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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. rogue1

    rogue1

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    If you don't want any risk and want guaranteed return, rabo direct has some juicy term deposit offers you could take advantage of. Start with a few short ones and work your way up to the five year ones at 3.50%. Or put a stack in a 90 day notice saver at 2.70%. If you devote about 500k to this you can get an income of around 15-20k (after tax) with no risk. That would still leave you plenty left over for higher return investments if you really want to do that...
     
  2. MrChow

    MrChow

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    Asset Allocation based on risk profile and time frame is a good place to start.

    I am aggressive with funds I don't need or look at for 15+ years (high allocation of stocks), and very conservative for funds I anticipate needing within 10 years (high allocation fixed income).

    High allocation means different things depending on your risk profile and what losses you can handle without needing to change strategy. EG. A 50/50 stock-fixed income strategy had a -25% drawdown in the GFC which was the worst financial crisis in 60 years.

    Life situation is just as important as theory too as houses, kids, jobs are major factors in what you need.
     
  3. IFocus

    IFocus You are arguing with a Galah

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    Great advice from all big picture goes to Systematic :2twocents

     
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  4. aus_trader

    aus_trader

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    A lot of good advice from other members of the forum so far. Totally agree with earlier comments about being conservative with preserving/investing this precious investment money you have received. Don't treat it like a lottery win (even a lottery win shouldn't be squandered away) since someone has worked hard to earn it and pass it onto you.

    Stock investing is hard and if you are a newbie take time to practice and paper trade while keeping the money in the bank or term deposits.

    Even with many years of experience I have diminished returns from stocks and ETFs given a lot of time is invested in researching. Even with risk management for preservation of capital implemented, my Medium/Longer Term Stock Portfolio is just keeping it's head above water.

    As already suggested by other members, as the prices are coming down, putting a deposit down on a reasonably priced house or buying it outright may be a good idea to consider also. Take your time to find a bargain since the steam is slowly coming out of the "hot" property market as it's cooling down...
     
  5. Bendonovan

    Bendonovan

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    Stitch up?
     
  6. Bendonovan

    Bendonovan

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    That’s for response so cynical. Firstly, no I am not in the re-investment plan with the banks. How do I sign up to that? Secondly, what do you mean by ‘averaging down’? (Sorry to sound thick!)
     
  7. Bendonovan

    Bendonovan

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    Hi systematic, thank you very much for your reply. In fact I was blown away by the helpful responses I got. What a great forum.i feel like I should reply to thank everyone?! :)

    Yes I am 100% debt free. I was Incredibly sensible growing up, working hard and putting money away instead of partying hard. And bought crap cars instead of flashy loan cars etc. so I’m all good on that front.

    To add to that, I have a house with no mortgage. It is a comfortable house so I see no need to move into a McMansion. So tick that box as well.

    You mentioned my living. It’s etc. whilst I don’t earn a huge amount, my income just about covers my living expenses. If I ever got to a position where I was struggling to meet this, I would simply reduce my charity volunteer work in exchange for paid employment. Simple!

    Good question. I only invested 25% of the funds, because I wasn’t sure if it was the right thing to do,or not. But I was happy to do it, Because in all likelihood, a financial advisor would probably have allocated at least that kind of percentage of funds into a generic ETF asx tracking fund anyway I think?

    I don’t feel like I will be the book-reading and researching type. It’s not that I’m lazy. I just don’t mind missing 1 or 2% percentage less than I could make, by not having to go that extra mile. I just want simplification, hence why I bought up the STW shares. Seemed like an easy call.

    I also have the thinking.....that 100k 30 years ago was an incredible amount of money, but it is worthless now to the people who either kept it in the bank or under their floorboards. I want to ensure, that this $1,000,000 I have now, that I keep above any CPI increase so when I do finally need to call upon the money for whatever reason (let’s say I. The year 2040), that the money will be at ‘today’s value’ not the value that it was on jan 1st 2019!!

    Oh, one more thing,happy new year
     
  8. So_Cynical

    So_Cynical The Contrarian Averager

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    You sign up for dividend reinvestment via the relevant share registry site, computershare or link market services for the banks and STW, you average down when you buy or get dividend reinvestment allocated shares in STW etc at a lower price than you have paid previously.

    Lets say you have a parcel of shares and you paid $50 for each share, now you buy the same sized parcel at $40 per share, your average price goes down (average down) to $45 per share.
     
  9. Junior

    Junior

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    Some great advice here, I'll add my 2c.
    • Start by putting together a list of your goals...not so much your financial goals, but your lifestyle objectives and wants. Sort these by priority/importance and by timeframe.
    • Once you have your key objectives, this can then drive your investment strategy and how to allocate your cash. The funds can be separated into buckets based on the timeframe and purpose of those funds.
    • This means that any funds which you intend to spend or utilise in say, the next 5 years, should not be invested in shares or property in the interim and could go to term deposit. Any funds which will be used for a longer term goal should be invested.
    • As others have said, a good independent financial adviser would be useful to you. If you don't want an ongoing relationship with one, request 'one-off' advice which addresses your areas of concern and your objectives. This will help steer you in the right direction, and benefit from a third-party perspective.
     
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  10. rogue1

    rogue1

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    I feel like I will piggyback a bit on this thread, because the OPs situation is remarkably similar to my own.

    I am in my early 40's and am about to come into a solid inheritance. I have a small family and a house all paid off. In terms of employment, I am looking to take a big step back because I want to wind down my stress levels, so I'm hoping that market investments might be able to help provide enough income to cover most of my annual expenses (estimated around $40k per year).

    In this sense, I am looking closely at high dividend return options, as well as overall security. On my hit list I have a range of ETFs to cover the world, US and Aus markets, but I've noticed a lot of those don't really yield very much in terms of dividends.

    I have also been looking into the most generous companies in the ASX 50, but before I go all in and dump my load (some time next week), I should ask if anyone has some good suggestions for me in terms of income providing shares.

    Thanks in advance...
     
  11. bonox

    bonox

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    income doesn't have to come from dividends. You can quite happily sell small parcels of shares with significant growth for income as well. In a new era of diminished CGT discount and no franking credit refunds, if your income is limited to your investments, there's really no downside to liberating high growth/low dividend shares instead of focussing only on companies issuing high dividends.

    In such a scenario, you'll usually end up paying a little more CGT and little less yearly income tax - planning can make this strategy rewarding given the CGT discount in the shorter term.
     
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  12. wfdTamar

    wfdTamar

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    Gawd, ok, I'm another in the same boat as Ben, bit older and not quite so much money, but the same attitude. I lived before on very little and still do. Have a paid off house. I put all my inheritance into STW, using SelfWealth as broker and day traded it. This makes it very easy and cheap ($9.50 per trade). My thinking was it's one share that covers the ASX200 so it's blue chip and means I don't have to know anything about individual companies. Did quite well except for when Trump mouthed off when I was holding shares and they dropped a couple of times. However even during those periods my trading strategy worked as I intended it to - I just ride the drop and wait for recovery, living off the dividends. Another tactic might be to trade during the drop to take advantage of the rise on the way back up.

    When I started doing this people said I was mad, put it (or some of it) in real estate. Glad I didn't. Would have lost if in Mel/Syd and paid over the odds where I am.

    The only problem would be if you needed a lot of money at short notice when the stock is down (like to buy a new car or house). Those sort of purchases can be foreseen and planned for so take money out of the shares when they're up and keep it in a more stable investment you can get at with enough notice to suit (like Term deposit).

    Another thing might be to look at ETF's that cover different markets like overseas, or particular market segments. I do think putting any money in a bank account other than what you need for immediate use or any emergency is crazy. If you need some, just sell some shares.

    Another aspect is tax and if you want to get into things to minimise it. As it looks like negative gearing is about to go (if Labor win) that will be out and quite right too - a ridiculous perk for the wealthy.

    Get yourself a credit card with a good reward scheme and a decent limit to cover all expenses and just pay it all off each month. That way you get perks from the card and have an emergency buffer.
     
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