what to do with my money

Discussion in 'Share Investing Strategies, Theories & Education' started by Cherrybomb, 4th Jun, 2019.

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  1. Cherrybomb

    Cherrybomb Member

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    Hi, I’m about to come into a large chunk of money. Approx $500,000. I currently own a unit and have no mortgage so I’d like to invest this money for my future. I’m 50 now and want to retire ASAP. I have no clue about investing but I’ve been looking at some managed funds. I don’t understand all the lingo. I find all the different options paralysing. On Canstar the funds I looked at all had approx 6% return over 5 years. Does this mean that 500,000 would only make my money grow 30,000 in 5 years because that doesn’t sound like much to me. Or does it mean 6% per year over 5 years? If 30000 I don’t really understand why anyone would bother as a bank account would make more. Maybe I’m misunderstanding this? Anyhow I’d really appreciate some advise. I don’t want to put my money at high risk though. Thanks
     
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  2. twisted strategies

    twisted strategies Well-Known Member

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    welcome to InvestChat ,

    first of take a DEEP breath

    second find a reliable pocket calculator ( and make it your best friend )

    ALL investing involves risk ( even term deposits .. otherwise the government wouldn't guarantee the first $250,000 per ADI )

    now investing is risk v. REWARD ... and expect folks to downplay the risk and put extra shine on the reward ( their job depends on that sale )

    your best investment currently is KNOWLEDGE ( and the time to gain it yourself )

    ( and yes to a novice the choices are mind-numbing and the promises dazzling )

    Financial Dictionary | Investopedia

    this is a US site but much of the knowledge translates to Australia .

    another important aspect are fees ( and ongoing costs , if any )

    BTW 6% ( per year ) is good return in the current climate ( but MIGHT be high risk )

    the RBA has just cut to 1.25%

    however if inflation were to return 6% might quickly become loss-making

    also your investment profits are taxable ( so calculate minus 30% of returns ( excessive i know , but quick and instructive )

    once you insert tax into the equation so can see why shares ( with their franking credits ) are so attractive to many

    this is a concept that you might find useful

    Compounding

    Compounding


    stay calm and think about what is best for you ( one size does NOT fit all , in this area )

    also if thinking of retirement go and get a full medical first ( i did , and the government told me to STOP working immediately ... and gave me a disability pension , so i wouldn't be tempted )

    PS you still need to learn about all this so you know any fund manager , you use , isn't selling you a smelly mutt ... it can be very hard work making investing profitable .

    ( don't forget potential inflation when assessing future returns )

    good luck
     
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  3. Hodor

    Hodor Well-Known Member

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    Typically quoted in annual return - though not always.

    There are lots of ways returns can be quoted to make them look better. Before fees, favorable timeframe, adding franking credits, the list goes on. Then often the top performers become the bottom.

    Bank interest is about as near as you get to a sure thing, hence the return is less. To increased upside you generally take on more risk.

    Sounds like this cash is a one off opportunity to set yourself up. Take some time to think before you jump in.

    Indexing is a popular low risk strategy. I'd read up on bogleheads Australia.

    Also dollar cost averaging.

    Vanguard is a popular choice for low cost funds. Keep in mind fees have about the highest correlation with long term returns - lower fees better returns.

    Lots of financial talk is pointless and seems to make people think it's too hard to do themselves. Investing can and should be easy.

    That's the first things that spring to mind
     
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  4. twisted strategies

    twisted strategies Well-Known Member

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    *** I'd read up on bogleheads Australia.***

    thanks for the heads up !!

    i was unaware boglegeads had an Australian site ( i sometimes i peek at the US site )


    the hard bit ( for me ) is thinking carefully and not be tempted by excessive greed
     
  5. Hodor

    Hodor Well-Known Member

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    Your strategy is very involved.

    I prefer fool proof, I'll take market returns.
     
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  6. Hully

    Hully New Member

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    If you're unsure on how compound interest works, click the below link and fiddle around with the figures. It'll give you a better idea of how interest will affect your investment. Just remember to take off tax.

    Compound interest calculator | ASIC's MoneySmart

    Also, as mentioned above, research "dollar cost averaging". In your case for example, instead of putting your $500k into managed funds, you might put $100k in over 5 years, protecting yourself against a market decline.

    Knowledge is definitely where we need to start. Other than my super, I currently don't have any investments yet. I will begin having surplus cashflow very shortly, so I'm currently just researching as much as possible before making an informed decision.
     
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  7. twisted strategies

    twisted strategies Well-Known Member

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    *** I prefer fool proof, I'll take market returns.***

    what will the market return in a severe downturn ???

    and more importantly which assets will survive that downturn

    now in an ETF ( say a top 200 index ) only guarantees to hold 200 large cap stocks ( not that the stocks will make any profit at all )
     
  8. Hodor

    Hodor Well-Known Member

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    Might suffer a 50% paper loss at the time, I'd be loading up in such a scenario.

    You can't run or hide from a crash. Trying to time the market or get an edge is a tough game. I don't believe I'm better or smarter than everyone out there trying to beat the market, with 80 to 90% failing after costs at 10 years I'll take market returns.

    The market isn't completely efficient, it's damn good though.
     
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  9. twisted strategies

    twisted strategies Well-Known Member

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    in my portfolio i am factoring in a 10% total capital loss ( from business failures ) .. some that will probably fail in stressful time have already risen sufficiently for me to rescue the original investment cash , and they are not counted in the 10% as i MIGHT decide to crystallize the profit before the company fails ( not all them fail without warning )

    now paper losses that can be really tricky from memory in the bumpy bits between 2011 and 2018 there were several times the portfolio was down more than 30% ( but since i hold more small/mid-caps than most , it was not that unusual ) so in a REAL downturn 50(+)% would not be unexpected .

    now when BHP slid down below $18 , i scratched up more cash and bought more , in a big downturn i HOPE to have the courage to do similar ( opportunities and cash permitting )

    but the next big downturn will be my first ( as a market participant ) and only time will tell how i will react under that pressure .

    the current plan is to tweak as wisely as i can , clench my teeth and HOPE ( and rebuild from anything that survives )

    of course younger people have some other wise options ( like buy some vacant land and say resell it in 5 years after the market settles [ property and equities ])

    also i am after INCOME in the years after March 2020 ( i hope to never need to sell-down the portfolio )
     
  10. John Mellberg

    John Mellberg New Member

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    Investing is difficult, lots of things to consider and it's easy to lose money. If I were you I'd spend some time finding the best financial planner or adviser you can (this may not be your bank). Also, note that every return (such the the 6% exaple you mentioned) should be seen in the context of the associated risk aka risk-adjusted return.
     
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  11. twisted strategies

    twisted strategies Well-Known Member

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    assessing the true risk is the very hard bit ( ask the average saver in Cyprus or Spain )

    added in are the currently weak inflation ( that won't last forever , even if we sink into recession first )
     
  12. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    I am a bit of a boglehead, but did a good and can't find an Australian site, can you please point me in the right direction?
     
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  13. twisted strategies

    twisted strategies Well-Known Member

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  14. 89WorldUnow

    89WorldUnow Member

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    I want to categorised myself in younger people or let me say I prefer this option. This is more safer in my opinion. Ant to all that what you've said, I totally agree.
     
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  15. twisted strategies

    twisted strategies Well-Known Member

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    welcome to InvestChat ,,

    i am over 60 and in sliding health , so i don't expect time to heal much of the capital losses from a serious downturn , since 2011 several of the companies i have invested in have failed but in the rally since others have rallied enough to make it sensible to recover and reinvest the investment cash ( so the winners have covered the failures , so far )

    however if the entire market plunges share prices will fall and dividends are liable to shrink or be suspended

    now if you have another 20 years of investing time you have a good chance of rebuilding from the surviving investments

    good luck and keep your eyes open for opportunities , and general intell.
     
  16. 89WorldUnow

    89WorldUnow Member

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    Yes I will. Thank you very much.
     
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