Today is ANZAC Day and we want to acknowledge all those who served and those who continue to serve. Thank you.

And to those who made the ultimate sacrifice, lest we forget.

Here’s what you need to know today

• In a stand-off between the US and China, it appears that Trump blinked. The US President announced that he may cut tariffs on Chinese goods by up to 60%. Given Trump is unlikely to enjoy media reports that he backed down, we wouldn’t be surprised if we see a Truth Social post reversing this announcement in the coming hours. (AFR)
  
  

• The US stock market responded positively to the reports that Trump was open to lowering tariffs on China as well as reports he wasn’t planning to fire Federal Reserve chair Jerome Powell. The S&P 500 was up 1.7% on the news.
  
  

• Australia will create a critical minerals reserve and use it as leverage in negotiations with the Trump administration over tariffs. Prime Minister Anthony Albanese announced the measure that would see the Australian government stockpile critical minerals like rare earths to safeguard supply for Australia and her allies. (AFR)
  
  

• The Coalition spent the day defending their pledge to not repeal Labor’s electric vehicle tax breaks. Peter Dutton had previously said he would scrap the fringe benefits tax exemptions for those buying EVs through a novated lease. Then, on Monday, he pledged not to repeal these exemptions. (AFR)
  
  

• More than 100 Australian Fintechs, including Employment Hero, Prospa, Swyftx, and Hnry, have signed a letter accusing both major political parties of stifling innovation. The letter points to stalled reforms including privacy safeguards, responsible lending, digital asset regulation, payments reform and a broader digital economy framework. (Capital Brief)
  
  

• A ceasefire in Ukraine now appears out of reach. The US has proposed a ceasefire deal that would divide territory at the current frontlines and require Ukraine to recognise Russia’s annexation of Crimea. That is a non-starter for Ukraine, as their constitution states Crimea is a legally recognised and inseparable part of Ukraine. US Vice President JD Vance said America would “walk away” if the two sides failed to strike a deal. (BBC)
  
  

• Treasurer Jim Chalmers confirmed he has raised the James Hardie deal with the ASX, but has said he is reluctant to intervene despite the concerns of investors that the company is effectively being “stolen” by management. The ASX gave James Hardie a waiver to merge with America’s Azek without shareholder approval, allowing them to effectively move their primary listing to the US (and therefore be subject to US listing rules). (AFR)

What the…?

American fast-casual Mexican chain Chipotle is looking to introduce more robots into operations, including one called ‘Autocado’. No prizes for guessing what Autocado will do - automatically cut, core and peel avocados.

The company said it has been testing Autocado since July 2023 and it can process one avocado in just 26 seconds. Given Chipotle uses over 5 million avocados a year, Autocado will have its work cut out for it. (Quartz)

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Investing is a lifelong journey

Here’s what you can learn today.

Talking to parents about investing

Community Question: My parents want me to buy an investment property in Sydney but I don’t want to commit to the long-term mortgage and associated baggage, especially because I’m currently studying my PhD (this isn’t a flex, I’m trying to say that I’m on a low income at the moment). Essentially, my question is how do I tell my parents that I want to start properly DCA’ing into index ETFs / VDHG instead of buying into the Sydney housing market?”

We put this question to Patrick Malcolm, financial adviser at GFM Wealth Advisory.

Firstly, congratulations on what you have achieved so far with your savings. It is a great effort.

The best way to approach your parents is to explain what you have detailed in your question: That it would be tough for you to purchase a property as you don’t want the financial commitment while studying for your PhD.

Practically, it would be difficult for you to purchase a property in Sydney with the deposit you have accumulated, as disheartening as that may seem!

Generally speaking, it is best to have accumulated a 20% deposit plus funds for Transfer Duty; however, some lenders offer home loans to borrowers with low deposits. Generally, a home loan of up to 95% of the property value is the most a lender will provide. These loans are riskier for the lender, so they mitigate the risk by charging Lenders Mortgage Insurance (LMI). LMI helps protect the lender if you can no longer repay your loan.

LMI can be expensive. It can be paid upfront or sometimes added to your loan balance.

With $90,000, you could purchase a property in Sydney for $700,000 and cover a 5% deposit, the Transfer Duty and estimated LMI of around $30,000. According to the latest CoreLogic Home Value Index, released in August 2023, the median price of a house in Sydney is $1,333,985. The median price of a unit in Sydney is $817,059.

It is important to note that while paying LMI can get you on the property ladder earlier, there are significant risks:

You could have difficulty refinancing with low equity: If you buy a home with a 5% deposit, you’ll have 5% equity until the property value changes or you start paying down the loan. You will find it difficult to refinance your loan until you have more equity. You may be able to refinance but will have to pay LMI again until you have at least 20% equity.

There is also an increased risk of negative equity: If the property’s value declines, you risk going into negative equity as your LVR is already high.

This is even before discussing loan repayments, which would be $3,971 per month ($47,652 per annum) on a $665,000 loan assuming an interest rate of 5.94% p.a. This is before the additional ongoing costs such as insurance, rates and other property maintenance.

The important thing is to make sure you commit to your investing plan. I don’t think this will be a problem for you, given that you have already accumulated a large amount of savings. A mortgage can be a forced savings plan, and the costs make it expensive to get in and out of the market, often making property an excellent long-term investment. However, with discipline, this can also be applied to investing in the share market.

I wish you the very best of luck with your PhD. Education is also a great investment!

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