ASK PAUL
Q
I earn $60,000 a year
and last year I put myself
under a debt agreement. I
felt it was my last option due to the
circumstances at home. I’ve made
bad decisions in the past and am now
straightening things out in my life.
I have decided to put aside money to
buy shares as I feel it is a good start
in preparing for my future. I am
turning 30 this year and I feel stuck.
I need your insight into whether it
is a good move to start investing in
shares or save my money.A debt agreement is not a pleasant
experience, Christine, but good on youFor Christine it’s smart to ...Learn
from bad
decisions
For grateful Gerard, a shares tip paid off and ...$2000 is now worth $200,000
Q
I followed your advice in
1997 on a Money TV show
that year. It was to invest
$2000 in four shares: CSR, NMW
and Lendlease, and I don’t remember
the last one. I still own Lendlease
but out of these four shares only one
went up and up and up. I started with
the $2000 and you can add two zeros
these days, thanks to you. Now my
question is: I’m 66 years old, retiring
next month with $200,000 in super
and $200,000 in shares, mainly
small caps, which don’t give many
dividends. What should I do?An excellent example of why I have
always encouraged diversification,
Gerard. Despite my best efforts and a
strong team of analysts who help me, the
simple truth is the future is uncertain. My
portfolio is the same. A few shares, sadly,do poorly, most do pretty well and a few
are superstars. Anyway, I am delighted
to hear that you can add two zeros to the
money you put into shares.
We are similar ages – I am 62 this
year – so we are in the same boat. My
thoughts would be to better diversify as
you get older, as I have done. The risk of
major losses is not a good idea as we hit
retirement. You hold mainly small-cap
shares in super and your portfolio.
As your super becomes tax free when
you retire and convert to a pension, I’d
suggest spreading your risk and adding
some of our major companies that pay
nice dividends. I do love getting franked
dividends into my super fund as, like you,
I get the franking credits back in cash
to my fund. So an investment in many
well-known companies is returning me
income of around 7%, including the
franking credits.for taking responsibility. You have two
really big things going for you.
First, you have said you made bad
decisions. This is really important. People
who say it was all someone else’s fault
learn nothing.
Second, you earn a good salary and
you are only 30. So by recognising your
mistakes, taking responsibility for them
and then knuckling down and starting to
put money aside is music to my ears.Frankly, the key issue for me is that you
are saving. Shares are a great idea if you
plan on holding them for the longer term,
say at least seven years.
If, however, you think you might want
to save a deposit for a property, then
building cash in a high-interest account is
a pretty good plan. If unsure, shares are
fine. They may go up or down in the short
to medium term but you can always
access your money if your plans change.Q
&
A