Can two people invest better as one? Nicole Pedersen-McKinnon calls the experts.

When local boy Milo Vulin met effervescent American Julie at an international film festival in 2002, it was love at first sight. Four months later, they were married.

What they had in common extended well beyond the norm - to a keen eye for an investment opportunity.

"I think I was 15 or 16 when I got my first mutual fund," says Julie. Meanwhile Milo, who runs his own management consultancy business, was busily buying property two houses in close proximity to the city, both of which he paid off quickly.

Using the equity in these homes, the couple would now like to relocate to a more upmarket suburb, and rent out both original properties. But they are concerned that prices might still be over-inflated and that the market might have further to fall. There's also the future direction of interest rates to consider. To combat a rate rise, is it wise to take out a fixed rate mortgage?

"We think property is the best investment," Milo says. However, they are still keen to have some stockmarket exposure. They would like to supplement Julie's existing US holdings which are "very aggressive" and predominantly in tech stocks in the US (including Cisco, Dell, Micron and Microsoft), as well as a health care fund from Vanguard with more Australian stocks.

Julie and Milo have a very long-term investment horizon for these stocks, possibly even their retirement, and want them to deliver high growth.
To this end, how important is it that they invest in stocks with a high dividend yield? And what sectors look set to make the best total returns?

Financial snapshot
Julie and Milo Vulin
Occupations Julie freelance writer; Milo management consultant and lecturer.
Salaries $100,000
Assets
Property: $475,000 home and $225,000 investment property
Super (incl US): $160,000
Investments (incl US) $145,000 in bonds, shares and managed funds
Cash in the bank $35,000
No Liabilities
The average week
After-tax income
Salaries $1200
Rental income $200
Investments $100
Total $1500
Expenses
Living expenses $700
Total $700
No risk insurance

Shares: Go for longer-term outlook and don't fixate on high-dividend yields
Peter Warnes, research director of Aspect Huntley

Milo and Julie, sectors that look positive over the longer term include energy utilities, non-discretionary retail, health, banks and financial services. Within those sectors, the stocks you could look at include Alinta, Woolworths, Ramsay Healthcare and Westpac. Well-managed and shareholder-friendly companies like Wesfarmers and Record Investments can also be considered.

Long-term investors should not ignore stocks with a dividend yield of, say, 4 per cent if the company can consistently lift profits and dividends by, say, 12 per cent per annum. A company with these attributes selling at $1 and paying a dividend of 4 cents per share yields 4 per cent. In 10 years, under the impact of compounding, the 4 cent per share dividend has increased to 12.4 cents per share and, while the stock might still yield 4 per cent if the price appreciates to $3.10, the yield at cost has jumped to a very attractive 12.4 per cent.

But don't just look for high-yielding stocks at a point in time as the growth in dividend per share may disappoint over the long term.

Alinta, Westpac and Record Investments are selling on relatively attractive full-year 2005 yields of about 5.5 per cent and possess better-than-average growth prospects. Investing for the long term with a starting yield of 5.5 per cent should, with the benefits of compounding, result in a substantial total return over the next decade.

Finally, on Cisco, UBS rates it "neutral" with a target price of $US20 (based on a price-earnings ratio of 25 and a full-year 2005 option-adjusted earnings per share of US78 cents).

Property: Consider selling your house now before moving upmarket
Steve Blaker from Logical Finance Management in Sydney

The general consensus is that property will remain flat, with capital growth lagging behind other asset classes. Although past performance should not be used as an indicator for future returns, history demonstrates that in the long run international shares have outperformed all other asset classes.

Having said this, it seems as though your decision to purchase another property is for lifestyle purposes. In using the equity in both properties and renting out your current home you will be converting your CGT-free asset (your home) to a taxable asset and producing two additional income sources which it appears you don't need. Further, as both properties are debt-free, you don't benefit from negative gearing.

Consider selling your home and using the proceeds to purchase your new home. The property market may well have more downside potential, making this an ideal time to sell. This places you in a great position where you will have sold on the upper end of the cycle and will have the cash and time to sit back and wait until home prices have really flattened.

When the time comes to choose a mortgage, you may choose a split loan, which allows you to borrow a portion at a fixed rate and a portion at a variable rate to hedge your interest-rate bets.

Most lending institutions now allow you to make extra repayments on such loans of between $5000 and $10,000 without penalty.

Steve Blaker is an authorised representative of Associated Planners Financial Services.

Gold: Set your investment goals before trying to capitalise on commodities
Paul Moran from Cameron Walshe in Melbourne

The decision as to which sector or individual investment is best should always be determined by your long-term goals. These goals then set your investment parameters such as income, capital growth, tax effectiveness and flexibility.

Investing in gold can be done a number of ways. You could buy bullion, buy shares in gold mining companies, or speculate on gold futures. All of these aim to make money if the gold price rises, but speculating on futures also provides the option of making money if the price drops.
Investors have historically used gold investments as a hedge against catastrophic financial events, or as a speculative investment. From a diversification perspective, you might even consider a parcel of commodities, rather than just gold.

Gold-linked income plans tend to consist of strategies to produce profits from short-term volatility in gold prices generally from trading futures. This is quite a high-risk process (often presented in a way that seems low risk!), but if this suits your risk appetite it might be appropriate for a small portion of your overall portfolio.

Vanguard funds in Australia provide broad access to a particular investment market (such as Australian shares or listed property) by passively holding most of the shares that make up the sector's index (such as the ASX-200).

Direct shares provide the most specific upside to capitalise on opportunities that arise from time to time, but do need to be closely managed by the investor.

If you expect to live in the US in the long-term, currency should really be hedged to the US dollar, but if you think you will stay in Australia, look at Australian-dollar investments.