How to buy property if you’re broke
I HAVE never been the person who buys into the latest fad. Maybe it was because of a childhood where I grew up having to wait for Christmas or birthdays for new gadgets or gifts.
This experience seems to have taught me that having the bright new shiny thing isn't all that it is made out to be.
So when it comes to investing, I have applied this life lesson to how I choose my investments.
You may have heard a lot of fuss about cryptocurrencies lately. To me, these are a classic example of the latest new shiny toy.
For a small group of people who took a punt some years ago, cryptocurrency has resulted in massive gains. That isn't the experience for most investors anymore.
So where should you be investing your hard-earned money right now?
THE STATE OF THE MARKETS
The great news for investors is that there are a whole lot of new ways you can invest in the major wealth building assets, such as stocks and property.
In some cases, with as little as $20 per week. Yes, you won't be able to afford a dream house (or even any house) for that much cash, but you can invest.
Now before I tell you where I am investing my money right now, the first thing we have to overcome is the fear that you are investing at the peak of the market.
Investing the smart way involves having a consistent plan to invest every week or month. Since investing for your financial future is a long game, the state of the market right now is far less important than you think.
But for those that are still a little worried, let's have a look at where the markets are at right now.
The Australian stock market is about 6000 points today, which is almost 12 per cent below the all-time high of 6800 from November 2007.
The property market is also experiencing small declines in the main capital cities. Recent data suggests prices have fallen by 2 to 3 per cent, particularly in Sydney and Melbourne.
So, we are not buying at market peaks now, and history tells us that markets always climb higher over time.
WHAT TO BE BUYING NOW WITH $20
My recommendation is that you spread your investing dollars across each of the main asset classes. This diversification provides some risk mitigation and the opportunity to participate when each market is rising.
Here is how you can get started today.
To get started in stocks, the simplest thing you can use are exchange traded funds, or ETFs.
These are a great product for those who don't have the time to analyse the market for individual opportunities. An index ETF will give you exposure to the whole market and replicate the returns of the market.
The minimum to get started is normally the smallest parcel your stock platform will allow, which is normally $600.
In recent times there have been new stock investing services introduced that let you start with as little as $20. These services let you invest in a range of funds that suit your goals.
In Australia, there is Spaceship Voyager. I haven't used this service, but if you want a simple way to get started and don't have enough to buy a parcel, this is a great way to get in the game.
The first option is to invest directly in good investment grade properties.
Investment grade simply means that the property has a good land component, is close to amenities, and is appealing to potential renters of the area.
Again, if the costs of buying direct are too much for you right now, there are alternatives.
The first is property based ETFs that you can buy on the stock market. These ETFs are funds that have invested directly in property, either residential or commercial.
And just like stocks, there are new services popping up for people who are starting out with small amounts.
One such option is Brickx, with as little as $100 you can buy a 'brick' of a home. For example a $1,000,000 home in Sydney can be broken into 10,000 brickx and you can own one for $100.
You enjoy all the income and expenditure as you would if you owned the property, just on a proportional basis.
One final suggestion is to consider gold and silver.
If you listen to the fear commentators, they are suggesting Armageddon is coming to the financial markets.
If they are right, then having some of your money invested in commodities will be a great risk management strategy.
I'm certainly building my gold holdings.
And yes, you can buy gold and silver ETFs as well.
There is an old Chinese proverb, the best time to plant a tree is 50 years ago, the second best is today. Warren Buffett applies this proverb to investing, and you should too. If you haven't started yet, the best time to start is now.
To see what you can achieve with as little as $20 per week, check out this simple calculator and be prepared to be amazed.
Andrew Woodward is a mindshift.money accredited money coach based in Sydney who teaches people to take control of their money and invest for their future, simply and efficiently. Sign up for his free weekly money tips at his theinvestorsway.com.au.