1. Property is the best investment you can make
|The term 'safe as houses' is often used to justify residential property investment. And it's true that investment in residential property has proven very resilient in the market over long periods, often outperforming other asset classes1.
But as a short-term profit generator it is far less stable because of the costs of buying and owning an investment property and cyclical rises and falls in property prices. It is also illiquid: you can't sell a bedroom if you suddenly need some cash.
2. All mortgages are the same
|There are different types of mortgages2. With a principal and interest mortgage, you pay off the principal loan plus the interest and own more of your property over time – a common approach for owner-occupiers. In an interest-only mortgage, you only repay interest, and will owe your mortgage provider the original value of the property at the end of the mortgage – a common approach for investors. With an offset or redraw mortgage you effectively use the mortgage as a bank account – they're a popular way of paying down a mortgage faster, but usually with higher costs.
A reverse mortgage, on the other hand, is an equity release mechanism for older home owners who have paid off their home3.
3. Investing in large, stable companies yields the best return
|So-called blue chip shares in large, stable companies pay regular dividends and can generally ride out share market shocks. Yet it can be the smaller, more speculative companies that generate the highest capital returns. When deciding where to invest4, it’s a good idea to consider things like dividends and franking credits as well as share price in your calculations, and consider getting advice. You will also need to decide whether you’re more interested in an income (dividends) or in rising value (share price).|
4. It's okay to put off saving till later in life
|You may not be a high earner in your first job, but putting money away as soon as you start working is a powerful wealth accelerator because of the power of 'compounding' over time. According to the government’s MoneySmart calculator, $100 a month amount invested in an account paying 5% interest p.a. would amount to $41,375 after 20 years5.|
5. You'll need super to enjoy retirement
|The Association of Superannuation Funds of Australia (ASFA) has said that most couples need about $61,000 a year for a comfortable retirement, or $43,000 for single retirees6. These figures will vary according to your situation, so tools such as these from ASFA and MLC can help you estimate your needs. Experts agree that, unless you can rely on an independent income, building up adequate funds in super is essential for a comfortable retirement.|
6. I am automatically eligible for the Age Pension
|There are different rates of Age Pension payments for single people and couples. However, the rate is subject to income and assets tests7.
The age at which you're eligible to apply for the Age Pension is also rising, with those born after 1 July 1957 not eligible for a pension until they turn 67. Without adequate super, experts say many may need to downsize the family home or borrow to pay for retirement.
7. You need to save for a rainy day
|An emergency fund is an essential resource to weather unexpected events8. A good rule of thumb is to have enough money saved to cover at least three months’ living expenses and to put money away regularly to build up a fund.|
8. With no debt I'll have a good credit rating
|Having no debt doesn't guarantee a good credit rating. A change of address or an undetected identity theft can damage your rating. Australian consumer advocacy group Choice recommends requesting a free credit report once a year and, should you need it, accessing the free financial counselling offered by community organisations, community legal centres and some government agencies9.|
9. Credit cards are good for emergencies
|Credit cards can help with unexpected expenses, but you'll be charged interest if you don't pay off the full balance each month. Paying only the minimum each month can prove expensive. This is why experts recommend having an emergency fund to use instead.|
Important information and disclaimer
NULIS Nominees (Australia) Limited AFSL 236465 ABN 80 008 515 633 provides this information as trustee of the MLC Super Fund ABN 70 732 426 024. This information may constitute general advice. It has been prepared without taking account of individual objectives, financial situation or needs. Before acting on any information, you should assess or seek advice on whether it is appropriate for your needs, financial situation and investment objectives. We recommend you obtain financial and tax advice tailored to your own circumstances prior to making any investment or acquisition decision. Any general tax information is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent. This information is current as at 9 October 2019 and may be subject to change, for example should there be a change of legislation or economic conditions. An investment with NULIS is not a deposit with or liability of, and is not guaranteed by, NAB or other members of the NAB Group, and is subject to investment risk including possible delays in repayment and loss of income and capital invested. Past performance is not a reliable indicator of future performance.
Any advice and information on this website is general only, and has been prepared without taking into account your particular circumstances and needs. Before acting on any advice on this website you should assess or seek advice on whether it is appropriate for your needs, financial situation and investment objectives.
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MLC Limited uses the MLC brand under licence. MLC Limited is a part of the Nippon Life Insurance Group and not part of the NAB Group of Companies.