The time to act is now

There’s a photo somewhere of me stark-naked being dunked into the Murray River. No, it wasn’t part of the Apple iPhone hack, writes Scott Pape.

NOT FOR INTERNET... 15/12/2004 BUSINESS: The Barefoot Investor. Scott Pape. HWT staff.

THERE’S a photo somewhere of me stark-naked being dunked into the Murray River.

No, it wasn’t part of the Apple iPhone hack — the incriminating picture lays behind the sticky cellophane of a photo album at my parents’ home.

It was taken when I was a toddler. My father had muttonchop sideburns, a gasper in his mouth, and a tinny on the riverbank.

My mother wasn’t in the shot, but that’s because she was probably sunbaking, lathered in Reef Oil.
That was my first family holiday — 80 clicks from the middle of nowhere (Ouyen).

This week I took my wife Liz and son Louie on our first family holiday … to Fiji. Sounds exotic, but the joint is totally overrun by middle-class Aussies. They even have the same power-points (a nice touch, actually).

At our resort the kids ran around the pool looking like martians — covered head to toe in sun-safe rash shirts, clutching an iPad in one hand and an organic chicken burger in the other.

The best thing about Fiji is that the locals all have a strain of my grandmother in them: they absolutely adore kids.

The hotel staff would pick up Louie, play peek-a-boo with him tirelessly, shower him with kisses, and then hand him back to me. They’d do this multiple times a day, and often while I was perched at the bar, talking to other DIKs (Dads I Know).

Here’s some of the comments I heard over a coconut mojito or two:

“I’d like to buy shares, but I reckon a big crash has gotta be just around the corner.”

“We’re waiting for the housing market to drop before we buy.”

“The cost of living is out of control — it’s really tough!”

No, what’s tough is serving a bunch of pale, pudgy, whingeing Aussies $9 beers, when you’re earning $3 an hour. (They’re having the last laugh though — literally — a worldwide Gallup poll in 2012 found that Fijians are the happiest people on Earth). The point I’m trying to make is that you and I are faced with very rational reasons to put off doing something with your money.

Case in point, when my old man was dunking me in the Murray, there were lots of reasons for him to play it safe.

The international economy had just been hit with a baseball bat. Then came the 1987 crash. Then the “recession we had to have”, where interest rates rocketed to 18 per cent.

Then the Asian financial crisis. Then the tech wreck, and then the grand poobah of them all, the Global Financial Crisis.

Yet here’s the thing: since that photo with my old man was taken, a one-off $10,000 investment would have snowballed into $278,615, according to Vanguard Investments.

Today the “average” Aussie is one of the wealthiest people on the planet.

Yet in order for you to end up “average” you needed to have done something “remarkable” decades ago — that is, moved forward directly in the face of your financial fears.

While life has changed for the better since my parents were in my shoes, the predictors of long-term wealth have not changed one bit.

People who buy a comfortable home and pay it off (and avoid the trap of trading up), are better off than those who don’t.

People who save a good part of their income end up wealthier than people on much higher incomes that don’t.

And people who invest in a business (either starting up their own, or by investing in established ones), compound their wealth over time.

When you’re in the middle of the Triple Ms (Marriage, Mortgage and Midgets), the days are long, but the decades go quick.

In the blink of an eye Louie will no doubt be laughing at our old-fashioned “digital” pics.

The best time to do something intelligent with your money, is right now.

Bula!

Tread your own path!

COP AN EYEFUL OF MEDIBANK’S PRIVATES

THE Government is getting ready to sell off more of the country’s silverware. This time it’s Medibank Private, which will be floated on the stock market in December. It promises to be the biggest privatisation since Telstra.

Medibank Private is the largest private health insurer in the country, with 3.8 million customers. Bupa is the second largest, and between the two of them they control more than half the private health insurance market.

Incidentally, this explains why buying your health insurance through iSelect is such a terrible deal — both giants refuse to deal with the comparison site. It’s only the much smaller, second-tier insurers who pay iSelect a kickback of up to $800 per sign-up. On a $2000 annual premium, that’s a huge whack — and ultimately you’re paying for it.

Rant over. Now back to the sale.

The man in charge of flogging off Medibank Private is Finance Minister Mathias Cormann — and he’s got a hell of a job ahead of him. The best analogy I can think of is that it’s like he’s trying to sell his wife’s car to his best mate: he knows he needs to get a good price for it — otherwise he can kiss goodbye any future action in the lower house.

Yet he doesn’t want to stiff his “mate” either. And by mate, I’m referring to the millions of voters who’ll line up to purchase Medibank Private. Cormann knows full well they’ll also be lining up to vote at some stage, too. If he sells them a dud, the Belgian-born MP is waffles.

So the stakes are high.

My guess is that he’ll have a go both ways.

How will the bankers price it? Well, roughly the same way you and I would buy a second-hand car. We’d look at a comparable car, and make our estimate based on that. Medibank’s bankers will do the same thing: their comparable “car” is the already listed NIB Holdings (though the bankers will be paid up to $80 million for working this out).

Matthias will (hopefully) also look after us small shareholders. When the details of the offer are announced later this month, I expect there will be sweeteners to boost the share price — perhaps in the form of a discount for small shareholders, or a loyalty bonus for holding your shares for 12 months — maybe both.

Either way I’d encourage you to pre-register your interest at medibankprivateshareoffer.com.au before the cut-off of October 15, because doing so will give you the opportunity to get a larger allocation of shares. And when the Government sells off the silverware, it’s almost always worth your while to grab some.

Originally published as The time to act is now