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Newby with lots of cash

Discussion in 'Beginner's Lounge' started by Bendonovan, Dec 29, 2018.

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  1. Bendonovan

    Bendonovan

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    firstly, sorry if my title comes across as bigheaded. I just thought it would get straight to the point. If it helps I am a voluntary charity worker for most of my working week.

    So.....I have recently run into a heap of money via inheritance. A million dollars roughly. I’m 35 years of age.

    Last years, at the near peak of the market I rushed out to buy some shares. Why? I don’t know. It seemed like a good idea. Lol

    I mainly bought STW shares so set and forget them for the next 10 years. So pretty much I bought $200,000 of STW shares and $50,000 of bank shares.

    So I have nearly $750,000 left......

    What should I do? I don’t really need the money and happy to sit and wait. It would be nice to get some extra dividend income as my annual salary is relatively low ($30,000 per year) given the extra charity work I do on the side.

    I did make a visit to a financial advisor. He wanted to charge me $7,000 (plus about 4K per year) to ‘look after me’ but to be honest I feel I only will make basic decisions anyway so do I really need him?

    Second question......

    Should I look at getting some kind of stockbroker to help me or should I just sit on STW stocks for 10 years? Should I look at getting into the USA/overseas market.

    Risk is not a big problem for me. If I lost half of this money I wouldn’t cry....I didn’t really earn it in the first place.

    I feel a bit lost, not sure who/where to turn for advice. I just feel like now is a good time after the Stockmarket having dipped quite low in recent weeks.

    Any feedback would be appreciated

    Thank you, Ben.
     
  2. greggles

    greggles I'll be back!

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    Hi Ben, welcome to the forums.

    It sounds like you're randomly picking well known stocks that you think will do well with mixed success. You might want to look into ETFs (Exchange Traded Funds) which are basically managed funds but listed on the ASX. In short, you can diversify as much or as little as you like. Some ETFs follow indexes, some particular sectors and others specific commodities etc. There are many of them, each with their own purpose or focus. You can find a comprehensive list of ASX-listed ETFs here.

    Best of luck with your investments. :xyxthumbs
     
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  3. againsthegrain

    againsthegrain

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    easy come easy go eh ... the rich get richer the stupid get poorer
     
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  4. tech/a

    tech/a No Ordinary Duck

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    Harsh reality.
    Ben if your serious leave it in a bank until YOU know what to do with it.
    Learn to fish rather than looking for someone who wants your Burly.

    You'll lose 1/2 far quicker than you'll increase it by 1/2

    Dont be blase you have a very rare stroke of luck dont BLOW IT!

    Life will either be full of opportunity and Fun
    or Full of regrets and arse kicking!
     
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  5. tinhat

    tinhat Pocket Calculator Operator

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    Actually, that doesn't sound anything like what Ben has told us. He just told us he has invested $200,000 in an ETF (STW) and a further $50,000 in bank shares. That doesn't sound like random stock picking to me.

    ***

    $1M won't buy you a house in Sydney but it is a fantastic nest egg. The first rule is to preserve your capital. Even though your STW shares will be down in the current market they very closely track the XAO and should do OK in the long run if you assume that the stock market will go up in the long run.

    Preserving capital should be your number one rule. Your first goal should be to preserve the real value of the $1m you have today. That said, because you have a long time frame you can afford to ignore large drawdowns on your STW shares due to stock market corrections and bear runs (of which 10-30% drawdowns are a regular occurance over the long run) if you don't foresee needing to get your hands on that money in the short to medium term. Historically, the XAO has achieved an average return (value appreciation plus dividends) of about 10%pa. Anyone who panics over a 10-30% stock market drawdown hasn't managed their risk exposure appropriately.

    If you want to start actively investing in the stock market you may want to allocate just a very small amount of your overall capital to this. For example, if you are interested in dabbling more into stocks, you might reason that your $250,000 invested in the index tracking and bank stocks should return about $25,000 on average over the long term so for now you might decide to risk actively investing $25,000 into other stocks, because even if you lose it all in the long run you will come out unscathed. Stock trading is a zero sum game. For everyone on the winning side of a trade there is someone on the losing side. If you do start actively investing in stocks you should develop a trading plan before you do so. What criteria you will use to select stocks, what your entry conditions will be and what your exit (stop loss or take profit) conditions will be.

    I personally have gone very long bank stocks lately. Is the bottom in for the bank stocks? I think it could be, but there are lots of reasons to be pessimistic about the macro outlook at the moment: trump in the white house, Brexit, regulatory and punitive fallout from the banking royal commission, negative consumer sentiment in the USA, a looming federal election always dampens the ASX's exuberance. Then again, it's when everyone else is pessimistic that the opportunities can arise!

    Good luck!
     
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  6. Darc Knight

    Darc Knight Investor not Trader

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    @systematic usually has some good advice for Newbies :)
     
  7. lenny

    lenny

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    Hello Ben.

    Looks like you are in a pretty enviable position for a young person.

    I would recommend reading Gary Antonacci's book dual momentum and/or Mebane Faber's Ivy portfolio.

    Both books fully disclose rules for a robust and simple rotational ETF strategy's. Or you could just do a google search and get rules and performance records for free:)

    Good luck with your journey.
     
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  8. verce

    verce

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    I would put the 1 million in a term deposit for as long as possible. This will avoid the temptation of wasting it on frivolous things.

    Spend the 12 month interim educating yourself. Diversify and allocate accordingly. Put maybe 1% into mainstream cryptocurrency.
     
  9. Darc Knight

    Darc Knight Investor not Trader

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    As a newb myself I went to my Bank in October to see what they could do. They were falling over themselves to get my money into a Term Deposit. When told I qualified for a special negotiable rate I argued with the Manager "just give me rate". When they wanted to engage in negotiation I turned and walked out the Door. Geez that felt good :D

    Try it!
     
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  10. qldfrog

    qldfrog

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    First i am not very optimistic and believe the markets are near or at the end of a bull run.
    So preserve assets
    Thee isno harm putting a bit of your winfall in gold..real gold not paper gold, a bit in usd and maybe swiss franc and or yen.
    You will also realise that even if this seems a lot 1 million aud is not that much if you want to leave in australia and need to buy a house
    On the other end you can stop work and live in thailand all your natural life.
    So no hasty investment and long regrets please, imho some gold, cash in various currencies u til you are clear as to where you want to go, and how
    Do you want to stop work, open your business,travel or live forever on a beach..your choice
    Hope it helps
     
  11. tech/a

    tech/a No Ordinary Duck

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    Trusts are in place for people like those.
     
  12. SirRumpole

    SirRumpole

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    Might be a good time to take advantage of falling property prices.

    Put down a deposit on a reasonable house, borrow the rest, negative gear...
     
  13. jjbinks

    jjbinks

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    Agree with comments recommending a solid 12 months of education about your preferred investment choices (whether that be stocks/property etc. )
    Keep your money safe in bank/term deposit till then!
     
  14. fiftyeight

    fiftyeight

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    Give me $58,000 and then read The Barefoot Investor. Best $58k you will spend
     
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  15. rogue1

    rogue1

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    This is great advice, along with, give me $45,000 and read Rich Dad Poor Dad. You’ll notice it’s a little cheaper than the above adivce... ;)
     
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  16. IFocus

    IFocus You are arguing with a Galah

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    Hi Ben congratulations on your inheritance.

    1st rule for investment as Tinhat says "is to preserve your capital."

    2nd rule ....don't break rule No 1.

    Good work with the financial adviser if you go down that road again only deal with independents who run on a fixed fee and only charge for advice no on going fees....ever, don't deal with anyone linked to banks or any institution they will put you into funds charging higher commissions etc, talk to at least 6 different ones (seriously) you must become the expert because they wont be but you will get ideas from the process.

    Best advice I can offer is only buy shares (blue chip) during market crashes note the current down turn isn't a real crash yet 2019/2021 there is likely to be one.

    Spend a few years getting educated about investing, the returns over the long term will be worth while you don't have to be a super star, earn 7% a year and double your money every 10 years.

    Consider all markets and assets, keep it simple stupid and you will be fine.

    Don't trade you will lose money, 95% of retail traders lose trust me you are not the chosen one.


    Good luck
     
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  17. qldfrog

    qldfrog

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    Both above recommended readings worthwhile.
     
  18. tech/a

    tech/a No Ordinary Duck

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    Stitch up I think!
     
  19. systematic

    systematic

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    Well, my goodness - that was so nice of you to think that, and then go to the trouble of posting it! Thank you!

    I now feel like I'd better say something, lol...but there's been some good advice already, at this point.

    Just a few random thoughts, @Bendonovan based on what I could glean from the post...

    Firstly, sorry for any loss that lead to the inheritance. Second, yay, for the inheritance! As you already know, a once in a lifetime opportunity!

    You're 35yo and spend most of your working week doing charity work. My first temptation is to ask what you do for a living...meaning, to put bread on the table and pay the rent?

    It's also great that you acknowledge that, 'you don't know'. That's good - and much better than pretending you do!

    It's okay to use - or not use - a financial planner. I'll stick with what I always say: if you need one (remember, not just for investing but for other aspects of your financial life) - try and find a good, *truly independent* fee for service planner. They DO exist, here in Australia. If you have a lot of money available for investing, they could also help with stuff like how to structure yourself, how to use super etc. So, they definitely have a value.

    I don't like that you said, "Risk is not a big problem for me. If I lost half of this money I wouldn’t cry....I didn’t really earn it in the first place."
    I do know what you mean here - it's cool - but I just want to pull you up on it...because none of us want you to lose half this money! You didn't earn it - but someone did...and thought enough of you to leave it to you to manage. End of sermon, though :)

    Next are some obvious, financial planning 101 (at least in the textbooks) advice - that you'd also get from popular financial gurus...

    Any debt? Like any...10 bucks to a mate, car loan, whatever? If so, it should be GONE by close of business tomorrow. No excuse.

    Another basic: what are your expenses in a given fortnight / month / year? You've got the dough, so you should take 6 months expenses (including annual bills etc)...and put that amount aside in an emergency fund. You can call it a Mojo account (Pape), or whatever you like. It's a rainy day fund. Put that in a separate bank account (some even use a separate bank)...and you're done.

    Beyond that...before we even talk about investing...it's all about you, at this point. Your goals and your upcoming financial needs. Got kids that you want to put aside for? You might not be able to buy a house in Sydney, as someone pointed out (are you even in Sydney?) but if (a) you don't already have a house and (b) you have aspiration to own a house...you at least have a 20% deposit available regardless of where you live...and if you're not in Melbourne / Sydney you might be able to buy a home for cash. So - that's a big one. It's harder to go on with investing advice without knowing the nature of your current income / expenses (re: your earlier comment that you do volunteer work) as well as what your aspirations and current situation is re: house ownership (because if you wanted to own a house, and you didn't currently have one...that could take up a giant chunk of this money). I'll leave it with you - but I'd just say that if you don't have a house and you want one, and the median house price in your area is well under a million...do it. Pay cash for the thing.

    The trouble is - at this point for all we know you are already debt free, have a home and have some means of supporting yourself that allows you to devote most of your time to charity work. In which case almost all of the one million is available for investing. Is that the case?

    The investing side...best advice would be to take it slow. Nothing wrong with some broad index funds and / or simply using aggregate funds (like my often mentioned Vanguard lifestyle funds).
    If you want to go deeper with investing, yes - read some books etc. and go slow from there. Depends on the level of involvement you want.
    I wouldn't just gamble, as per your comment in the DCC thread. It doesn't matter that it's just $3,000 and now that's not much money to you. It sets the wrong attitude. You even say in that post that you have no idea what you're doing. I'd refrain from any speculation like that until you do know what you are doing.

    It's really about goals. What do you want? If you don't need the money (because you are already set up with everything else)...then why invest just 250k when it's all available for investing?

    BTW, these questions are meant to get you thinking - you don't need to answer them here.

    Hope something in that helps...
     
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  20. So_Cynical

    So_Cynical The Contrarian Averager

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    Make sure you are in the dividend reinvestment plan with the banks and STW, at least you can average down a little over the next 6 to 18 months...
     
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