Jonathan Cattana The game plan: strategies for financing private school fees
My favourite holding period is forever.
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You now know the four asset classes, you are aware of what asset class you should be investing in. Now let’s investigate four different strategies you can consider when saving for your child’s private school fees. Your situation will determine which strategy may work best for you.
Those strategies are:
• A simple savings plan
• Step on the gas—a geared investment portfolio
• Debt recycling—good debt
• A discretionary trust – not just for the wealthy.
A frequent question everyone asks is in what name they should hold their investments in? The answer is: it varies depending on your circumstances. There are three ways in which you can hold an investment. They are in:
1. an individual’s name
2. a company
3. a discretionary trust.
Each of the above has its own positives and negatives. In my case I prefer to hold investments in a company or in a trust. A trust is a great way of controlling assets and yet you don’t own them. More later in this chapter regarding trusts. I would press upon you to seek advice around which structure is best suited for you.
In a moment we will look at each strategy in detail but before we begin we need to understand an important investment definition.
Dollar cost averaging As mentioned before, dollar cost averaging is investing a fixed dollar amount in a managed fund or a direct investment such as shares, on a regular basis for a period of time. It is a wonderful way of entering the share market if it appears to be overpriced.
When approaching dollar cost averaging, you are reducing the price volatility (ups and downs of a managed fund or share) by investing religiously every month. If the price goes down one month you receive more units/shares for your regular monthly contribution. If the price goes up the following month, then you receive fewer units/shares for that month and so forth. You are drip-feeding your savings into the market on a disciplined, regular basis, once a month, twelve months a year. This means you won’t become overly concerned if the market dips. Also, as the market moves higher every month, you won’t be swayed to wait because you think the investment is far too expensive.
Essential steps for all wealth creation strategies
Three essential points you must adhere to for all these strategies are:
1. Maintain a budget. Every dollar must be watched. Companies and other big organisations have them—you need it to. Be prepared for all your yearly expenses. Map it out. Cash flow management is critical to financial success in whatever form.
2. Leave the past behind you. If you have had bad luck before or made a wrong decision on an investment before, please leave that baggage behind. It’s time for a fresh start.
3. Be Patient. If you don’t believe in your financial plan and have doubt about what you’re trying to achieve, it will only make you become impatient and make mistakes. Planning is more than half the battle, be patient and let the plan work for you.
4. Discipline. This speaks for itself.