$160,000 is go­ing back­wards

Sally’s sav­ings might be safe in the bank but her ...

Money Magazine Australia - - ASK PAUL -

Q I am 45 with $160,000 in the bank and I can’t de­cide how to in­vest it. I do not own a house or any other as­sets and I have no debt. I des­per­ately need help to de­cide what to do with my money.

Well, Sally, you are in a most un­usual sit­u­a­tion, with $160,000 cash at the bank and no other com­pli­cat­ing fi­nan­cial fac­tors. It may help to con­sider what not to do.

Cash at the bank is super se­cure and a great thing to have for part of your money. But with low tax­able re­turns and in­fla­tion, it has his­tor­i­cally been about the worst place to leave your money for the long term. The bank is mak­ing money on your money, but af­ter tax and in­fla­tion you are go­ing back­wards. As I of­ten say, with longterm money I’d pre­fer peo­ple to buy the bank by buy­ing shares in it rather than leav­ing funds in it.

We need to chat about your com­fort lev­els. We agree you need to do some­thing and you could eas­ily buy a share port­fo­lio. It is riskier than money in the bank but with much bet­ter re­turns over time. Equally, depend­ing on your job and salary, you could use this as a very nice de­posit to buy an in­vest­ment prop­erty. As you look past cash, prop­erty and shares re­ally are your two most ob­vi­ous as­sets. If you look back in, say, 20 years, pro­vid­ing that you buy ei­ther shares or prop­erty with some thought, I think you will be pleased with the de­ci­sion.

My per­sonal thought is that if you do own a home, buy­ing shares or top­ping up your super makes a lot of sense. If you don’t own prop­erty, I re­ally do like the idea of you own­ing one and get­ting it paid off over time.

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