Stash your cash for a safety net

IF you have a burning money question, or want to win a fight with your hubby, shoot over to barefootinvestor.com

Agent advises the couple, signing documents.

CLAIRE WRITES: I am due to receive approximately $50,000 inheritance from overseas. I have had two incidents of my husband having emotional affairs online and I am still in the relationship. But I want to put this money aside as a nest egg so that if I need to leave if he strays again, I can support myself and our two young children. I am currently in full-time employment. What would you recommend I do to make a sound investment?

BAREFOOT SAYS: I’m no Doctor Phil, but the very fact that you’re asking me this question means there’s a good chance you’re not going to reach your ruby wedding anniversary.

Now, Australia has a “no fault” divorce — so even though your husband is a dog, it doesn’t mean he’ll be penalised in the property settlement.

So if I were you, I’d keep the inheritance in cash, in a separate bank account, in your name. Let your husband know that you’ve now got a getaway fund.

SOUNDS A BIT HIGH

DON WRITES: With a term deposit maturing next month I’m curious to hear your thoughts on AMP REIT paying 9.16 per cent. Too good to be true?

BAREFOOT SAYS: I don’t know which real estate trust you’re referring to, so I can’t give an informed answer. However, the return they’re promoting is high — too damn high for my liking.

In an era of historically low interest rates, a 9.16 per cent rental yield suggests that somewhere along the line they’re taking some risks.

Or, more accurately, its investors are taking risks.

ARGO OR INDEX FUND?

JANE WRITES: My son is 19 and currently has $30,000 in the bank. He is a second-year apprentice with another two years to go, still lives at home and quite frankly is a tightwad (putting it nicely).

He is putting an extra $1000 a year into super taking advantage of the government co-contribution and I’d like to invest $10,000 into the share market to leave and forget.

I’m thinking either Argo or Vanguard Aust index shares. What do you think?

BAREFOOT SAYS: They’re like choosing between Kylie and Dannii, or Kim and Kourtney — not that much difference between them.

However, I favour the Listed Investment Companies like Argo over a straight index tracker for a number of reasons: first, because they’re cheaper than Vanguard.

Second, because Argo and AFIC have a history of outperforming the market over decades. There’s no black magic to this.

The index is forced to buy all 200 of the biggest companies on the market — which include some absolute dogs — whereas the professionally managed LICs can avoid most of the barkers.

Either way you’ll do better than 90 per cent of the retail managed funds.

THE DIRTY BOND

DOUG WRITES: I’m retired and currently have $100k invested in the Franklin Templeton Multisector Bond Wholesale Fund. The fund invests in global bonds (fixed interest) and is supposed to pay quarterly dividends.

During the past 12 months the fund has failed twice to pay a quarterly dividend (ie, in April and October this year). Can you please explain why this “fixed interest” fund has not paid these two quarterly dividends?

BAREFOOT SAYS: Describing this as a fixed interest investment is like saying heroin is an after-dinner mint.

The fund profile suggests that most of its gains (and its losses) come from bond and currency trading, rather than income distribution — hence the lack of dividends.

The countries the fund is investing in include some of my favourite takeaway cuisines, but their investment prospects are best described as “adventurous”. If you’ve been sold this as being safe and secure, check to see that you’re adviser isn’t on heroin.

BUMPING BUFFETT

AUDREY WRITES: We have about $60k worth of Berkshire shares.

I want to sell them while they are reasonably high and the Aussie dollar is low and then reinvest in something undervalued. We should stand to make 30 per cent on the dollar difference. Does this make sense to you?

What advice would you offer regarding the timing of selling? We plan to buy them again when they dip.

BAREFOOT WRITES: No,
I don’t think it makes any sense. Why would you trade in and out of a company that has increased its book value by 1,826,163 per cent over the past 50 years?

MOTHER-IN-LAW RATIO

JENNIFER WRITES: My partner and I earn $75k and $70k respectively, we also have a side business that nets between $4k and $5k every six or so weeks.

Here’s the thing — we have $65k in credit card debt, zero savings and a mortgage of $563k with a Loan to Value Ratio of 116 per cent partially guaranteed by the mother-in-law’s house. Mum wants to sell in 12-18 months; how can we get this down so we can refinance and get her off the loan while also paying down the credit card debt?

BAREFOOT WRITES: Your poor old mother-in-law. This is exactly the reason that I don’t like anyone going guarantor. If you don’t pull your finger out right now, you’re going to absolutely screw her over. So the first thing you should do is talk to your bank, and apply for a hardship variation.

Over the next 18 months, focus on repaying the secured mortgage debt, which you’re about $78,000 underwater.

Clear it off.

Originally published as Stash your cash for a safety net