From browsing this website, you may already know the power of investing through superannuation. But what if you wish to live a little in your forties or fifties and want to access some of your investments before the age of 65?

Oliver is a 32 year old high-school teacher earning $47,000 pa. He is married to Rachel, a 31 year old paralegal earning $38,000 pa. They have one child, Mark (15 months) and Rachel is pregnant with their second. Oliver and Rachel came to Elite Financial Solutions to ask how they could increase their wealth over a fifteen year period.

Oliver & Rachel's financial planner created a full financial plan for them. He ensured they had current and tax-effective wills, were adequately insured and that they both consolidated their various super policies to avoid paying multiple sets of fees. Elite Financial Solutions then arranged for Oliver and Rachel to purchase an investment property, to supplement their long term investments.

The final step was to commence a savings plan. Managed funds were an ideal vehicle for this purpose, as it would allow them start with a relatively small sum and make regular contributions to an investment providing both income (by way of dividends) and capital growth (a result of share prices increasing over time).

Given that they wanted to invest over a long term (15 years), Oliver and Rachel decided to invest their managed funds for growth. They were aware from our discussions that there was possibility of negative returns, however as they had a long term outlook, they were prepared to tolerate short term fluctuations in order to maximize their returns.

The final step was to initiate a loan facility, which let them borrow funds against the money they were putting in, so they could effectively double their contributions to the fund. This is a very tax effective manner in which to create wealth. The interest, being tax-deductible, is offset mostly by the dividends returned by the managed funds and partially by the regular contributions made to the fund.

Although we can predict their rate of growth, for example if their funds returned 10% net of fees and charges, and the cost of borrowing (known as negative gearing) is only 8%, they should increase the return on their investment from 10% net to 12% net. Any loan accrued can be paid out at the end of the 15 years with part of the extra growth accrued.

They started with a sum of just $5,000 (geared to $10,000) and decided to add $500 (geared to $1,000) per month to the investment. The graph below shows their cumulative contributions to the fund, the projected growth (had they not geared the fund) and the projected growth of their investment at a 1:1 gearing ratio.

Fund returns will vary from year to year, but using expected long term average growth and income rates, they may expect their fund to perform as follows