You’ve set up your superannuation and bought a house to live in, and now you’re stumped with where to put your money next.
What about putting your money into something that you can enjoy, and that’s also a great investment?
Private investment manager Michael Holmes, author of Super Smart Money, said the ideal investment to enjoy straight away is one where you can “put up your feet, hang in the hammock” and yet still reap a steady cash flow.
But keep in mind, while these are investments for the soul, they need careful consideration and research if they are going to have the possibility of paying off financially too.
Show me the Monet
Melbourne-based Arc One Gallery co-director Fran Clark told The New Daily that artwork is “probably one of the greatest risks you can take, but it also has some of the greatest gains if you know what you are doing”.
More important than the very speculative financial gains is the “daily pleasure” and “enhanced lifestyle”, said the North Melbourne Gallerysmith director Marita Smith, who warned that art investing is “highly speculative, requires patience and the returns can vary greatly”.
Here is what these gallery owners recommend:
• Buy from a reputable gallery or auction house.
• Verify past ownership of the artwork (provenance).
• Educate yourself about art generally. Read voraciously.
• Arm yourself with as much information about the piece of art and the artist as possible.
• For lower risk, buy “blue-chip art” by a deceased artist with a distinctive style and a strong history of sales on the secondary market.
• Hold onto the artwork for at least five years, preferably longer.
Private investment manager Michael Holmes warns that art investing is “real high-risk” and pure price speculation.
And don’t forget – it’s for you to enjoy, so make sure it’s something you want to look at.
Shares that give back
Of the more than 2000 companies listed on the Australian stock exchange, Mr Holmes only has eyes for “a little niche” of 20 or fewer that can bring in a strong cash flow straight away while you “don’t do anything at all”.
These are companies with a history of high dividends that he thinks will continue to pay out a lot (but not quite 100 per cent) of their strong profits each year well into the future so that you can sit back, relax and reap the twice-yearly rewards.
The Commonwealth Bank (CBA) and Woolworths stand out from the rest, said Mr Holmes (who said he derives “absolutely no” kickbacks from recommending these shares). Woolworths has never not paid a bigger dividend than the year before, and CBA, which this week posted a rise in its first-quarter profit suggesting it is on track for another record profit, has only once cut its dividend.
Because you’re worth it
This year, Mr Holmes undertook a 40-week course to improve his business, and is now a glowing advocate of self-improvement as “one of the best investments you can make”.
“For me, it’s paid off. I would have gotten back, even before the course finished, what I’ve put into it,” he said.
Immediate benefits could be gained from learning a language, enrolling at university or TAFE, or paying for a short course to expand your mind and your employment prospects.
• For more inspiration read this piece on the short courses that could change your career
Holiday house, celebrate
Rising Tide founder and managing director Chris Browne told The New Daily that he and his wife recently bought a holiday home in Barwon Heads after six months of careful planning.
“It is possible” to find a holiday home that is also a wealth creator, but the primary focus should be family enjoyment, with “making a few bucks” a distant second, said Mr Browne, an independent financial advisor.
Capital growth is likely to be poor because demand is usually low for nine months of the year in top holiday spots. Instead, aim for a property with proven rental yield so that if you get into financial difficulty you can easily rent it out to other holidaymakers, he said.
Invest in your swing
Several Australian golf courses, such as The National in Victoria, offer share schemes that double as both a membership package and a potential money maker.
If demand goes up or the membership fees go up, you can potentially on-sell your share to another golf enthusiast, Mr Browne said.
“I’d go in with the idea that you’re going to be a member of a great golf course as opposed to going in thinking that you’re going to be a millionaire,” he said.
Be wary of self-managed
If you do decide to buy an art collection or a holiday home, think twice before buying it through a self-managed super fund, Mr Browne warned, as this strategy is “really dicey, if not illegal”.
This is because if you hang the painting or stay in the holiday home, you may technically be deriving a personal benefit from your super before you are eligible to access it. It may also breach the sole purpose test – you must use your SMSF for the “sole purpose” of providing for your retirement.
“All of the message that we’re getting from the ATO is that they are really going to tighten up on this sort of stuff because they know that some people are taking the piss a bit,” said Mr Browne.
Watch the below video from the ATO for more information: