Question 1: My wife and I have one investment property in our SMSF and one outside in our own names. My wife is concerned that we are not paying down our loans quick enough, and I think if we bought quality shares it would be a better option. The interest rate for our SMSF loan is 5.19% (principle and interest) and outside is 4.99% interest only. Should we use our spare money to pay down our loans quicker or buy shares?
Answer 1 (By Paul Rickard): This is a question that only you and your wife can really answer.
I can make a financial case – that investment in shares paying fully franked dividends of 5% will give you an effective income return of 6.07% in accumulation or 7.14% in pension – which is higher than the interest cost of 5.19%. So, from an income point of view, you would be better off in shares than paying down the loan. However, if your partner is uncomfortable with the risk in owning shares (potential capital loss), or will feel much more comfortable if the loan is extinguished – then follow that path.
I like exposure across multiple asset classes – you also need to take this into account.
Question 2: It seems that Metcash (MTS) has been increasing gradually in price and some major funds are taking positions. What is your view?
Answer 2 (By Paul Rickard): Yes, after a horrid run, Metcash (MTS) seems to have found a bottom around $1.00 and some of the funds have been building positions.
The brokers still don’t like it. According to FN Arena, sentiment is still mildly negative (score of -0.3, on scale of -1.0 most negative to +1.0 most positive), with a consensus target price of $1.21.
I feel that the grocery supermarket wars have a long way to play out – so I can’t get excited about MTS
Question 3: I’m interested in investing in the NYSE and would like to know the best brokering companies that offer the most seamless and cost effective options for their products/services though their online trading platforms including international share transactions in foreign currencies and/or local currencies?
Answer 3 (By Paul Rickard): CommSec offers a good service – however, unless you are going to hold a portfolio of shares, the initial custody fees are high.
NABTrade charges a lower brokerage rate and their online access is good. However a potential downside with NABTrade is that they convert each transaction back into Australian dollars – so you effectively pay a foreign exchange spread on each side, where as other services allow you to hold US dollars. For a trader, this can be an issue. Try also IG markets.
Question 4: In your experience what is the easiest and most cost effective way to transfer large sums of foreign currency into Australian dollars? In my case it would be US dollars to Australian dollars.
Answer 4 (By Paul Rickard): Banks are going to be the cheapest, but shop around and also consider Ozforex
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.