Ask Paul: My adviser suggested property but I don't want a 30-year loan


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Hi Paul,

I'm after a suggestion on where to invest my savings. I'm 36 with an income of $139,000 plus super; have $84,000 and $US30,000 ($44,000) in savings; am not married and have no kids.

I have no private health insurance and no insurances associated with TPD, death or income protection within super.

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I feel buying a house is not ideal as I would get locked into a mortgage for 30 years. My thinking is to take more risk with a rental property (apartment) or some other investment.

I went to a financial adviser and they gave me a six-year plan with three options: buy a house, buy an investment property or invest in indirect property.

I like option three as the money is locked in for two years at a time and dividends can be reinvested in more direct investments such as managed funds.

My question is whether this approach is better, or do you feel I could invest in other options. Any suggestions you can provide will be much appreciated. - Hamza

Well, Hamza, I would argue that the best thing to do is to take action.

I am more concerned that people have goals and save on a regular basis. Shares and property have both done well over time and with a growing population they are likely to do so in the coming decades.

I am not really sure what "indirect property" means, given you mention a two-year lock-in. It may be some sort of syndicate, which makes me a bit nervous. Equally it could be listed or unlisted property trusts, but these do not usually lock you in.

A low-cost managed or ETF or something similar is a sensible idea with a long-term view.

The adviser has given you a framework to assist with decisions and will know a lot more about your situation than I do. Take a close look at the indirect property suggestion and seek a second opinion if you are unsure.

Your salary is high, meaning some salary sacrifice into super is a good plan. I can see why death insurance is not much use to you, but income protection insurance, I would argue, is important.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Click here to ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. Please view our disclaimer here.

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