Top investment questions for 2011

To coincide with the launch of Mozo’s new Investments Hub, we asked The Debt Man, Bruce Brammall to be our featured expert on Mozo Answers.

Over the week we had close to 50 great questions about investing, superannuation and managing debt. The answers from Bruce (with some assistance from our other Industry Insiders) proved to be essential reading for anyone looking to invest their cash right now.

In fact, we thought the week was such a success that we’d run a highlight reel! There are many more Answers than those below, so if you can’t find something for you, head over to Answers and have a browse through.

Is now a good time to start investing in shares?

If you have money to invest, I'd be recommending investing some now, certainly. But the best way to invest is to invest regularly. Put in small amounts on a regular basis. If you put in a portion of your money now and then add to the investment on a regular basis, then you won't be putting all of your money in just before a big fall.

I think now is a good time to START investing. But even though the market has fallen, and people have lost a wad of money in recent months, it's never a time to be taking really big bets. Enter the market slowly…

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What is a “good” amount of money to start a share portfolio?

I probably wouldn't start a direct equities portfolio with less than $50,000. To buy individual shares, I wouldn't do it without being able to purchase around $3000 to $4000 of each company and be able to have a reasonably well diversified portfolio of between 10 and 15 stocks.

If you're purchasing five stocks or less, you're lacking diversification and you're taking some pretty big risks on individual companies that you might not know too much about.

If you're starting with less than $50l - and you believe that you should be investing in Australian shares - I would recommend a managed fund that dealt with Australian shares. Something like an index fund, such as Vanguard, which will give you broad exposure for a low cost.

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Fixed or variable loan?

Personally, I prefer variable rates. They are generally cheaper over the medium/long term but they are going to fluctuate. And when interest rates rise beyond “normal”, that can be a bit uncomfortable if you don’t have some good savings in your offset/savings account.

Fixed rates will smooth out the bumps, but will probably be a little more expensive over the term of the loan. If you look at a fixed loan rate and think “Yeah, I could live with that for 1/3/5 years and it wouldn’t make me uncomfortable”, then they can make sense. Fixed rates are an insurance premium. You get a guaranteed monthly mortgage, but you’re generally going to pay a little more for it.

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