Beware the crypto punt
QUESTION: If you’d bought $1000 of Bitcoin in July 2010, how much would it be worth today? (a) $1430 (b) $143,000 (c) $1,430,000 (d) $14,300,000 (e) $143,000,000 The answer? (e). Yep, $143 million, nearly enough to buy a decent threebedder in Toorak, Melbourne.
Staggering figures, but true — it was trading at 6c a share back then, and now it’s $8580.
Oh hang on, in the time I’ve driven home, read the kids a story, put them to bed (twice) and come back to my computer, a Bitcoin is worth $9051!
That means our $1000 is now worth $150.8 million.
In other words, we’ve made $7 million while I was reading Bob the Builder. (Can we build it? Bob, with seven million large, yes we can, just not in Toorak.)
Now, let’s be honest, you wouldn’t be a dinky-di, redblooded, chop-eating Aussie if my little quiz didn’t get your … err … bitcoins going, right?
After all, we’re the biggest punters on the planet.
The Economist magazine says: “Australia is the most lucrative gambling market in the world: according to H2 Gambling Capital (H2G), a consultancy, betting losses per resident adult in Australia amounted to $990 last year, 40 per cent higher than Singapore, the runner-up, and about double the average in other Western countries.”
That’s why there are plenty of stock-jockeys trying to get you to “invest”. Case in point, here are a few headlines from investment newsletters talking up “cryptocurrencies” like Bitcoin: “$642,245 for every $10,000 invested?” “This could turn $500 into $42k.” “A potential 629 per cent gain if you buy on tomorrow’s opening.”
Note the artful disclaimers in each headline: the question mark, “could” and “potential”.
Fair dinkum, these claims would make Tom Waterhouse blush. Don’t get me wrong, at this time of the year I love a day at the races. But at the track, everyone knows it’s a punt. Bottom line? Don’t confuse cryptocurrencies with investing. They, too, are a punt. CAN I TRUST PARENTS-IN-LAW? Hi Barefoot, My parents-in-law (both in their 60s and retired) have put a proposition to my boyfriend, and I am very uncomfortable about it. He is in serious debt, with credit cards and personal loans. In two months they will lose their cheap rental home (they’re renting from a friend, who is now selling the place).
So they want my boyfriend to buy a home in his name for them to live in. They say they will pay him $5000 a month and cover all other costs. For income they have four pensions — two for themselves and two “carer payments” they receive for having two people in their 80s living with them. They say it will not cost him a cent, so he can pay his debts and, when they all die, he will have a house. They all think it’s an amazing idea, but alarm bells are ringing for me!
Abbie Hi Abbie, Ding! Ding! Ding! I’m hearing the same alarm bells! I could be wrong, but it sounds like your parents-inlaw have been moved on from mooching off their mate so they’re looking around for their next meal ticket, which just happens to be your boyfriend.
Make no mistake, they’re looking out for themselves not for their son.
At risk of beingeing a party-partypooper, let me poop on this plan. First, retired pensioners can’t underwrite a mortgage, especially when part of their income is supplemented by carer payments which may go to God at any stage. Second, it sounds like your boyfriend would have trouble qualifying for a mortgage, given you say he is in “serious debt”. Even if he can score a loan, it doesn’t mean he should.
What could end up happening is your deeply in-debt boyfriend becomes your deeply indebt husband, and you both end up on the hook providing a home for his deeply dependent parents for the next 30 years. RIPPING OFF PENSIONER? Hi Scott, My mum received about $300,000 inheritance. Being financially illiterate (after a life of illness and liliving on the ddisability pension)pension), sheshe wwent to a NAB financial planner, who put her money into a superannuation account with MLC. The good part is she is still eligible for a disability pension. The bad part is that NAB charges around $2500 per year for their “advice”, and MLC charges around $3000. Rip-off? Chantelle Hi Chantelle, There is no way anyone on a disability support pension should be paying $2500 a year ongoing for advice. Besides, if your mum is under the Age Pension age, whatever she has in super is exempt from the asset test. What she should do is go and see a free Centrelink Financial Information Services Officer, who will help her maximise her pension for free.
As far as the cost of her super goes, it’s about average: over the next decade, she’ll end up paying over $50,000 in fees. (If people paid their super investment bill the same way they do their quarterly power bill, it’d be an outrage, but it’s all out of sight, out of mind.) If she can “fight the power”, I’d suggest she switch to an ultralow-cost industry fund. MILLION DOLLAR PAYDAY Dear Scott, I am 24 years old and I earn $40,000 a year working part time. Today I received a lump sum of $1,000,000 (after costs) due to being run over by a car seven years ago. I need to pay around $5000 a year in ongoing medical costs. How should I invest this money, and is it worth setting up a trust and a “bucket company” that reinvests in itself?
Max Hi Max, First up, you won’t have to pay tax on the payout itself, but you will pay tax on any investment earnings you earn on it. Now, would I invest the money in a trust and then distribute the investment income to a company?
Possibly. The trust will give you asset protection benefits, and the company acts as a bucket to theoretically cap your tax at a company rate of 30 per cent. But it’ll also gobble up a few thousand a year in fees to your accountant.
However, let’s not put the cart before the horse. If I were in your shoes, I’d keep it simple: buy a nice little unit for cash (say $500,000) and put $15,000 into Mojo (high-interest online saver account).
I’d put $25,000 into term deposits with different maturities to cover any medical costs within the next five years.
I’d also kick $25,000 into your super.
Then I’d invest the rest ($435,000 or thereabouts) into good-quality Aussie shares (either via a trust, or in your own name), tick the Dividend Reinvestment Plan option (so your dividend earnings are automatically reinvested into more shares), and let your money compound.