Q.

We are about to buy our first investment property and have been advised to set up the loan so that the interest is capitalised and we only pay off the home loan while the investment loan gets bigger. Is this a wise move as it sounds a bit risky to me?

This is a contentious area and I suggest you buy a copy of the book Saving Tax on Your Investment Property written by Julia Hartman and myself which covers this in great detail. My own view is that an ever growing investment debt is not good from a financial point of view and that your best strategy is to keep the investment loan on an interest only basis and use all your spare money to reduce your non deductible home loan.