The Booby Prize

Hi Scott

About 10 years ago I won $2,000 in a competition. Part of the prize was a financial planning session with AMP. So I took up the offer and, on the advice of the financial planner, invested the $2,000 in two managed funds through AMP. I then added another $2,000 of my own money soon after. Since then, the funds have barely broken even -- in fact I currently have less than the $4,000 originally invested. I have considered taking the money out and investing it elsewhere but am worried about realising the loss. Any suggestions?

Dennis

G’day Dennis,

Sounds like you won the booby prize, mate!

It reminds me of the meat tray my father always seemed to ‘win’ every Friday night at the pub. How many tickets did he have to buy? How many beers did he and his mates have to drink? Why were the sausages a slimy green? But I digress.

The last decade hasn’t been great for the Aussie share market. In fact, if you look at a 10-year price chart it shows that the ASX 200 — which represents the 200 biggest companies on the share market — has done basically nothing.

If you’d invested in a low-cost index fund, you could have earned 6 per cent a year, factoring in share price gains and the all-important reinvested dividends. In other words, your $4,000 would be worth about $7,200 today.

Dennis, you may have won the prize, but judging on your returns I’d say your advisor has too!

Scott