Question from reader Lukelegend30:
My wife and I don’t have children yet and are about to turn 30. Our combined monthly income is around 60 million VND (US$2,400) after taxes. Our maximum monthly expenses are around 10-15 million VND. Currently, none of us have any bank debts and we bought and live in an apartment in HCMC valued at around VND 10 billion in 2020. Additionally, we own another apartment with a title deed that can be rented for 15 million VND per month. but I send all this money home to support my parents.
Since we are still quite young, I would like to ask experts what is the best investment strategy in these conditions, especially since we are planning to have a child next year. Thanks, expert!
Tips from Ta Thanh Tung, Head of Real Estate, FIDT Investment Consulting and Asset Management Joint Stock Company:
First of all, I would like to congratulate you and your wife on owning relatively high value properties at such a young age. Based on the information you provided, I have the following recommendations.
Your family’s savings rate is between 66% and 75% of your income, which is commendable compared to many young Vietnamese families we have advised. With a child due next year, this rate may decrease due to additional expenses. However, maintaining a savings rate of 50-60% is still excellent. If this rate works for you, consider maintaining it or cautiously increasing your spending by no more than 10% as a reward for your hard work.
Concerning the optimal use of your monthly surplus:
You should first create an emergency fund to ensure financial stability in case of unforeseen circumstances like illness or work interruptions. Since you haven’t mentioned life insurance and you’re planning to have a child, this fund should be able to cover six months of expenses. Once you have life insurance, you can reduce the fund to a minimum of three months of expenses.
Next, life insurance is also essential for both of you, especially as you are expecting a new addition to your family and your assets currently lack highly liquid options. Remember to prioritize emergency funds and life insurance before considering investments. Effective investments can be undermined by unforeseen risks, leading to financial hardship if you don’t take protective measures.
After building up the emergency fund and insurance, invest the remaining monthly surplus in stocks. This should be a regular monthly activity, especially when stock market valuations are attractive. Your choice of stocks should match your risk appetite. If you lack experience or time to research, consider hiring a financial advisor or investing in fund certificates, such as open-end funds or exchange-traded funds (ETFs).
As for the apartment you currently live in, I don’t know if you have a particular lifestyle, but it is relatively high-end. Owning such an apartment makes your asset portfolio very focused on real estate and composed almost exclusively of two apartments.
You may want to consider restructuring your portfolio by opting for a slightly cheaper apartment. The additional funds could be used to strengthen your stock investments or to purchase a plot of land or two, which will diversify and increase the liquidity of your asset portfolio.
Regarding the apartment that generates monthly income for your parents, FIDT data on the HCMC apartment market from 2015 to 2021 shows that the average annual price growth of older apartments (over four years since completion) is from 5 to 6%, which can go down to 3-4% for apartments more than five years old.
Rental yields are generally 4 to 6% per year. Therefore, the combined return from price appreciation and rental income is approximately 7-12%, but will decline over time.
Thus, owning an apartment in the long term is less profitable than land located in the outskirts of HCMC, which can yield an average annual return of 10-12%. By converting this apartment into land, you can use the monthly surplus to support your parents without depending on rental income.
However, this requires a detailed financial plan, taking into account the stability and potential growth of income from your main jobs.
*The question and answer are translated into English by AI
