The $18 Million Man

Hi Scott,

I'm 33, a consultant in relatively solid employment and have had some recent solid years of income, the immediate future looks bright. I have $500k in cash and would prefer to keep my cash liquid, out of the property market and in the sharemarket. Should I lump the entire amount into a mid strength fund at 12.5% to 15%? Or diversify and go 80% fund and 20% shares, oh a little bit of mojo too I guess? I am a natural risk taker!Thanks,

Ben

Hi Ben,

I've never heard an investment labelled 'midstrength'. Sounds like a beer.

All kidding aside, you shouldn't label yourself 'a natural risk taker' until you've watched the value of your investments fall by 50 per cent. Everyone sees themselves as a risk taker until they lose money. (Warren Buffett has watched the share price of his company, Berkshire Hathaway, decline by 50 per cent three times in his investing career. He never sold once).

Yes, you should have three months of living expenses in a Mojo account. Yes, you should also have a home. If you've got both of these under your belt, I'd be investing directly in shares: either via low-cost Listed Investment Companies, or building a portfolio of individual companies.

The bottom line is that you're young and rich -- and you'll end up richer: if you'd invested $500,000 in 1980, it would have grown to be worth $18 million today. History doesn't repeat -- but it sure does rhyme.

Scott