Dou­ble the $1m and re­tire early

By in­vest­ing his sale pro­ceeds wisely, Bernard can ...

Money Magazine Australia - - ASK PAUL -

QI re­cently sold my unit to a de­vel­oper as part of a col­lec­tive sale and re­ceived a net $1,070,000. What ad­vice or strate­gies would you give to fur­ther in­vest this money?

Would buy­ing a few in­vest­ment prop­er­ties (say three over the next 12 to 18 months) and putting the re­main­ing amount into a term de­posit be a good op­tion? Or would you look at in­vest­ing in stocks or bonds? I’m still young at 34 and would like to even­tu­ally dou­ble that $1 mil­lion and set my­self up for early re­tire­ment. Your rec­om­men­da­tions would be greatly ap­pre­ci­ated.

Bernard, you are in­deed still young and with $1 mil­lion from your sale you can re­ally set your­self up for the fu­ture.

To dou­ble that by your re­tire­ment age is a very mod­est goal, even with an early re­tire­ment tar­get. Let’s call that age 55, mean­ing you have to dou­ble it in 21 years. You also have to al­low for in­fla­tion, so let’s go with 4% as a his­tor­i­cally re­al­is­tic re­turn above in­fla­tion. If this is achieved – and, of course, there are no guar­an­tees here – your money would dou­ble in 18 years, so by age 52.

First, you may have em­ployer con­tri­bu­tions go­ing into su­per, which re­ally helps to bring for­ward re­tire­ment. With your $1 mil­lion, I am pretty sure that cen­turies of his­tor­i­cal in­vest­ment re­turns will prove to be true and show a term de­posit to be your low­est-risk but worst in­vest­ment.

So we turn to prop­erty, bonds or shares. My view is that with this great op­por­tu­nity to se­cure your fu­ture, why not spread your risk?

Con­cen­trat­ing risk will give you the po­ten­tially big­gest re­turns with the great­est risk. Spread­ing your risk across growth as­sets makes more sense to me. So what about one or even two prop­er­ties and then a share port­fo­lio? You could use low-cost ETFs to own a di­ver­si­fied share port­fo­lio or a very low-cost man­ager such as Van­guard.

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