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How should I be investing now?

I have mucked around with stocks for sometime with mixed success and despite some of the worrying things around the world right now, I suspect shares will do okay for a few years and I don’t want to miss out. I was thinking about an ETF that tracks the index or a model portfolio with a bias towards high growth. I am 43 years of age and close to paying off my house. I was also wondering if I should be investing inside a self-managed super fund? What do you think?

Given you’re in the lucky position that you have paid off your house, I presume you have super if you’re an employee and given your age, you’re wise to be diversifying your investment assets and asking these questions.

I like the ETF option as at least you get what the index does and this year I suspect it will be good for big companies, which drive the index.

A model portfolio is created with the person’s profile in mind and there’s a lot of mental muscle going into its construction, but they do need to be watched in case some stocks need to be replaced. Brokers can do this for you, but you have to be careful that they don’t over-service you to build up their fees. You could do this with a financial adviser who can help you watch the portfolio and make recommendations.

On whether you should do this using a self-managed super fund, this is also an area for a trustworthy financial adviser who can assess your qualifications for becoming a DIY investor. Some say $500,000 is needed and others say higher for a SMSF because of the accounting and auditing costs, but if you can do a lot yourself, you can make it work with say $250,000. The thing is if you invest out of super you will pay your marginal tax rate but inside super it’s only 15 per cent.

Provided you’re happy to tie up your money in super until you retire, then investing inside super will give a big tax windfall compared to investing outside of super. Some people invest outside using borrowed money and the tax deductibility helps to reduce the overall tax slug. If you’re happy to let your money roll over in super, then super investing is very tax effective but you have to be sure that you won’t want to touch your money until you’re 60 years of age.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

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, March 23, 2011

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