Pete Wargent blogspot

Co-founder & CEO of AllenWargent property advisory, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds, & private investors.

4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the better property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete Wargent is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"Pete's daily analysis is unputdownable" - Dr. Chris Caton, Chief Economist, BT Financial.

Invest in Sydney/Brisbane property markets, or for media/public speaking requests, email pete@allenwargent.com

Monday, 14 April 2014

Retirement?

Pension

The subject of retirement is very much in the news at the moment, with Federal Treasurer Joe Hockey potentially set to raise the pension age in Australia, perhaps all the way up to 70.

What would I say about that?

First and foremost, don't let the government of the day dictate to you when you retire. Decide for yourself!

And secondly, consider, what if there was a job you would do for free, even if you live to be much older than 70?

How quickly can I retire?

If there is one question I get asked more than any other it is this: "How quickly can I quit my job?".

From a practical point of view, the answer is quite self-explanatory.

If you work on the principle of ultimately being able to invest your cash in equity products which pay you tax-advantaged dividends (i.e with franking credits attached) o~5% per annum, then the mathematics is very simple.

Multiply your annual desired retirement income by approximately 20 times and that' presents you with the amount of cash you need available to invest (click chart):


Boom. Easy. 

Thus if your goal is income of $75,000 per annum, then you need around $1.5 million available to invest in equities which pay you a growing franked dividend stream which can match or outperform the rate of inflation over time.

Once you have set the target, then you must start out on the long road of working diligently, spending less than you earn, and investing the difference in order to build your portfolio until it reaches the level you need. 

It really is that straightforward.

Whether you choose to use shares, property or a combination of both to reach the goal is largely a matter for personal choice. 

I'd say, though, that it is absolutely imperative to enjoy that journey! Otherwise, what actually, is the point of it all?

Ways to reach the goal sooner

Naturally, one of the reasons people tend towards property investment is to use the banks money as leverage to reach their retirement goals sooner, although of course leverage magnifies capital losses as well as gains.

A more conservative approach is to simply keep pumping money into an index fund or a portfolio of equities every month or at any time you are able to do so, until the dividend streams exceed your expenses.

How else might you be able to reach your goals sooner?

One way, obviously, is to earn more money. Another way to is to spend less of it, leaving you more money to invest. This is not rocket surgery, as the (mildly) humorous saying goes.

If you're feeling switched on today you will also have noted that the goal will be reached sooner where your desired retirement income is lower. 

In fact, if you are able to commit to living the rest of your life on a caravan park down the coast on an austere subsistence of lentils and water, you could potentially reach that position of 'financial freedom' remarkably quickly.

In fact, I'd go so far as to say that even a moderate income earner could achieve such a goal within one market cycle if they are 100% dedicated to that goal.

However...

Before getting too carried away and resolving to live a live of total austerity, let's take a step back for a moment.

One thing which troubles me when people ask: "How quickly can I quit my job?" is that...well, if quitting your job is your primary motivation, then I think I can say with some certainty that you are working in the wrong job.

This is I would call "away from" motivation. You might be able to get away from the job which you find tiresome, stressful, depressing, anxiety-provoking or draining. But then what?

What if money were no object?

If you on a Sunday night you have a dread of Monday mornings, then the 3 minute video I've inserted below from British philosopher Alan Watts is well worth a watch.


What would you do if money were no object, questions Watts? It's a very valid question.

I agree that earning a high income seems important, and admittedly I say that as someone who was a top bracket taxpayer at the age of 28. 

I soon worked out, though, that my passion was for finance and investment, particularly writing about these subjects and actively investing, so I resolved to find a way to make that my business.

Mark Twain said: "If you can make your vacation your vocation, then you'll never work a day in your life". 

And Mark Twain was right.

Meaning

I usually feel that I must be somewhere along the right track when I'm offered money to write articles or appear in the media, since that is what I'd happily do for free anyway.

Similarly, when I'm paid royalties for my book sales, I know that I'd write books whether I was paid for them or not (don't tell my publishers that, though), so I take this as a good sign that I'm in the right line of work.

I'm interested in investing in property and shares in London and Sydney, so I founded a business which helps other people to do just that.

As the very wise Alan Watts correctly points out, you can become an expert in your field of passion by applying time and effort to it. 

Remember the Zulu Principle: through specialising in your passion you can become an expert in your field. And if you are interested in something, then it's certain that others will be too.

Yes, of course, you can follow the "Early Retirement Extreme" approach by resolving to live on rice and pulses. But then what?

Happiness?

What makes people happy? 

Health. Family and relationships. Meaningful work. Charitable giving and gratitude. And a sense of freedom, which is partly gained from doing what you want to do.

Some questions to consider:

-what excites you?
-what makes your heart beat faster?
-what would you do if money were no object?
-what would your ideal day look like?

I've just forced myself answer the same questions. 

I'm excited by working in the media. 

I enjoy travelling and learning to speak local languages, and would love to visit more countries than I have to date (28) - there's a whole world out there and, since we only live once as far as I'm aware, what a waste it would be not to see as much of it as possible!

Writing is fun. So is watching Rugby League (though not so much this season, so far!), and spending time and interacting with friends and other people. I like living in Sydney, but have also had tremendous fun taking  a year to drive around the whole of Australia. 

I like talking about, debating and implement investment strategies, I find real business and real estate interesting, and am fascinated by reading and analysing news about the economy. 

I get a thrill from charitable giving which I know will change people's lives for the better - such as paying school fees or buying a simple gift - in fact, it's hard to think of anything which gives more genuine pleasure and satisfaction than that.

These are just a few of my interests. But what about yours? 

Forget the pension age of 70, for a moment. What line of work would you continue doing if you lived to be 95? Because it interests you and you find it exciting?

If you spend less than you earn, and apply discipline and patience, then you will reach the retirement income goal sooner or later. But don't forget to enjoy the journey!