Market wrap: Is this the investment play for Gen Z?
Buying a property is a significant financial decision for anyone, that requires careful planning and preparation. With interest rates rising, Gen Z are feeling even more pressure to get into their first home, so what are the steps you need to take to buy a property?
First and foremost, Gen Z needs to stop listening to baby boomers, because they are repeatedly told how hard it is to get into the property market. But we need to change the message we are sending to the younger generation, so that they can move forward in a positive and more financially rewarding way.
Let's get one thing straight, living in a house that has your name on the title does not give you financial security. What it does is handcuff you to a bank, where you work hard to pay the bank, so they can make lots of money from you. But all this does is create a great deal of stress, and potentially mortgage stress, as more and more people are experiencing.
Gen Z often say they can't afford to buy where they want to live, so they live where they can afford. Unlike the baby boomers, they also are enticed to get into debt to have everything in the house, so they live a great lifestyle. But what sort of lifestyle is that, if you are constantly worried about the pressures of paying the mortgage? There is a better way.
If the goal is to get into the property market and build wealth, then why not do it smarter rather than harder. Young people should invest in an investment property and have the tenant and tax man pay for the mortgage, leaving them free to live where they want to live.
If the tenant is paying $500 per week in rent and the tax man is allowing you to claim on interest payments and other costs, then even in the current interest rate environment, Gen Z won't have to use much, if any, of their own money to fund the mortgage repayments. This leaves them free to live where they want, giving them a better lifestyle and less stress. So, how do the younger generation get a deposit together?
Start saving and aim to have a deposit of at least 20% of the property value. To accelerate the process, each time your bank account gets above $1,000, use that to buy good quality blue chip shares. That's because you'll receive more in dividend income than the interest payable on your bank account. The other benefit is that, on average, your money will grow above inflation.
While you're saving, start educating yourself on the property and stock market and do your research. In regard to the property market, you need to look at the best areas to invest regardless of which state the property is in. This is an investment, and you need to treat it like that.
To get ahead financially, it's wise not to follow the herd. Having an investment property that is being paid for by a tenant and the tax man gives you far more security and less stress than buying a home to live in. Buying a property isn't a complex process, if you have educated yourself, and with careful planning and preparation, you can make your dreams a reality.
What are the best and worst performing sectors this week?
The best performing sectors include Information Technology up more than 4%, followed by Consumer Discretionary up more than 3%, and Financials up more than 2%. The worst performing sectors include Energy and Materials, which are both down more than 2% followed by Utilities, which is just in the green for the week.
The best performing stocks in the ASX top 100 include Xero up more than 15% followed by Insurance Australia Group and Seek, which are both up more than 5%. The worst performing stocks include Woodside Energy Group and ALS, as both are down more than 6% followed by South 32, Evolution Mining and Northern Star Resources, which are all down more than 5%.
What's next for the Australian stock market?
This week, the All Ordinaries Index is technically trading up for the first time in a month, but, so far, the rise has not been convincing. While caution still needs to be exercised, a strong close up on Friday would go a long way to setting the scene for what might occur in the coming weeks.
The Australian stock market is in my target zone for the low, which was between 7,200 and 7,500 points, so it is quite possible it will rise over the coming month and possibly longer. However, if the close on Friday is around the low for the week, we need to expect further falls to the lower end of my target range.
Again, it will pay to be patient and wait for confirmation as the first step to success in the stock market, whether you are an investor or trader, is to get the direction of the market or stock right. Until direction is confirmed, your risk is high, and the outcome is uncertain.
For now, good luck and good trading.
Get stories like this in our newsletters.