s looking at retirement in a few years. If you’re in your 40s or 50s, salary sacrifice could be a great idea.

Given your cash position, becoming an owner-occupier might be worth considering before property kicks along in price over the next few years. Your spread of investments looks OK, but what’s your risk profile? This is especially relevant with shares into the fifth year of double-digit growth.

Over time, it could be wise to improve your exposure to shares, but the timing for that could be in the future. Also, $200,000 worth of cash looks overweight. I hope you’re getting a good rate of interest.

I reckon your main job is to find an adviser you can trust who won’t rip you off, and get your goals linked to alternative strategies to see if they produce the results you want. Don’t be afraid of paying for good advice. If it’s good, it will pay for itself over and over again.

In short, the balance of a portfolio is entirely dependent on you, your circumstances and your level of investment comfort. A financial planner will help you nut this out.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Wednesday, November 24, 2010

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