Don’t Go Changing

Hi Scott,

In last Sunday’s column there was a paragraph that read “Scarface Claw is in this instance OnePath/ANZ ... who have some of the worst performing Super Funds”. I have to say this scared the hell out of me as I have just done a transition to retirement with this specific fund you mentioned. I am 65 now and am topping up my Super with some of my pay other than the work contribution. Should I be concerned, or ride it out?

Wendy

Hi Wendy,

Your email reminds me of a friend of mine who married an ocker knockabout Aussie bloke who spends his free time sitting on the couch, drinking beer, and watching sport. She’s still holding out that one day she’ll arrive home from work and he’ll be watching the Bachelor, and drinking a bottle of Kombucha. It ain’t going to happen.

Similarly, ANZ/OnePath have consistently topped the FatCat Fund list of having the worst performing funds. Every year, for the last seven years! According to StockSpot, who compile the data on funds, they control almost a third of the worst 40 performing funds.

Faced with this dubious award, year after year, you’d think that ANZ would have woken up to themselves, and stopped picking the pockets of their customers with high fees. They haven’t.

Scott

A Hairy Problem

Hi Scott,

Your latest column about Hairy Maclary and expensive super funds really put the cat among the pigeons in our house. Our financial adviser (who we like) has us with AMP (among a slew of other retirement-related accounts), and we are finding it hard to see through all the smoke and mirrors to get to the fees so we can feel secure. Can you suggest a few questions that are polite but will still get us to the information we need?

Chris

Hi Chris,

Would you let your plumber charge you an extra $1,000 to fit a tap simply because he asked after your grandkids?

Of course you wouldn’t!

Yet the fact that you’re having to “see through all the smoke and mirrors to get to the fees” tells me that you need to get out the planner plunger … your thinking is blocked!If I were in your situation, I’d write him the following email:

Dear (advisor’s name)

I was reading the newspaper the other day and I was shocked to read that the majority of funds underperform the averages each year. That made me think that I should contact you and ask how all my funds are going. So can you please do the following three things for me:

1. Print us a statement that clearly shows my annual percentage return since we began, net of fees.

2. Benchmark our return against the relevant accumulation index for the same period.

3. Provide me with an itemised list of fees (expressed in both dollars and percentages). Include any and all ongoing fees, commissions and administrative costs that I’m charged.

After we have this information, it would be great to sit down and discuss it all.

Chris

I’m sure you’ll find his reply surprising, especially to question two. My view is that the best way to boost your investment returns is by lowering your costs. If your advisor is working in your best interests, he’ll agree with you. The only reason the conversation will be awkward is if he’s not!

Scott

Are Index Funds in a Bubble?

Hi Scott,

The financial guru from the movie The Big Short, Michael Burry, who made a fortune betting against the US housing collapse, is saying that the next big bubble is index funds and exchange traded funds (ETFs), and that things will get really ugly should the share market crash. Aren’t index funds what Barefoot recommends? How do you respond?

Steve

Hi Steve,

After the 1987 crash, governments around the world held at least six inquiries to work out what caused it.

There was no conclusive answer.

My guess is that investors were driven by their emotions:

First, by greed as they watched stocks going up (buy, buy, buy!), and then quickly by fear (sell, sell, sell!).

And, given human emotions don’t change, this behaviour will be what causes the next crash.

Faced with all this erratic decision-making, wouldn’t it be good to have a mechanical, unemotional, by-the-numbers way of investing?

Enter index funds (and Exchange Traded (index) Funds (ETFs).

They are simple to understand: you own, for example, a share in the 300 largest businesses on the ASX.

They have transparent investing rules: twice a year they rebalance the portfolio so it matches with the index (the market).

And, as a result, they have low turnover, low taxes and low fees.

In other words, they are the exact opposite of those actively managed funds that try and pick market swings and roundabouts.

In fact, we know that, over the long term, investors in these actively managed funds will end up with less money than they would if they’d invested in a simple index fund. (And repeated studies show that even those actively managed funds that do well in the short term often do so by luck rather than skill.)

Now, to your question: will things get ugly for index funds if there’s a share market crash?

Yes.

Yet it will be ugly for every investor, whether they’re in index funds or not. However, I still can’t see how owning a collection of the largest stocks on the market would put you at a greater disadvantage than other investors.

Steve, if you’re lying awake at night worrying whether you’ll be able to sell your investments in the event of a once-in-a-lifetime crash — rather than, I don’t know, making love to your wife — you really need to check yourself before you wreck yourself.

Besides, history tells us is that the day a market crashes is the worst time to be selling.

Scott

The Best Present

Hi Scott,

Many years ago, when I was five, we lost my father to an accident, and my siblings and I always wish we had more memories of him. Just this year we lost our mother to cancer. Before she passed away I asked her your questions (from the Father’s Day column) and videoed it. The answers were surprising and showed a side of Mum I had not seen. When she passed, I shared it with my family as a parting gift from her. Out of all the money lessons I have learnt from you, this is by far the greatest. Thank you for sharing, it’s such a great idea.

Sarah

I’m sorry for your loss.

Lots of readers wrote to me this week telling me they followed my advice last week and did the Father’s Day video with their dad. It’s funny how something that costs nothing but time, and the courage to ask the questions, can be worth so much — arguably as personally valuable as anything worldly they could have left behind.

Scott

Is This a Scam?

Dear Scott,

Your Bitcoin scam article prevented me from losing $5,000. Thank you! However, it raises another question: Where can I find out categorically if Oasis Trade is a scam company?

Tegan

Hi Tegan

Yes it is.

Scott

Tuck Shop Attack

Hi Scott,

You have talked about in-school marketing programs (like ‘Dollarmites’) and how they hook kids into using the big banks. Well, I have a concern that we are doing the same now with the ‘Qkr!’ program that is run in schools so kids can pay for stuff at the tuckshop. To sign up, parents have to provide their bank details, and their kids’ details as well. The fact is that Qkr! is owned and run by Mastercard. Isn’t this just another way of gaining access to information about our kids’ buying habits?

Troy

Hi Troy,

Yes, of course it is.I had a look through Qkr’s terms and conditions:

Mastercard collects your kid’s photograph, and tracks your location, preferences, interests and behaviours, so they can ”send you marketing materials and personalised content”.

On my evil-banker-meter, that’s fairly standard practice.

(It’s not like they’re Commbank, who pay schools kickbacks to sign kids up to their credit card marketing funnel.)

And it’s no worse than what’s going on in your kid’s bedrooms, where every click and swipe they make is tracked.

Big tech is collecting kids’ data at an alarming rate — as much as 72 million data points before they turn 13 — according to ad platform SuperAwesome.

And even vigilant parents can be caught out: this week Google’s YouTube got caught collecting children’s personal data without their parents’ consent, and was fined million (mere pocket change!).

Thankfully, former Google boss Eric Schmidt has kindly offered us parents a simple solution to all this digital creepiness: we should simply let young people change their names when they turn 18 so they can escape their digital past.

See, billionaire tech leaders have all the answers!

Scott

My Girlfriend Was Hiding a Secret from Me

Hello Mr Barefoot,

Just finished your book and it has completely changed my perspective on money — I finally believe I will be able to buy my future home in Sydney. That was until my girlfriend of one year surprised me with her $30,000 debt (credit cards, personal loan and education fees). I had a grand plan of saving together and buying a home, but now I feel like someone has stolen my mojo. How do I attack this problem?

Chris

Hi Chris,

She deserves your respect: it would have taken a lot of courage for her to lay bare her true financial state.

Honestly, the number of people who don’t do this till after they’re engaged — or married — is astounding.

Explain to her how you feel, and that you’ll work together to help her get on top of her finances.

You won’t do this by giving her money — this isn’t your problem — rather, you’ll support her by loaning her a copy of my book, and reinforcing good money behaviours by going on lots of saucy Barefoot date nights.

By the end of the year you’ll have a good idea of how committed she is to fixing her finances. If she sorts herself out, it’ll be a source of strength in your relationship. If she can’t, well, at least you know what you’re in for.

Scott

I Vowed to Write to You Once We Were Debt Free

Dear Scott,

Ten years ago, my wife and I were drowning in debt, with a big mortgage and maxed-out credit cards. I came across a copy of your (first) Barefoot Investor book and vowed to change our circumstances and write to you once we were debt free. Well, this week, 10 years on, in our early 40s, we paid the final instalment on our home loan. We have also built a healthy share portfolio and have not used a credit card in 10 years. It is the most amazing feeling to get there. We are debt free, and we sincerely thank you.

Dom

That has made my week.

But let me tell you: it has nothing to do with me (well, apart from a little at the start).

It’s you who did it, internalised it, lived it. You are freaking amazing.

Most people don’t stick to anything, ever. The fact that you were able to do this for 10 years … that’s incredible.

You pulled yourself out of a pit for 10 years!

Now, here is my prediction: if you can stick to something for 10 long years, the next 10 years are going to be really exciting for you. Because, if you continue doing what you’re doing, you’re going to build serious wealth for yourselves (rather than the bank).

With the dedication you’ve shown, I want you to email me in another 10 years’ time and tell me you’re millionaires. You deserve all the success in the world. I’m really proud of you.

Scott

Weapons of Mass Destruction

Hi Scott,

I am just about to finish my uni degree and have landed myself a full-time job at a small accounting firm. Before I plough into the life of debits and credits, I want to make sure I join the best super fund in the market. I have looked at various funds that use indexing and have low fees. However, I have read that they use ‘derivatives’ in their portfolio. Have you looked into the portfolio breakdown of these funds? Derivatives have resulted in a lot of mess in the past for a lot of people.

Skeptical Sam

Hey Sam,

You’re asking all the right questions.

Stockspot found that index super funds beat 90% of all other super funds — both retail and industry — over five years. However, not all index funds are created equal.

For example: REST super use Macquarie Bank’s True Index fund, which charges no fees.

What’s the catch?

Well, Macquarie True Index uses ‘derivatives’, which essentially means that it isn’t required to invest in the actual shares that make up the index, only to guarantee to provide the returns the index makes.

But what happens if Macquarie doesn’t come good on their promise?

Well, that is the risk you’re taking.

REST say they’ve done their due diligence and are comfortable with the risk.

I agree with them. However, personally, I want my index funds to actually own the underlying shares.

Scott

Hairy Maclary and the Fat Cat Funds

I copped an elbow to the head.

“Your turn”, grumbled my sleep-deprived wife.

I stumbled into the nursery, where our daughter was wailing.

Cutting teeth is a tough game, and we’re right in the middle of it.

Still, it allows me to catch up on my 3am iPhone reading. Last night I read the Stockspot Fat Cat Funds Report, which names and shames the worst-performing super funds in Australia.

Now, I may be a little delirious as I type this, but this report reminded me of a book I was reading to our daughter earlier in the evening: Hairy Maclary from Donaldson’s Dairy.

It’s a super-simple set-up: Hairy Maclary and his doggy mates (all with cute rhyming names) are on the hunt for a bone (a high-returning super fund), while at the same time trying to avoid their arch-nemesis Scarface Claw — ‘the toughest tom in town!’ (the Fat Cat super funds).

Scarface Claw is, in this instance, OnePath/ANZ (now IOOF), AMP, Perpetual, MLC and Zurich.

These five financial outfits have 30 of the 40 worst-performing super funds.

What does that mean?

Well, according to Stockspot, the average young worker who has their super with one of these funds could find themselves $200,000 worse off when they retire, compared to choosing a low-cost fund. Hercules Morse, as big as a horse!

Yet, with the greatest of respect to Stockspot, this ain’t groundbreaking research:

This is not a test of investment skill, but of investment costs.

These Fat Cat funds all have one thing in common: they charge way too much (average 2% per annum).

Now, if this was a children’s book, old Scarface Claw would understand the gig was up and scamper away.

Yet this ain’t no fairytale.

The 40 Fat Cat funds have been licking the cream off investors’ returns for years. Collectively, they are siphoning off $150 million a year in fees, according to Stockspot.

In other words, they’re making out like Muffin McLay — like a bundle of hay!

Tread Your Own Path!

The next big thing

I like to think of myself as a ‘young mover and shaker’.

Truthfully, though, the only thing about me that still moves and shakes these days is my belly (damn you ‘dad bod’!).

In the same way, Nimble likes to refer to itself as a ‘fintech disruptor’.

It gives Nimble a sort of … mover and shaker air … financial technology, man! We’re changing the world!

Actually, no.

The closest Nimble comes to being ‘fin’ tech is that it’s a loan shark that preys on young people.

Nimble slugs millennials the maximum rate the payday laws allow: 20% of the principal, plus 4% per month.

Yet their marketing is truly masterful: their ironic hipster-cool advertising encourages young people who are short on cash to just ‘Nimble it’.

Make no mistake: the combination of charging insanely high interest rates and uneducated young customers means that Nimble is making a lot of money.

And now, for the next line, I’d like you to quietly hum the Jaws theme song to yourself.

(Dernum … dernum … dernum.)

Nimble has just revealed it has huge expansion plans: it’s applied for a fully fledged banking licence.

This is very bad news for young consumers … they’re effectively shark bait.

Yet wouldn’t it be good to teach teenagers just how dangerous this mob is, before they fall for their advertising?

Well, that’s exactly what my high school money class teaches.

Here’s how it goes:

First, we play a Nimble ad (which is actually pretty funny).

Many of the kids laugh as they watch it, and probably think to themselves “that’s a cool company”.

Then I get them to go to the Nimble website, which shows an attractive young couple fist-pumping the air, presumably after scoring what Nimble calls a ‘smart little loan’. And then I get the class to calculate the total cost.

“Let’s say you get hit with an unexpected $1,000 car repair bill, and you decide to ‘Nimble it’. How much will it cost you after nine months?”

After a little bit of maths, the kids work out that the answer is a whopping $1,560.

You should see their faces when they work out how much it costs. They literally can’t believe it.

That is the power of teaching independent financial education in schools.

From that point on, every dollar that Nimble spends on its highly targeted youth-based advertising is wasted on these kids. The game is up. They’ve jumped the shark

Tread Your Own Path!

The Ultimate Father’s Day Present

Every Mother’s Day, my wife and her girlfriends have a tradition:

They book a fancy restaurant and get all dressed up, looking a million bucks …

And then?

They offload the kids onto their husbands and spend the rest of the day drinking champers together!

So for Father’s Day this year, I figured “if it’s good for the ewes, it’s good for the rams”.

I started a brand-new tradition: me and the other husbands decided that for Father’s Day we’d put on our cleanest jeans, offload the kids, and head to a local joint for a brew or two (or three).

Nice one.

Yet there’s another Father’s Day tradition that I’ve been doing with my readers for years, and I’d like to share it with you.

See, it’s a bit of a cliche that every dad gets a mug … or a keyring … or a block of chocolate … or a tie.

But what I want to share with you today is a present that you and your dad will treasure.

And even better?

It won’t cost you a thing.

Let me explain …

You see, my wife’s father died a few years before I met her.

When our house burned to the ground, in 2014, we lost some of the last remaining photos of him, the letters he’d written, and the paintings he cherished.

How does my wife explain to me who her father was?

How does she explain to our sons who Grandpa was?

Her physical reminders are now lost in the ashes.

So, I made a pact with her that each year I’d share with you, my readers, the ultimate Father’s Day present.

The Ultimate Father’s Day Present

If you’re lucky enough to have your father still with you, here’s how you can give him the ultimate Father’s Day present. Go and see him, whip out your phone, hit ‘record’, and ask him the following questions:

1. How did you meet Mum?

2. What advice can you share with me about money, life and happiness?

3. What does being a dad mean to you?

4. What are you most proud of?

5. How would you like to be remembered?

This is not for Facebook. It’s for you and your family’s legacy. One day, it’s all you’ll have left of him.

And you’ll treasure it.

Happy Father’s Day!

RIP Tim Fischer

Hi Scott,

Thank you for sharing your memories last week about Tim Fischer. That can’t have been an easy thing for you to do. I grew up in the bush myself and have a very strong appreciation for Tim. I am also the daughter of a farmer who was incensed with the change in gun laws after the Port Arthur Massacre. But after seeing Tim speak at a community function Dad came home and packed up the gun shed: “It’s just not necessary”, he said. Then I was in the USA for university just after the Columbine shootings ‒ I could not have been more proud to be Australian. Tim was a giant.

Cass

Hi Cass,

Thanks for sharing your story.I received hundreds of emails from readers about Tim, and it made a tough week a little brighter reading through the stories of people just like you.

This week I spoke at Tim’s funeral, and it was one of the greatest honours of my life. He was a decent man who left Australia a better place. That’s all you can ask for at the end of your life, right?

Scott

My Baby Sent Me Broke

Hi Scott,

Over the last two-and-a-half years we have had two babies and a wedding. Our first baby came earlier than planned so it wasn’t covered by private health, and we made the silly choice to pay for it out of pocket. Then, over a couple of years on one income ($240,000), we have accumulated two credit card bills totalling a hefty $60,000. We have now read your book and managed to pay off two large loans using your method, but we do not know how to get these credit cards paid off. Please help!

Katie

Katie,

Look, I’m all for blaming my kids for everything (especially on a Sunday morning), but $60,000?

Seriously?

The cost of having a kid in a private hospital, assuming no complications, is about $10k.

Other parents have weddings and babies, but they don’t have $60k on the never-never.

You’re earning $13k a month in the hand, but you’re broke.

Why?

Because you’re spending too much.

If you’re looking for a magic wand, you can go to MyBudget (see above).

But if you ask me, you’ve already proved to yourself twice that you can pay down debt, so three times is a charm.

Besides, you guys are high income earners ‒ you could have this debt paid off within the year.

Even better, you’ll set a great example for your kids.

Scott

I Owe MyBudget $1,250

Hey Barefoot,

I signed up with a money managing agency MyBudget because I felt that some financial structure and discipline would be good, and also to make my parents happy. Unfortunately, the model did not work for me. I do not think it is okay for someone with mental health issues to be told they cannot see their psychologist because there is no money for it, or they cannot have their prescriptions filled at the chemist for the same reason.

At the time, I signed a contract for 12 months but I found it far too restrictive and inflexible, and started managing my money myself again after only a few months. The trouble is, I ended up owing MyBudget approx $1,250 in fees and charges.I was asked to pay within a timeframe but I never did, as I couldn’t afford it. Now I am following the Barefoot steps, I don’t think I can say I am truly debt free and don’t owe a cent to anyone until I clear this. So I would like your advice as to what to do ‒ pay up, or assume that MyBudget have written off the debt?

Tara

Hi Tara

I wouldn’t pay them.

Then again, I don’t think anyone should pay them.

First, because they’ve built their business on the back of broke, vulnerable people.

(For those who don’t know, MyBudget is the financial equivalent of having a personal trainer come around, lock your fridge and dish out the food to you.)

Second, because they charge too bloody much.

(Over a thousand dollars upfront, as well as ongoing fees.)

Quick quiz: if MyBudget are running your budget, guess who gets paid first?

If you answered “my psychologist”, or maybe “the chemist for my prescribed medicine”, you would be wrong.

Third, because no one should hand over the responsibility of managing their money.

Seriously, if what you’re saying is true ‒ that their budgeting person said you should scrimp on mental health and prescriptions ‒ that’s kind of … crazy.

So I’d write a letter to them explaining your issues and saying that you got awful service, and because of that you’d like them to write off the debt (and provide you with a letter confirming they’ve done it).

And if they say no, I’ll take it up on your behalf.

Note to readers: if you’re having problems with debt, you should ring 1800 007 007 and speak to a community-based financial counsellor. They offer an independent service, and best of all they don’t charge $1,250 … they do it for free.

Scott

This week I lost a mentor

It was 2pm when I arrived at the Peter MacCallum Cancer Centre in Melbourne.

I’d been going since 5am, driving in from the farm, then having back-to-back meetings … and back-to-back coffees.

I took a deep breath and strode confidently into a private patient room and greeted my old mate, former Deputy Prime Minister Tim Fischer.

My first thought was that he looked really crook.

My second thought was that I started feeling really hot … was there a heater on in here or something?

And then?

And then I fainted. Out cold. On the floor.

Tim was watching all this unfold, and quickly hit the emergency button at his bedside.

The nurses came sprinting into the room and made a beeline for Tim’s bed.

“Not me, I’m fine! It’s my young, fit-looking friend over there who needs help!” he said, pointing at me.

When I came to, Tim was laughing and taking photos of me on his iPhone

“You’re always trying to show me up!” he said.

That afternoon, as I drove home, Tim called me from his hospital bed:

“How do you feel? Do you need a good doctor? I have a good doctor. I can call him now. It’s no trouble, really …”

I can’t think of a better story to explain my friendship with Tim, who sadly passed away on Thursday.

Today I want to talk about the difference Tim Fischer made in my life.

Our First Meeting

I first met Tim roughly 15 years ago — and it wasn’t by chance.

I actually cold-emailed him (and a bunch of other heavy-hitters) about joining the advisory board of a financial education program I was developing for Aussie kids.

Not only was Tim the only person who bothered to reply — he suggested that we meet up to discuss it.

A few days later he arrived at our meeting clutching his trademark Akubra in one hand, and a dog-eared copy of my first book in the other.

He’d come prepared.

Over the next hour I gave him my pitch: where I was from, what I was about, and the change I wanted to make.

Tim listened intently, sizing me up as I spoke. It’s fair to say that he saw something in me that I didn’t see in myself.

“An ambitious project like this is going to take you many years … but it will be worth it,'' he told me.

(He was right: it would take another 15 years to get it off the ground, and it has been worth it.)

What I didn’t know at the time was that Tim would become one of my closest mentors.

Many More Meetings

Over the years we met up at my farm in Romsey, at his joint in Albury, and everywhere in between.

(And I mean everywhere. When he was the Australian ambassador to the Holy See in Rome … he snuck me and my girlfriend in, and even allowed us to stay (in sin) at the Australian embassy. Though I got back in God’s good books by later marrying her.)

At these meetings we’d talk about finance, economics, politics, power, the media … and farming.

Yet for all those high-powered conversations, the thing I remember most is that he would always take the time to ask: “What’s going on with Liz? How are the kids? How’s your dad? How much rain are you getting?”

Above all, he had a confidence about him.

And he had a habit of filling you up with his confidence in you. I would leave each meeting believing that I could pull things off. It made me want to stretch further, try harder and do better.

Over the years he gave me lots of good advice. However, as with the very best mentors, I didn’t just learnt from the advice he gave me — or the many doors he opened for me — but by watching him.

Especially in the last week of his life.

Our Final Meeting

This weekend Tim and I were due to run a town hall charity event in my hometown of Ouyen which was being recorded for ABC Local Radio.

We called it ‘Living the Rich Life in Regional Australia’. (It was Tim’s idea of course.)

Yet a few days ago Tim rang me and told me that he had to pull out — doctor’s orders.

I replied: “Look, I totally understand … and I think we should cancel the event. After all, this is your baby … your brainchild. Without you there, it just won’t be the same.”

His reply was classic, confident Tim:

“You will NOT cancel! You will NOT quit!

“We have the opportunity to tell the story of Ouyen — and how to live the rich life in regional Australia — to thousands of people. And you never know who’ll be listening … it could spark an idea or give inspiration for someone else living in a small town.

“Besides, I’ll twist your arm — I’ve already filmed a video that outlines my thoughts on what towns need to do to thrive.”

I played that video (which he’d shot from the hospital grounds!) at the event.

Before I played it, I pointed out a few things to the audience:

First, Tim’s body was riddled with cancer. He must have been in excruciating pain as he was making the video. Yet he never let on. Not once.

Second, this was the final week of his life. And he devoted part of it to making a video helping people in the bush get a better shake of things.

You can’t fake that.

Look, I’ve been in the media for years, and met some very self-important people — big shots, politicians, media stars — who say one thing in public but are totally different when the cameras turn off.

Not Tim.

He was the real deal.

I think Australians worked that out about him.

And they loved him for it.

Rest In Peace, mate.

Cancer Can’t Beat Me

Dear Scott,

One minute I was living the high life at a business awards night in Cairns – two weeks later I was diagnosed with breast cancer. I heard the big ‘C word’ and felt the walls come crashing in around me. What followed was six months of high-dose chemo, an operation, eight weeks of radiation, and another six months of preventative chemo. Yet I am happy! I am living in the present moment, and above all else my finances are in order — no credit card debt and only $80,000 left on my mortgage. The trick was that (before my illness) I’d read your book, many times in fact. You have saved me so much worry, Scott. I have also had the courage to put all my financials in order for my family. Thank you, sending positive vibes your way!

Janelle

Hi Janelle,

In a week that’s been dominated by front-page doom and gloom finance headlines, your story stands out like a shining star. People waste a lot of effort thinking about things they have zero control over, but putting off the things they have total control over, like getting your own situation sorted. Here’s to your continued health and happiness Janelle. You Got This!

Scott

$2 Shares?

Hi Barefoot

You have been sitting on my bedside table for a full 12 months! Yet, after a year of my fiancée threatening to not turn up to our wedding unless I read your book, I have read it and am raring to start investing. I am a Commbank customer (have been since my mother signed me up as a Dollarmite!), and I would like to know your thoughts on Commbank’s new app ‘Pocket’. It looks pretty good, and it only charges $2 to buy $50 worth of shares.

Chris

Hi Chris,

I’m always happy to help the groom make it past the broom!

I had a play around with Commsec’s new app ‘Pocket’, and I actually think it’s pretty good.

It’s clearly aimed at first-time investors who don’t have a lot of dough. As you’ve mentioned, you can kick off your portfolio with a $50 investment and only be charged $2 a transaction (though you’d want to invest more than that, otherwise it works out to be a hefty 4% fee!).

There are seven different ‘themes’ you can choose to invest in, which sounds cool, though they’re really just regular off-the-shelf exchange traded funds (ETFs). Still, they’re a much better deal than investing in an expensive CBA-Colonial managed fund.

Okay, that’s the positive. Now for one big negative.

The only reservation I have with all these investing apps is that they can lead to you checking your balance too much. Behaviorally, the best thing you could do is to delete the app off your phone and forget about it for a few years while you focus on your fiancée. Then you could give ‘Pocket’ a try.

Scott

I am FURIOUS

Hi Scott,

I am FURIOUS.I study full time (business at UTS) and work round the clock in real estate to support myself, while all my uni friends bludge off the Government. Last year I earned $48,000, and to my absolute disgust my accountant tells me I’ll be up for HECS even though I am still studying! This is wrong on so many levels. You should do something about this.

Sarah

Hi Sarah,

As Tony Jones says on Q&A, “I’ll take that as a comment”.

What old stubby-fingers your accountant was telling you is true. The Government has reduced the amount you need to earn to start repaying your HECS debt to $45,881, regardless of whether you are still studying.

Is that unfair?

I don’t think so. Your HECS debt is effectively an interest-free loan, tied to the general rate of inflation. So it’s a lot better than the massive student debts that burden students in America.

My advice?

Don’t be furious, and quit comparing yourself to your friends: it’s a recipe for unhappiness.

Besides, paying tax is a good thing: it means you’re earning money. And the more money you make, the quicker you’ll get rid of your HECS debt!

Scott

Why is Nike targeting my kids?

Did you know that Nike is launching a Netflix-style monthly subscription for kids’ sneakers?

It’s called the ‘Nike Adventure Club’, it’s aimed at two-year-olds to 10-year-olds, and it kicked off in the US last week.

There are three tiers of subscription: $20, $30 or $50 a month. Meaning that parents who sign up get a brand-new pair of sneakers once a month, once every two months or once every three months respectively.

Sidenote:

What kid needs a new pair of Nike sneakers each month?

When I was a boy, I scored my older cousin’s Dunlop Volleys. Problem was they were about four sizes too big, which meant that every so often I’d kick the footy and my shoe would fly off and hit my cousin in the short and curlies.

When I protested to Dad, he got on his knees and pressed down on the empty toes of my shoes: “Plenty of room to grow into these”, he cheerfully announced.

(Nowadays my wife worries that our 18-month-old doesn’t have enough ‘arch support’. But I digress.)

Marketers are following the lead of tech companies and moving to subscription-based payments.

Today you can pay a monthly subscription for Amazon books, but what about renting your bookshelf?

Well, you can.

Ikea has announced it’s trialling a furniture rental subscription service across 30 countries. (Which makes perfect sense, especially if you’re a renter. When your lease ends you can just hand back your hacked-together bed, rather than throwing it out or trying to sell it on Gumtree for a few bucks.)

Businesses are clearly attracted to subscriptions for the lucrative recurring revenue: why bother going through the costly exercise of selling to the same customers over and over again, when you can charge them a small monthly fee?

Case in point: scrappy start-up Dollar Shave Club took a razor to global giant Gillette by launching a monthly shaver subscription. They quickly signed up 3.2 million customers to a monthly autobill, and in less than five years sold the business for a cool $1 billion to Unilever.

The final reason businesses like subscriptions is that they build a deeper relationship with the consumer:

“One of the things [Nike CFO] Andy Campion gets excited about, is that we are now building relationships with kids from two years old”, says Dave Cobban, general manager of Nike Adventure Club.

Okay, so that’s next level corporate creepy (hello, Dollarmites).

Then again, these guys really do ‘Just Do it’: their $60 kiddie shoes really only cost about $2, and are probably sewn together by Nike’s other youth-based stakeholders … dirt-poor Bangladeshi kids working in sweatshops.

Whatever the motivation, one thing is clear: subscriptions are here to stay.

Tread Your Own Path!