Investopoly

Have you ever had a strong opinion (prediction) about investment markets which was subsequently proven to be incorrect? A recent example was when many people predicted borrowers would be forced to sell their properties due to the Covid lockdowns and the market would crash. This outcome now seems unlikely.It is my view that a humble mindset is the best way to avoid being blindsided by unexpected investment risk, whilst at the same time spotting all opportunities. Let me explain.Predicting the end of the world isn’t a risky endeavourRobert Glazer wrote about the concept of cognitive dissonance in his recent blog:“… the authors examined the followers of cult leaders who predicted that the world was going to end on a specific date, and told everyone to prepare. When that day passed without a fiery inferno, you may have expected these cult leaders to have lost all credibility with their followers. Instead, the exact opposite happened. The leaders simply declared their prediction was incorrect and declared a new date. Like clockwork, their followers doubled-down and began preparing for the next apocalypse. Why would they do this? According to Tavris and Aronson, it was likely too painful for the cultists to admit they had fallen for a fraudulent prophecy. It was easier to avoid interrogating their own judgment, and to instead dig a deeper hole of delusion for themselves.”This shows the danger of holding strong opinions and leaving no room for the possibility that you could be wrong, particularly when you are investing money.Perpetual property bears seem to ignore the evidenceThere are two prominent commentators that have been perpetually bearish about the Australian property market since I started ProSolution in 2002.They are Martin North from Digital Financial Analytics and economist Dr Steve Keen, who is now working in London. Of course, there are others but these two stand out in my mind.They have both been outspoken and incorrectly predicted property price crashes on a number of occasions. In fact, I recall watching Dr Keen on the TV program, Sixty Minutes in 2008 telling all Australian’s to sell their property. Apparently, he even sold his apaMy new book out in mid-2026: To join the pre-order waitlist and get a bonus. More info go to: https://prosolution.com.au/book-preorder-bonus Do you have a question for the podcast? Email us at questions@investopoly.com.au. If you're interested in working with our team and me, discover how we can work together here: https://prosolution.com.au/family-office-servicesIf this episode resonated with you, please leave a rating on your favourite podcast platform. Subscribe to my weekly blog: https://prosolution.com.au/stay-connected IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.

This year’s budget was definitely aimed at business rather than individuals, and it needed to be. The main goal of the federal budget is to create jobs to repair the damage that Covid has done to the economy and Australian community.Therefore, if you already have a job, there’s not much good news for you in the budget. However, there is plenty of good news for the Australian economy which will probably enhance the share market and property investment returns.What’s in it for individuals?The major benefit contained in the budget for individuals was income tax cuts. These tax cuts are backdated to begin on 1 July 2020. The table below sets out the tax savings (second column from the right) that you may enjoy.The budget also included some other miscellaneous benefits, which are listed below.Improving the super industry and performanceThe government will direct employers to pay super into existing accounts (as advised by the ATO) to avoid opening a new account with a new super fund when you start a new job. This will avoid workers unknowingly accumulating multiple super accounts.The government will also take measures to improve the accountability and transparency of super funds, which is a problem I have written about previously. This includes building a MySuper website which will allow people to rank investment returns and fees. Any improvements in this space are long overdue.Interestingly, the government did not announce that it would postpone the increase to the compulsory super contribution rate from 9.5% to 10% p.a. At this stage, this is still set to begin on 1 July 2021.Granny flat arrangementsGranny flats will now be exempt from CGT where a formal written agreement is in place.Relaxing the paid parental leave qualification criteriaParents will qualify for parental leave payments if they have worked in 10 of the last 20 months, instead of 10 of the last 13 months, preceding the birth or adoption of a child. This is to accommodate the impact of Covid.Additional government grantees for first home buyersThe government will make available an additional 10,000 First Home My new book out in mid-2026: To join the pre-order waitlist and get a bonus. More info go to: https://prosolution.com.au/book-preorder-bonus Do you have a question for the podcast? Email us at questions@investopoly.com.au. If you're interested in working with our team and me, discover how we can work together here: https://prosolution.com.au/family-office-servicesIf this episode resonated with you, please leave a rating on your favourite podcast platform. Subscribe to my weekly blog: https://prosolution.com.au/stay-connected IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.

The government made an important announcement last week. This change could substantially increase your borrowing capacity in the next year. It is perhaps the most significant change that has occurred in the last decade and will further fuel property price growth.I also wanted to update you on interest rates, particularly in light of recent expectations that the RBA will soon cut rates again.A positive change for investors and the property marketIn 2009, the government re-wrote the laws governing the provision of loans. This required mortgage brokers and lenders to ensure that any new loans provided to borrowers were ‘not unsuitable’.The background is importantSince the introduction of this new legislation, the government (ASIC) has been gradually tightening the laws, particularly over the last 3 to 4 years. In October 2018, I compared the loan application process to a forensic investigation (see below). This was not an exaggeration.A few months ago, even the Governor of the RBA agreed that the tightening of credit rules had gone too far. There have been many examples of banks trawling through bank statements questioning small ($20) expenses. This pedantic approach added very little to the quality of the credit assessment.Your current spending tells me little about your ability to repayPerhaps the most significant recent event was Westpac’s success in defending an action initiated by ASIC regarding its alleged non-compliance with the credit laws. This case is now referred to as the 'Wagyu and shiraz' judgment. That is because Justice Perram said "I may eat Wagyu beef everyday washed down with the finest shiraz but, if I really want my new home, I can make do on much more modest fare…”.When faced with the decision of whether to go out to dinner or make a mortgage repayment, almost everyone will make the right decision. To some degree, a high level of discretionary spending is arguably strong evidence that you have surplus cash flow that you could otherwise divert towards loan repayments.The upshot is that 100 pages of ASIC guidance has created a very bureaucraticMy new book out in mid-2026: To join the pre-order waitlist and get a bonus. More info go to: https://prosolution.com.au/book-preorder-bonus Do you have a question for the podcast? Email us at questions@investopoly.com.au. If you're interested in working with our team and me, discover how we can work together here: https://prosolution.com.au/family-office-servicesIf this episode resonated with you, please leave a rating on your favourite podcast platform. Subscribe to my weekly blog: https://prosolution.com.au/stay-connected IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.

n May, I wrote a blog after CBA released its bearish ‘worst case’ forecast for the property market. It predicted a 32% drop in prices! I outlined in my blog why I thought that was rubbish and prices would not fall by more than 10%. To date, according to various data sources, property values have not slipped by much more than 2% to 3%, which is barely noteworthy.CBA revised its forecast on 9 September admitting they got it wrong.Now that the virus is under control in Melbourne (and also nationally), I thought it was an opportune time to share my forecast for next year. It is my view that prices in well-established, inner-city, blue chip suburbs will rebound strongly in 2021 and deliver double-digit growth.I set out the reasons for adopting this view below.Covid has hurt low-income earners and younger people the mostUnfortunately, lower-income earners have been more financially vulnerable to the impact of Covid. They tend to work in occupations that do not lend themselves to working from home. In addition, industries such has hospitality, travel and tourism have been severely impacted, especially in Melbourne. As such, Covid has disproportionately affected lower income earners to a much greater extent.A high proportion of middle and higher income earners are likely to either recover their income back to pre-Covid levels very quickly or haven’t been impacted at all.In fact, there is a large cohort of people that are in a stronger financial position today. That’s because their income has been unaffected, their discretionary spending has reduced e.g. less eating out and no holidays and interest rates are at all-time lows. As such, many people have either accelerated debt repayments or accumulated more savings.The best evidence of the financial strength of this cohort is reflected in the credit card spending data compiled by the banks. This data gives us a real-time indication of how much people are spending by category. Overall consumer spending is up 5% compared to last year. This demonstrates the unaffected cohort more than makes up for the people that have lost their jobs and income. This thematic is likely to translate to the property market too, especially in blue-chip suburbs.Low rates will inflate asset pricesIt is a generally accepted economic principal that lower interest rates result in increMy new book out in mid-2026: To join the pre-order waitlist and get a bonus. More info go to: https://prosolution.com.au/book-preorder-bonus Do you have a question for the podcast? Email us at questions@investopoly.com.au. If you're interested in working with our team and me, discover how we can work together here: https://prosolution.com.au/family-office-servicesIf this episode resonated with you, please leave a rating on your favourite podcast platform. Subscribe to my weekly blog: https://prosolution.com.au/stay-connected IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.

The compulsory superannuation contribution rate is set to increase by 0.5% each year for the next six years (i.e. from 9.5% to 12%) beginning from 1 July 2021. It is understood that the Federal Government is considering postponing next year’s increase, due to concerns about whether the economy can afford these higher employment costs and at the same time as deal with the current economic challenges.A lot of the commentary about superannuation, including whether next year’s contribution increase should be postponed, is often motivated by political and vested interests. Therefore, I thought it would be useful to cut through this rhetoric and focus on the facts alone (i.e. maths).In particular, I wanted to focus on two questions; (1) how long will your super last after retirement, and (2) how important are higher contributions compared to investment returns and fees.How long your super will last depends on what you spendObviously, a key determinant of how long your super balance will last is how much you spend. The less you spend, the longer your money will last – no surprises there!The best way to assess how much money you will probably need in retirement (to maintain your current standard of living), is to base it on how much you spend today. Of course, it is likely that you will spend your money on different things, but the aggregate amount tends to be very similar (between when you are working to when you are retired).This table sets out what people tend to spend, based on my experience. The rule of thumb is that living expenses (see my definition of General Living Expenses here) tend to be in the range of 40% and 50% of your gross employment income (but typically not less than $50,000 or more than $150,000).Comparing annual contribution levels of 9.5%, 12% and 15%In my analysis, I measured the impact of a 30-year-old contributing a total of between 9.5% and 15% of their income each year for 30 years i.e. until they are age 60.In most circumstances, contributing 12% My new book out in mid-2026: To join the pre-order waitlist and get a bonus. More info go to: https://prosolution.com.au/book-preorder-bonus Do you have a question for the podcast? Email us at questions@investopoly.com.au. If you're interested in working with our team and me, discover how we can work together here: https://prosolution.com.au/family-office-servicesIf this episode resonated with you, please leave a rating on your favourite podcast platform. Subscribe to my weekly blog: https://prosolution.com.au/stay-connected IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.

Investing well is important. However, investing well over long periods of time is most important.Everyone would agree that making a one-time 50% return on an investment is a wonderful outcome. But making a 7% return each year for 40 years is a far better outcome, as it multiplies your initial investment by a factor of 15!This is an important principal to remind ourselves of, especially at the moment when our lives (and, to some extent, markets) have been turned upside-down by Covid-19!Even moderate returns over long periods generate massive wealthThe chart below published by Vanguard (click to enlarge) calculates how much $10,000 invested in 1990 would be worth today.The Australian (ASX200) index is currently trading at 5,985. If it grows at 2% p.a., what will its value be in 50 years’ time?The answer: The ASX200 would be 16,100.If it grew by an average of 4% p.a., it would be worth 42,500. Now, imagine it if grows by 8% p.a. – which is still below the 8.9% p.a. growth rate over the past 30 years. That would push the ASX200 index above 280,000!!This simple example illustrates the beauty of playing the long game.But to successfully play the long game, you must resist the temptation to get sucked into the incessant short term ‘noise’, worry and predictions.I am usually sceptical when people tell me things have changed foreverThe world is full of forecasts. At the moment, many commentators are telling us that the work-from-home (WFH) movement will result in companies deserting commercial office space en masse. And increased WFH will also result in a permanent increase in demand for regional property – since we don’t need to travel into the CBD anymore.As Mr Buffett says, “forecasters will fill your ears but never your pockets”. You should be sceptical when anyone tells you that things have changed permanently overnight, because they rarely do.Let me use WFH as an exampleIt is my view that WFH will have some impact on demand for commercial office space and, to a lesser extent, residential property in regional locations. But the size of its impact has been grossly overstated.The forced increase in WFH (thanks to My new book out in mid-2026: To join the pre-order waitlist and get a bonus. More info go to: https://prosolution.com.au/book-preorder-bonus Do you have a question for the podcast? Email us at questions@investopoly.com.au. If you're interested in working with our team and me, discover how we can work together here: https://prosolution.com.au/family-office-servicesIf this episode resonated with you, please leave a rating on your favourite podcast platform. Subscribe to my weekly blog: https://prosolution.com.au/stay-connected IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.

The difference between a great and an average accountant can be significant. Not only is tax one of your biggest annual expenses, but a great accountant should be able to proactively identify other financial opportunities, in addition to tax-saving measures.Typically, the more complex your financial situation is (e.g. if you are self-employed, running a business, have a trust or SMSF, etc.), the more you have to gain from having the right accountant. That said, working with a great accountant is in everyone’s best interest.How do you know if your accountant is great or not?It’s difficult for clients to tell whether their accountant is proactively looking for, and has identified, all financial opportunities. The reality is, you don’t know, what you don’t know.To help you, I have listed below some common traits or behaviours that may indicate if your accountant is great or not!They take a long time to respond to your calls/emailsThis is a common complaint by many people. A lack of timely responses causes two problems.Firstly, it suggests that they have too much work, are under-staffed or have poor organisational skills. Neither of these things will allow them sufficient time and space to be able to provide you with proactive advice – because they will always be (reactively) rushing onto their next task.Secondly, it will discourage you from seeking their advice or keeping them updated about changes in your circumstances. However, if you know your accountant is fast to respond to emails, then you will be encouraged to run things past them. Doing so will give your accountant more scope to add value.They don’t ask questions – just follow last year’s workIt should come as no surprise that preparing the same tax return, year-after-year can be repetitive work. That said, its dangerous to fall into autopilot mode because if you make a mistake or miss an item one year, you will continue to repeat that mistake in subsequent years.To combat this risk, good accounting firms regularly rotate staff so that the same person is not preparing the same work many years in a row – and also have well defined review procedures.If your accountant rarely asks you questions or for additional information during the return preparation process, then it could be a sign that they are running on autopilot.They don’t My new book out in mid-2026: To join the pre-order waitlist and get a bonus. More info go to: https://prosolution.com.au/book-preorder-bonus Do you have a question for the podcast? Email us at questions@investopoly.com.au. If you're interested in working with our team and me, discover how we can work together here: https://prosolution.com.au/family-office-servicesIf this episode resonated with you, please leave a rating on your favourite podcast platform. Subscribe to my weekly blog: https://prosolution.com.au/stay-connected IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.

This blog’s title is a bit deceptive, because every property you buy is important, for either lifestyle or financial reasons.I contemplated using the title: “why the first property you buy is the most important one”. But the reality is, if you have made a mistake on your first property, you can always start again.The general theme of this blog is to demonstrate that the compounding impact of buying the right property is critical to understand.Why is it so important?Let me explain using an example:Rick and Karen are buying their first home and are comparing two properties. Property A is considered to be investment grade and has great growth prospects i.e. 6% p.a. growth rate. Property B is a newer property but has inferior growth prospects and barely keeps up with inflation – growing at 1% p.a. Both properties cost $750,000. Rick and Karen need to borrow $700,000. After 5 years of principal and interest home loan repayments, the balance of Rick and Karen’s loan would have reduced from $700,000 to approximately $622,000. The value of Property A would be approximately $1 million, and Property B would be $790,000. If Rick and Karen purchased Property A, they would have $378,000 of equity. However, if they purchased Property B, would have less than half the equity i.e. $168,000. That is a substantial difference of $210,000!But it’s how this difference compounds that’s most importantIf in 5 years’ time, Rick and Karen were contemplating upgrading their property to buy a larger family home, the differential in equity will have a substantial impact on their budget.Assuming that they want to borrow a maximum of 80% of the new home’s value, a deposit of $378,000 will allow Rick and Karen to spend up to $1.45 million (allowing for 6% for costs including stamp duty).However, a $168,000 deposit will only allow Rick and Karen to spend $650,000, which is less than their current property value! If they buy for $1 million, they will have to borrow 90% of the value and pay for mortgage insurance (which will cost over $35,000!).Therefore, using this example, the difference between buying the right versus wrong property could be the difference between being able to take the next step (and buy a family home), or not.It should be noted that this equity gap will continue to grow. If Rick and Karen purchased ProMy new book out in mid-2026: To join the pre-order waitlist and get a bonus. More info go to: https://prosolution.com.au/book-preorder-bonus Do you have a question for the podcast? Email us at questions@investopoly.com.au. If you're interested in working with our team and me, discover how we can work together here: https://prosolution.com.au/family-office-servicesIf this episode resonated with you, please leave a rating on your favourite podcast platform. Subscribe to my weekly blog: https://prosolution.com.au/stay-connected IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.

My professional life has been all about “the numbers” for more than two decades! So, as an accountant and financial advisor, it pains me to say that numbers are not always right!Numbers are factual, verifiable, logical and the ‘robustness’ gives me a lot of confidence. However, when it comes to investing in property, a focus on numbers alone can cause very costly mistakes.Evidenced-based approaches are rooted in simple mathI am a strong believer in only employing evidenced-based investment methodologies. That is, only invest when there is overwhelming evidence that the methodology will generate the investment returns you desire. If there is no evidence, then it is too risky. You may as well throw darts at a dartboard.Of course, normally we look to math to verify the evidence. Therefore, I appreciate that me stating that numbers can’t always be trusted may be somewhat contradictory.Why can the numbers be wrong?It is very important to understand what has driven the data, because not all data is reliable or meaningful.Suburb median data is a good example of this point. Sometimes I see advisors or journalists reporting median house price growth in a given suburb, often to support an investment case. But it’s important to understand the data before drawing any conclusions.Was the volume (number) of sales statistically significant? Were the properties that sold during the period representative of the property type you are considering investing in? Were the results driven by a once-off change such as the release of more land, major developments or the gentrification of the suburb?Just because a suburb has generated price growth of 9% p.a. over the past 5 or 10 years, doesn’t necessarily suggest its future growth will be in line with this.Property specific dataProperty specific historical data can also sometimes be unreliable.It is important to ascertain whether past sales were representative of the true market value of the subject property. Situations such as sales between related parties, transactions in very buoyant markets (i.e. if purchaser overpaid), if any capital improvements were made to the property during the period and so on. These can all affect the implied capital growth rate.Not every sale perfectly reflects a property’s intrinsic value, so care must be taken.Data can over or under inflaMy new book out in mid-2026: To join the pre-order waitlist and get a bonus. More info go to: https://prosolution.com.au/book-preorder-bonus Do you have a question for the podcast? Email us at questions@investopoly.com.au. If you're interested in working with our team and me, discover how we can work together here: https://prosolution.com.au/family-office-servicesIf this episode resonated with you, please leave a rating on your favourite podcast platform. Subscribe to my weekly blog: https://prosolution.com.au/stay-connected IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.

Slides - Click here Watch the video - click here My new book out in mid-2026: To join the pre-order waitlist and get a bonus. More info go to: https://prosolution.com.au/book-preorder-bonus Do you have a question for the podcast? Email us at questions@investopoly.com.au. If you're interested in working with our team and me, discover how we can work together here: https://prosolution.com.au/family-office-servicesIf this episode resonated with you, please leave a rating on your favourite podcast platform. Subscribe to my weekly blog: https://prosolution.com.au/stay-connected IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.