mrd

By Doug Wroe

Have you been following my recent series that looked at how to gauge or measure your investments? Week one focussed on:

• Return ON Equity and
• Return OF Equity

Importantly, the next three weeks defined the three Drivers of Wealth:

1. Leverage
2. Compounding
3. Inflation

If you have missed these prior articles I strongly recommend you make a coffee, sit back and read them now. I know the information shared, if applied, really does have the potential to drive your wealth onwards and upwards! After that, keep reading my conclusion and wrap up to this exciting subject… More…

By Doug Wroe

This week we are continuing our series on the ‘Drivers of Wealth’.  If you have missed the previous three articles they are available below and I recommend you read them first.

1. Introduction – Drivers Of Wealth

2. Leverage – The First Driver Of Wealth

3. Compounding – The Second Driver Of Wealth

This week we are focusing on the third ‘Driver of Wealth‘; Inflation.

For many, inflation is something that is met with dread.  It is an unfortunate reality that we must tolerate as we see our basic living costs rise.  The price of bread and milk, building materials, government services and just about every other cost are constantly rising and putting more demands on our financial resources.

Inflation is not something that we can change or avoid.  It is a constant reality in our lives.  We can choose to fight it or we can choose to find a way to benefit from it.

How Can You Benefit From Inflation?

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By Doug Wroe

“The Most Powerful Force In The Universe Is Compound Interest” Albert Einstein

Compounding simply means multiplying; instead of adding.

When building wealth by increasing the number of assets that you control there are two basic strategies; Addition and Multiplication. Using Addition will obviously add to your wealth but it is Multiplication that will truly accelerate that growth. Let me explain further what Albert meant when he uttered the quote above.

Doing It The Addition Way

Saving the money required to purchase an asset would result in you adding to your portfolio the equivalent value of the asset. Repeating this process and saving enough to purchase another similar asset is what I call doing it the hard way!

Let’s face it, very few people have the disposable income to save that much anyway.

Borrowing against an initial asset when looking to secure subsequent ones will fast track wealth creation. Not doing so will probably restrict the average person to securing just one or two assets, of any significance.

If you have no significant assets (such as property) when starting out, saving may be your only option to get started. Aside from those who use someone else’s equity (such as a parent), most of us are forced to save for that first deposit.

While it is common to start out this way, you probably don’t want to maintain such an approach as doing so will limit the size of your asset base to considerably less than it potentially could have been.

Purchasing an asset in an entity that does not allow you to later borrow against that increased value of the first asset means you may be limiting your options to an addition strategy. I believe this to be the case with superannuation, however, please check with your accountant as my understanding of purchasing in superannuation is limited.

Doing It The Multiplication Way More…

Socking Away Savings For Your Retirement? Big Mistake! Do This Instead And You Could Have All The Money You Need (And Some To Spare).

Do This instead!

By Doug Wroe

Last week we looked at the two key measurements of investments, Return ON Equity and Return OF Equity and then moved on to the Drivers of Wealth.

Read Drivers Of Wealth

• Leverage
• Compounding
• Inflation

Over the next few weeks I will dig deeper and unravel these three topics; starting this week with the First Driver Of Wealth – Leverage.

Leverage

Leverage is basically gearing. As in your car you cannot go at 100 km/h in 1st gear. The engine just can’t turn over that fast. It is through gearing that you are able to move your vehicle faster when the conditions allow. Essentially you are getting more turns of the road wheels for fewer revolutions of the engine.

In 400 BC Archimedes said “Give me a lever long enough and a fulcrum on which to place it and I shall move the world”.

What he was referring to was that, provided he had enough leverage or gearing, he could move any object with little effort. In a financial setting the meaning is very similar… being able to move or control larger amounts of equity or money by using a smaller amount. Let me give you an example:

Option One More…

By Doug Wroe

Over the years I have had an unusually high appetite for learning about financial investments. Some may say I am obsessed with it. I just find it interesting in the same way a gardener finds roses interesting. Over a number of years I actively sought out information that would help me to understand the “Drivers Of Wealth”.

I am always looking out for another trick or a better way to do things. I read magazines, go to information sessions and generally keep my ears open to what is happening in the financial and investment world.

There are so many opinions out there. It is so hard to filter out the noise and find what is really important and relevant to me and my family. Not only what is real and what is just a sales pitch but more importantly what the best path is for us to take.

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In my Friday newsletters I normally talk about everything property; from an educational angle. Today I’d like to wear my heart on my sleeve a little and “shoot from the hip”.

Of late, I have found myself telling and retelling the story of how and why mrd came about. Today I thought I would share my story with you.

I started my first full time job in February 1979 and since that time I have sought various ways of achieving financial independence and security. I determined not to become just another statistic… i.e. stuck in the rat race, travelling from work to home, home to work for five days a week… repeating this for 48 weeks a year for 45 years and then ending up broke, on a pension anyway. Statistically, that’s the most likely outcome for us all.

Most of my working life has been self employment, putting my hand to numerous things. It was in 1998 when a friend introduced me to a national property organisation, where I took up a role as a property researcher. I thought I had begun to understand just how ‘powerful a vehicle’ property was, and how it could help me to achieve my dreams and goals. In reality though… I had NO idea of how big the big picture really was! More…

Last week I wrote an article titled “How To Prosper In The Slipstream Of Population Growth”. In my article I included links to four short video segments that had been broadcast on the 7:30 Report; Monday through Thursday.

Last Friday night, after my newsletter was sent, Kerry O’Brien hosted the final episode in the series, titled “The Population Debate: Problems, Potential Solutions & The Need”. In this episode he hosted a panel discussion on the population debate; I have included links to all five of these segments below. If you saw the first four, scroll to number five… otherwise I recommend you watch all four (they are not long).

If you missed last week’s article altogether, go back and read it before watching the clips… and learn how you can prosper in the slipstream of population growth >>>read here

Part One – The Population Debate More…

I learned the meaning of the word slipstream as a young teenager with a pushbike. By getting a couple of metres behind a moving bus my friends and I found we could be dragged along,  making our efforts peddling somewhat less demanding. The irony was that you had to peddle like crazy to keep up with the bus and stay in its slipstream, so all-in-all the idea was better in theory than practice. Being “older and wiser” I now cringe at the thought of teenage kids riding in the slipstream of a bus on a busy highway… but hey, like you, I thought I was bullet proof back then!

Most people like the sound of doing less to receive more and with right knowledge understood that is very possible! Today I want to touch briefly on the subject of population growth; particularly Australia growing to 35 million people by 2050 and how YOU can prosper in the associated slipstream this will create! Firstly, a few definitions of the word slipstream:

• “The turbulent flow of air driven backward by the propeller or propellers of an aircraft”
• “The area of reduced pressure or forward suction produced by and immediately behind a fast-moving object as it moves through air or water”
• “To drive or cycle in the slipstream of a vehicle ahead”

If you watched the 7:30 Report on the ABC you would have seen the four part series they ran this week that focussed on the population growth issues being debated right now. Our population currently sits at around 21 million people but is expected to hit 35 million by 2050; producing many social, environmental and political consequences. The ageing of our baby boomer workforce will see a huge chunk of current tax payers move onto pensions. As a result:

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By Martin Bell

Recent figures from RPData inspired me to hit the keyboard again.

The capital growth figures for last year (median prices up to November 2009) show that Australia wide units showed better growth over the 12 months than houses.

Yes that’s right… in 2009, based on median prices, houses with the big land content did not grow in value as much as units with minimal land content.

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