How to get your Mojo working

I'M socially awkward but over the years I've worked out one default topic that most people find interesting: where I invest my money.

Staff and customers at a Bunnings Warehouse.

I

'M SOCIALLY awkward. I think it's because I'm missing the gene that allows you to think up good topics for social chit chat on the spot.

Yet, over the years I've worked out one default topic that most people find interesting: where I invest my money.

So today, in the interests of a pleasant discussion with no awkward silences, I thought I'd share with you the secrets of where my savings are sitting right now.

And, it's especially topical given interest rates are as flat as Warney's love life.

The best place for your savings

I'M a conservative guy, so over the years I've worked really hard to build up to having six months of living expenses in short-term savings (which I call my Mojo money).

Some people think this is overkill - and maybe it is.

Yet just knowing I have a big chunk of change sitting at the ready helps me ride out the bumps and bruises of the sharemarket - and for that matter, the bumps and bruises of everyday life. For me, cash means control.

Over the years I've parked the dough in a 24-hour access UBank saver account (currently paying 3.71 per cent - and 4.41 per cent with a $200 a month savings plan).

Like all bank accounts, it's government guaranteed, and it's separate to my other bank accounts, which means I'm not tempted to shuffle the money back and forth and whittle it away (I have very little self-discipline).

Yet, given that interest rates are at historic lows - and likely to fall lower - last year I decided I needed to get a better return, but without taking on too much risk.

So I took half my Mojo money, and bought shares in the BWP Trust (BWP). Don't get confused by the lingo. It stands for Bunnings Warehouse Property Trust.

By buying the shares, I essentially became a part-owner and landlord in 60 or so big green Bunnings' sheds (BWP trades on the sharemarket, and you can make an investment with as little as $1000).

My thinking was this: the trust has low debts, a top-quality tenant (Bunnings), decade-long leases (with built-in inflation-adjusted yearly increases) - and Bunnings pays all the outgoings (compare that to your average residential investment property!).

Subscribers to my investment newsletter, the Barefoot Blueprint, are up a staggering 25 per cent since we recommended the stock last year and we're getting a 6.2 per cent yield. Much better than a poke in the eye with a garden hose.

Tread Your Own Path!

Question of the week: Should I be worried about America's debt bomb?

Hi Barefoot,

I'm a new investor (thanks to you), but I'm worried about what's happening in the US right now.

I have to admit that I only have a limited understanding of economics and I don't really understand how the Federal Reserve 'tapering' will affect me?

I'm hoping you can explain it to me in English.

Thanks, Daniel

Hey Daniel,

The first thing to understand is there's no textbook explanation for what has happened over the past five years.

Essentially, the world was hoodwinked by a bunch of greedy bastards on Wall Street.

And infuriatingly, they haven't learned their lesson: according to the Bank of International Settlements, the share of "leveraged loans" in global credit markets is now at an all-time high - 10 per cent higher than the pre-crisis peak of 2008.

To mop up their mess, the US Federal Reserve created an emergency stimulus program, which has been going on for five years.

The centrepiece of the program sees them inject a staggering $US85 billion straight into the veins of the US economy every single month. And this week, Fed boss Ben Bernanke decided the American economy was still too fragile to turn off the debt drug - or even begin tapering them off.

Eventually, the US will have to wean itself off the drugs, and it'll be painful for all when they do (so, like a junky, they putting it off).

Here's how it affects you:

First, sharemarkets will more than likely continue to rise - right up until the drugs are shut off, or their potency begins to wear off - and make no mistake, it will happen.

Second, the Aussie dollar will continue to be strong.

By printing so much debt, the US is weakening its dollar, and the more they print, the less it's worth. Like a seesaw, that makes our dollar go up.

Reserve Bank boss Glenn Stevens has made it very clear it wants the Aussie dollar to go down, to help rebalance our economy away from the mining boom, and give our manufacturers a fighting chance.

And finally, that explains why there's a good chance the RBA will cut rates again by the end of the year.

However, the one thing the US has taught us is that ultra-low interest rates aren't always a good thing.