Investopoly

Many people feel investing in the share market is a complex and scary concept. This is often due to a lack of understanding.I have written a number of blogs about the advantages of index investing. However, I thought it might be useful to take a step back and take a look at the basics of share market investing.How does the stock market work?The share market is merely a place where people come to buy and sell shares. Some people will be buyers, and some will be sellers. They will each bid what price they are willing to buy or sell a particular stock. A deal will be done when they meet in the middle and agree on price. This is all done electronically (although, in Australia, prior to 1990, it was done on chalk boards).You can see an example of this in the screen-print below (for CBA). As you can see, there are 9 people that would like to buy 455 shares in CBA shares for a price of $79.77. There are also 16 people that are prepared to sell 519 shares for $79.79. Seconds after taking this screen shot, the shares traded or $79.78 (i.e. the mid-point). These transactions happen all the time and this is how shares are valued by the market.By the way, this is called market depth. That is, the number of buyers and sellers (and number of units) interested in trading a particular stock. It is important to invest in a stock with good depth to ensure your investment is liquid and fairly priced. More on this soon.What is a company worth?Obviously, the ‘market’ determines the value of a stock. As stated above, the market is made up of many buyers and sellers (most of them professionals).There is a concept in financial theory called the Efficient Market Hypothesis (EFH) which states that the price of a stock reflects all available information about that stock and therefore is an accurate indication of its intrinsic value. Whilst this theory has some merit, I believe that EFM is truer in the long run than it is in the short run. In the short run, popularity can drive stock prices, not fundamentals.Fundamentally, the value of a company is simply the present value of its future cash flows (i.e. profit). That is, what is the total value of say the next 10 years of profit after applying a discount rate (which is like an interest rate) to account for the businesses risk.So, the key factor that investors 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.

Australian’s have a well-documented love affair with property. Many people pursue the “great Australian dream” of owning their own home and over 2.1 million taxpayers invest in property. Most Australian’s also invest in the share market too, via their superannuation.However, one of the decisions that many people struggle with is whether to invest in property, shares or both. And if the answer is to invest in both, how much do you invest in each and is it wise to do one before the other?Like with many things in life, moderation is the keyAll things being equal, diversification is typically the wisest approach. Spreading your money across various asset classes helps you reduce your investment risks. Property and share investment returns are not correlated, so by investing both, hopefully the ‘good’ years in property will randomly offset the ‘bad’ years in shares (and vice-versa). That is less important in the long run, but in the short run, diversification smooths investment returns, which makes the road less bumpy and less stressful.Don’t invest if you are uncomfortableWhilst you should always aim to never let your emotions guide financial decisions (as discussed here), sometimes people are very uncomfortable with investing in either property or shares.I believe that you should never invest in anything unless you are 100% comfortable. Therefore, if your risk tolerance drives you to invest in one asset class only (i.e. property or shares), then that is okay as long as you use the correct investment methodologies. At the end of the day, the quality of your investments is more important than your level of diversification, especially in the long run.You probably don’t need to invest in more than two investment-grade propertiesSome businesses and articles online promote the benefits of acquiring a large property portfolio. Whilst this might be realistic for some, it’s completely unnecessary for most people. Of all the financial plans that I formulate, I rarely recommend my clients invest in more than three properties. In fact, most plans involve investing in one or two.There are two reason for this. Firstly, quality trumps quantity every day of the week! It is much better to put all your money in one high-quality property than spread your monies across several “average” quality properties.SecondlMy 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.

You would be excused for thinking that developed economies all over the world are gradually making their way to a zero interest rate environment.Long term fixed mortgage rates in the United States are less than 3% p.a. In the UK, rates are under 2% and even lower in Europe (circa 0.50% p.a. in France for example). In Australian this week, 5-year fixed home loan rate fell below 3% p.a. And in Demark the other week, Jyske Bank announced it would pay borrowers 0.50% p.a. to take out a mortgage! Anyone that had a mortgage in the early 1990’s would regard today’s interest rates as almost unfathomable.What does this mean for investor, especially those that borrow to invest in property?Interest rates lower for longer?The market is predicting that the RBA will cut rates by 0.50% by mid-2020. If this turns out to be correct, Australian mortgage rates could fall even further.In July, RBA Governor, Phillip Lowe said "Whether or not further monetary easing is needed, it is reasonable to expect an extended period of low interest rates." Many commentators have suggested that interest rates may not increase materially for a decade or longer. Japan, for instance, has been stuck on zero interest rates for 20 years.But the banks need to charge at least 2%A measure called the ‘net interest margin’ is the gross profit a bank makes from lending money to its customers. The net interest margin must cover all the banks costs and still deliver a healthy net profit. In Australia, the major banks net interest margin is approximately 2%.Therefore, even if Australia’s cash rate fell to zero, it is unlikely that variable mortgage rates would fall below 2%, as the banks would seek to maintain their profit margins. Of course, a negative RBA cash rate, which exists in some countries in Europe, could push variable mortgage rates below 2%.Bye, bye negative gearing tax benefits for property investorsThe most obvious consequence of low interest rates for property investors is that it significantly reduces negative gearing tax benefits. When interest rates were 7% p.a., property investors where crystallising large incoMy 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.

We all want to stay on the ATO’s good side. No one wants to invite a tax audit. But, at the same time, it is prudent to investigate all opportunities to minimise the amount of tax we pay.This often requires a balance between minimising taxes wherever possible, but not being too aggressive that you risk getting into trouble with the ATO. My view is that you always stick within the black letter of the law – never transgressing into any grey areas – as it’s never worth it in the long run.The ATO has made some significant changes lately that I want to bring to your attention. These changes might encourage you to review how to manage your finances.ATO: 90% of property investor tax returns have errorsThe ATO announced in April that it will double the number of audits of property investor tax returns to 4,500. It said that its data indicates that 90% of property investor tax returns contained errors. The ATO found four main errors:Interest deductionsErrors included incorrectly claiming interest that was not tax-deductible (i.e. debt was not used to produce taxable income e.g. home loan) and/or loan purpose was not able to be proven by the taxpayer e.g. they mixed purposes in one loan.It is likely that interest is your largest tax deduction, so you must take care in not compromising it. Make sure your loans are correctly structured as I have previously described here. And keep good records i.e. you can demonstrate what investment asset each loan relates to.In short, separate loans by asset i.e. separate loan/s for each property or investment – avoid having one loan for multiple purposes. And if you refinance and/or loan amounts change, keep thorough records.Claiming improvements as repairsIn short, a repair brings an asset back to the same condition it was in when you first acquired the property. An improvement on the other hand is improving the asset beyond its original condition and/or changing the nature of an asset.The cost of repairs can be claimed in full in the year they are incurred whereas an improvement must be depreciated over its useful life.The ATO does provide some guidance in 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.

A buyers’ agent is a real estate professional that will help you identify and negotiate the purchase of a property according to your specifications. They typically work for property investors but can also be engaged to purchase owner-occupier homes. This blog discussed whether you should use a buyers’ agent and if they are worth the money?Don’t forget, I’m independent!I have no vested interest in whether my clients engage a buyers’ agent or not. I am completely independent.The advantage I have is that over the past 18 years since starting ProSolution, I have seen the performance of many property purchases resulting from advice provided by many different buyers’ agents. Also, like in many industries, the buyers’ agent industry is small. You quickly learn what types of properties different agents are buying, and what the outcomes have been. In short, I have the perspective of being an “independent umpire” for over nearly the past two decades.These are my musings – hopefully they help you and give you some insight.Mostly used by investorMost buyers’ agents aim their services at investors. There are a few buyers’ agents that will work for home buyers. However, buying a home can be a more difficult brief because there are many considerations to take into account as it tends to be a more of an emotional purchase. For the sake of this blog, I’ll focus on investors only.It’s what you don’t know (or can’t see) that could hurt youSelecting an investment-grade property can appear deceptively easy. You would be excused for thinking that all you need is a checklist of items/characteristics to run each property through. However, as I have written about previously, identifying a quality investment-grade property is part-art and part-science. A good checklist and some financial analysis should satisfy the ‘science’ bit. However, you typically need years of experience to fulfil the ‘art’ component.I recall discussing a property with a reputable buyers’ agent a few years ago. The property seemed (to me) to tick all the boxes. However, the buyers’ agent didn’t like the property because the street was renowned for car break-ins. As such, tenant turnover was higher thaMy 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.

Borrowing to invest (in property or shares) is typically a good wealth accumulation strategy as long as you do it prudently and adopt a proven methodology to select quality investments. If used wisely, debt can be a very effective tool. However, whilst your investment strategy might require you to get into debt, the strategy must also articulate how you will get out of debt (i.e. repay it). This blog sets out some of these strategies.How much debt is safe to take into retirement?You must think about your interest rate sensitivity in retirement. For example, if you have $2 million of borrowings, an interest rate increase of 1% will cost you an extra $20,000 per year. If your only source of income is from investments and super, that increased amount of interest might have a big impact on your cash flow and standard of living.Generally, you want to aim for a debt level that is far less sensitive to changes in interest rates. Worrying about interest rate changes is the last thing you want to do in retirement.One thing I always aim for when developing a strategy is that I definitely do not want any negative gearing in retirement. That is, your investment property portfolio (if you have one) should at least be paying for itself i.e. rental income covers all expenses including loan repayments. It doesn’t necessarily have to generate a lot of income (depending on the client’s situation of course), but we don’t want to be in a position where your property portfolio is sucking out cash flow.Having zero debt might not be an optimal strategy either. A conservative amount of leverage will allow you to build wealth more aggressively, particularly in the first decade of retirement. I would argue however that you want to aim to have more conservative levels of debt when you are retired (compared to when you are working).Debt repayment tacticsWhen formulating a long-term investment strategy for my clients, there are a number of strategies we can employ in the strategy that allows us to reduce debt to an acceptable level prior to retirement.Buy an asset specifically to sellSelling assets to repay debt solves one problem (i.e. reduces debt) but can create another i.e. it might mean that you have insufficient remaining investments to fund your retirement.However, if you formulate a strategy from the beginning that is premised on the idea that you will sell an asset as a debt reduction mechanism, you can proactively plan around this. FiMy 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.

I have written about cash flow management a couple of times previously (here and here) because it is the most important thing to master in order to build wealth. It is also the reason that most people fail to build wealth. In fact, I have never met a wealthy person that doesn’t have good cash flow management. That is not to say they don’t spend money on luxury items. They only spend on luxury items that matter to them.The purpose of this blog is to show you how to master cash flow management in a very simple, easy to follow way. You don’t have to become super-tight or track every cent you spend. You just need to become a ‘conscious spender’.Money just goes… if you let itThere’s a saying that “a vacuum always fills” and this applies to cash flow too. I notice that with most people, living expenses rise in line with income increases. And most people spend whatever they earn. There is always something to spend money on. A better home, better clothes, better schools, better holidays, better restaurants – and the list goes on! Our ego wants us to spend all our money on “better stuff”. We tell ourselves we are worth it. We’ve worked hard so we deserve these “better things”. But don’t let the ego win! Ego really is the enemy of successful wealth accumulation.The difference between people that have successfully built wealth and those that have not is that wealthy people are very deliberate about their expenditure. They don’t waste money. They think about everything they spend money on and if it’s something that is not important to them, they will find the cheapest option or eliminate the expenditure in full. It’s all about value for money. Very few things are purchased on impulse. If it’s something that is important to them, they are happy to pay a premium (luxury price). However, in reality, there are few items that meet this definition. In short, wealthy people are smart with their money. It is not smart to buy something you aren’t going to care about in a few weeks’ or months’ time – irrespective of whether you have the money or not.Rich people know they can buy everything they wantSometimes people spend money on items to make themselves feel special, successful or even rich. For example, only a small percentage of the population can spend $700 on a pair of shoes, so “I must be ricMy 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.

To watch the full presentation, go to https://www.prosolution.com.au/recovering-property-market/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.

Two weeks ago, APRA told the banks that it no longer expects them to use a benchmark interest rate of 7.25% when testing an applicant’s borrowing capacity. Instead, they must add a buffer of at least 2.50% onto the loan’s interest rate. Given most home loan interest rates are in the 3’s, that could substantially improve your borrowing capacity.The banks are starting to push back on regulatorsUntil now, the banks have remained relatively silent about the government’s crackdown on lending standards which has resulted in a severe reduction in borrowing capacity. Of course, they have wanted to stay out of the limelight given recent bad press from the Royal Commission. However, they have now found their voice and have said the level of tightening is impractical, anti-competitive and potentially damaging to the economy.ASIC will hold public hearings in in August as part of its public consultation process. The banks will have an opportunity to voice their concerns in a more public arena.How banks assess your borrowing capacityThe banks will typically make a number of adjustments to assess your ability to service debt. Whilst all lenders have different rules, the below formula summaries the banks typical approach.See table here: https://www.prosolution.com.au/borrowing-capacity-increased/ The table is a generalisation. Due to differences in policies and your situation, each lender might apply slightly different methods.The impact of the recent benchmark interest rate reductionLast week both ANZ and Westpac announced that they will use a lower benchmark interest rate when calculating borrowing capacity i.e. not 7.25%. They will use the current rate plus 2.50%. This increased their borrowing capacity. I compared the big 4’s borrowing capacity using the same inputs and the table below summarises my findings. See table here - https://www.prosolution.com.au/borrowing-capacity-increased/ 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 Australian and US share markets reached all-time highs at the end of last week. This is great news for superannuation returns and existing share investors. However, where will the markets go from here?When valuations are high, future returns will be lowThere is a strong negative correlation between the starting valuation multiple (e.g. price-earnings ratio) and an investor’s subsequent 10-year investment returns. That is, if current valuations are high, future returns are likely to be low. This makes sense because if you invest in a company or market that is currently fully valued, there isn’t a lot of upside left. In fact, it could be that you are overpaying to invest in that company or market. If that is the case, you could experience capital deprecation.The US market valuations appear elevatedThe CAPE ratio is a widely accepted measure of a market’s current valuation relative to history. Currently, the US market’s CAPE ratio is over 30. The long-term average is in the range of 18 to 22, depending on the period and adjustments made. The US CAPE ratio has only been above 30 two times since 1871:in 1929 when the share market crashed nearly 25% (Black Tuesday) – the CAPR ratio was 32.5; andin December 2000 when it reached 44 during the dot-com boom. The NASDAQ-100 lost 78% of its value between 2000 and 2002 (called the Dot-Com Bubble).Am I saying that the US market will crash? No. In fact, the CAPE ratio is not a reliable indicator of short-term market movements, only long-term (10 year) returns. But this analysis does indicate that US market valuations are alleviated and as such, history tells us that future returns will likely be lower.What about Australia and rest of the world?Australia’s CAPE ratio is currently 18.4 which is above its median at 16.5. Fair value is considered to be 17.1. So, whilst the Australian market appears to be slightly overvalued, the differential isn’t as much as the US and other markets. It is important to note that most developed markets appear elevated at the moment – except for the UMy 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.