Someone call the doctor

I opened my mail, and felt a cold stethoscope to my nether regions:

My health fund was giving me a tickle. It happens every year. Over the past decade consumer prices have grown 20% … but health insurers have jacked up their premiums by 54%.

Oh, that’s cold!

If you pay for private health insurance you know that around this time each year your fund sends you out their ‘drop your dacks and hold your acorns’ letter. Spoiler alert: next week they’re going to jack up your annual premiums – with some funds hiking by as much as 5%!

So let’s talk about what you can do about it.

First, if you can afford it, most funds allow you to pre-pay your premium and lock in the old rate.

Yet let’s be honest: health insurance is bloody expensive, so it’s worth your while to spend an hour or so checking to see if you’re getting the best deal … or if you even need it (if you’re under the age of 31, or you’re earning under $90,000 a year as an individual or $180,000 as a family, you may not need it).

So here’s what I do for my family:

First, I purchase top-level comprehensive private hospital insurance.

Second, I don’t purchase extras or combined healthcare cover. Reason being, most extras policies cost you hundreds of bucks extra per year … whether you claim or not. Don’t believe me? Ring your fund and request an annual claim statement. Then ask, “If I switched to a comparable hospital-only policy, how much would I save each year?”

Third, I do my research on privatehealth.gov.au. That’s the government website and it’s weirdly good. It allows you to compare your current policy against others. Most importantly, it compares every fund on offer – unlike those comparison sites (like iSelect and Comparethemarket) which only list funds that pay kickbacks.

So this week it’s time to turn the tables on your fund, and get them to bend over and show you how flexible they really are.

Tread Your Own Path!

My Parents Have NO IDEA

Dear Scott,

All my life I was under the impression my parents were wealthy. My father was a partner in a law firm, and there were always extravagant annual overseas trips, fancy cars, beautiful houses, antique furniture, etc. They are now 70, retired, have no super left, are on the pension, and have $120,000 of debt ($80,000 credit card, $40,000 car loan). They used up almost every last bit of their savings, and all of their super, to buy their current home outright once my dad retired.

Yet they keep spending! They don’t seem to realise the severity of their situation. Mum still goes to the beauty salon to have all sorts of expensive procedures done, they still have two cars (one of them a Lexus SUV) despite only needing one, and now they’re going to get a reverse mortgage to release some equity from their home, just so that they can afford to live! I’m so shocked and frustrated, but I don’t know how to help them, because my dad is too proud to listen to me, and my mum is too embarrassed.

As I said, they’re only 70, and I’m afraid they’re going to end up homeless with nothing but debt that they have no way of paying off. I’m also concerned they will be coming to me for money if they have big medical bills down the track. While I love them and want them to be OK, I would resent throwing money at people who have always lived beyond their means while my husband and I are super-careful with our money. What should I do?

Worried Daughter

Hello Worried Daughter,

What should you do?

I think you should follow my lead: I see people doing stupid things with money all the time … it’s like I have a sixth sense for financial stupidity. Yet I have learned to resist the reflex action of going all Judge Judy on them.

Why?

Because they’re not asking for my advice, and it’s none of my goddamn business.

If people do ask for advice, I mostly tell them how great it feels to be in control, and how surprisingly easy it is to build momentum after you have a few dedicated Date Nights.

Just know this: deep-seated behavioural change is hard, especially since your parents have been doing dumb financial stuff their entire lives. Yet for some reason my approach has worked with hundreds of thousands of people, even people like your parents.

So that’s where I’d start: encourage them to read my book, or listen to it on a long car trip.

Will it work?

I don’t know.

Yet the one thing I know for sure is that finger-waving and shaming won’t work. Don’t let money jeopardise the most important relationships you have.

Scott.

My Kid has NO IDEA

Hi Scott,

In 2008 I purchased a photo shop, and my parents redrew their mortgage so I could do this. It was initially $65,000, but then over a few years it built up to $120,000. I ran it successfully for a few years but, as digital media grew and prints became less popular, the business slowly went down the gurgler, and closed in 2016. Since then I have been chipping away at the debt and it is down to $61,000, but the strain on my relationship with my dad is not great. He gets so upset if he sees me or my partner spending money on pleasure because he thinks we should just focus on the debt. I do want the debt gone but I also don’t want to miss out on precious time to make memories with my kids. How do I get it paid quickly but still enjoy life?

Kelly

Hi Kelly

Oh god.

So this was a terrible idea to start off with, and now it’s a festering sore.

If I were in your shoes I’d want to get rid of the loan from your father as soon as humanly possible.

Can you refinance it with a traditional lender?

In your situation I’d be willing to pay a higher interest rate if it meant I could save the relationship with my father.

Take this as a lesson (one your dad has probably learned by now): if you can afford it, give money away to your family with no strings attached, but don’t ever lend to (or go guarantor for) people you love.

Scott.

Making Hay

Hi Scott,

I just want to say I’m glad you’re writing a book for kids. I have this amazing young man called Jarrah (13 years old) who works for me. He comes once a week to help around my property, cleaning paddocks, cleaning water troughs and filling hay nets. He has worked for me a year now and it’s just an hour a week, but when I advertised the job he told me about his savings accounts. One account is for his car, one for his house and one for spending. Plus, if he invests money in the investment account his mum set up for him she matches what he’s put in. I’m blown away by the solid head on young Jarrah’s shoulders! His mum is a Barefoot follower (like me) and she has educated him well. When your book is published, I’ll buy him a copy.

Jan

Hi Jan,

What an amazing young bloke!

He’s exactly the kind of Barefoot kid that I want to feature in my new book.

So please go to www.barefootinvestor.com/kids

Scott.

I’m setting up a caravan park

My boys had cornered me.

“Dad, we’d like to talk to you about a business idea we’ve come up with”, they said in unison.

“We’re calling it … Pape Point Campground”, announced my eight-year-old.

“We could rent out the top paddock to caravanners for, say, $40 a night!”, added the six-year-old.

“Oh”, I said, trying my best to remain noncommittal.

They stood there eyeballing me expectantly.

I must have twitched, because they were off like a flash. They spent the next couple of hours huddled in their room coming up with a detailed plan for their caravan park: job titles, hours of operation, even a logo design (which they outsourced to their three-year-old sister — very sparkly).

Then they reappeared for round two of the pitch … this time with upsells:

“We could provide a rustic breakfast for $10.” (“Oh, that’s a great idea, mate!”)

“And sell them campfire wood and marshmallows, for $15.” (“Nice!”)

“And you can also give them some financial advice, Dad, for, say, $20?” (“Oh, now hang on a minute!”)

Pape Point Campground may be confined to family and friends … but still I was impressed. Not only was their creativity in full flight, but they were full of excitement. As a parent, I’m under no illusions: these are the good old days.

And it’s something that’s been on my mind, because I’m currently writing my next book, and it’s all about kids.

When I pitched my publisher the idea they loved it, especially when I told them the main idea: “It’s kids teaching kids.”

And that’s where I need your help … or, specifically, your kids’ help.

I’m looking for kids to feature in my book and inspire the kids of Australia.

So, if you’ve got a Barefoot Kid who:

Has their own little business …

Set up a stall …

Created a product …

Or enthusiastically done their Jam Jars at home …

Then I want to hear from you!

For the kids I choose, I’ll interview them, set them challenges, even help them learn about the share market.

(And of course also feature them in my new book.)

I’m on a tight deadline, so — parents, guardians, friends and grandparents — please go here to apply by this Tuesday 22nd March, 5:00 pm:

barefootinvestor.com/kids

Tread Your Own Path!

The Coming Property Crash

Hi Scott,

With all the craziness of Russia invading Ukraine and China looming in the background, I had a sudden worrying thought today. What would happen financially in Australia if there was a third world war? My partner and I are in our early forties and are about to purchase a third property. It is a significant spend, so is the possibility of a world war something we should add into the equation? I guess I expect the usual stock market crash, but should we also be concerned about a possible crash in the housing market?

Tania

Hi Tania,

Well, I am.

However, it’s got nothing to do with Russia or China or any other geopolitical risk — which I know very little about, and cannot predict.

Instead, what I am focused on is the impact of rising interest rates. The last time the Reserve Bank increased rates was November 2010 … and at that time the cash rate was 4.75%. Today it’s at 0.10%.

The housing market has gone a little crazy since Covid (as has the share market), as a result of basically zero interest rates. Nationally, house prices jumped by 22% over the past year, according to CoreLogic. I’m certainly not predicting it, but it wouldn’t surprise me if house prices (and the share market) came off a bit from here. That said, I have no plans to sell any of my own property. And if you can afford the investment, and you plan on holding it for decades, you should be fine.

Scott.

I got scammed

So this is kind of humiliating, but I have a confession:

A few weeks ago I got scammed … and it ended up costing me $5,000.

The toughest part to swallow?

It was kind of my own fault.

See, I have a longstanding rule of never reading anything that’s written about me. I don’t Google myself. I’m almost never on social media. Heck, I don’t even manage to read all my emails (luckily I have my long-suffering editor to help go through them).

In other words, I was a sitting duck just waiting to get scammed.

Here’s what happened:

A bloke set up a Barefoot Investor beginners Facebook group – that I knew nothing about – and it quickly grew to almost 100,000 people.

This group served as his primary marketing database.

Then he set up a website called Barefoot Budgets that looked and felt like my own Barefoot website.

He charged people $120 a year to access it.

Yet, more worryingly, he was recommending that his ‘Barefoot Beginners’ speculate on risky crypto and foreign exchange apps, because he was getting kickbacks from them.

Shockingly, this was going on for a couple of YEARS.

So, while old Scotty Boy was happily bouncing along on the tractor slashing grass, this dude was making hay while the sun shined!

The first I heard about it was when someone told me they wanted a refund.

“For what?!” I grunted.

Then I Googled ‘Barefoot Budgets’.

What the slash?!

The first thing I did was pay for a membership to Barefoot Budgets. (When the sign-up form asked me “How did you hear about Barefoot Investor?” I replied, “Because I bloody wrote it!”).

The second thing I did was call my lawyer.

Here’s you: “Okay, Barefoot, it sucks to be you, but surely this doesn’t really apply to me.”

Here’s me: “Oh yes it does.”

If you’re reading this you are, statistically, one of the wealthiest people on the planet … and to 90% of the world you’re rich, and a juicy target.

That explains why self-reported losses from cybercrime hit more than $33 billion last year. And also why calls to the Government’s Australian Cyber Security Hotline (1300 292 371) surged 300% last year.

So, here’s what you should do:

First, turn on ‘multi-factor authentication’ for all your accounts. (Google it.)

Second, use a password manager. (I use Dashlane to securely store my passwords.)

Third, pay for a virtual private network (VPN). (I use ExpressVPN — for $100 a year it’s good insurance.)

Finally, learn the lesson from me: keep your eyes open, especially when it comes to your identity. And if someone is pitching you an investment opportunity online claiming to be me … it’s not me.

The wash-up was that it cost me $5,000 in legal fees to put a ‘cease and desist’ on this guy.

Or, as I like to think of it, the cost of a good tractor slasher.

Tread Your Own Path!

Flooded

Hi Scott,

My parents were recently evacuated in the early hours of the morning and taken to temporary accommodation. Their property is flooded and the farm has sustained major damage. They are still reeling but I want to support them, and I know there is about to be a lot of paperwork. What’s your advice?

Kate

Hi Kate,

This takes me back to the bushfires of 2020.

I was sitting on a makeshift card table in the local town hall helping survivors.

The two things I learnt from that experience was:

It’s natural to be overwhelmed at the enormity of what’s hit you, and what you have ahead of you.

And, in the first few weeks of a natural disaster it’s chaos. The Government is still formulating its plans, and the insurance companies are … lawyering up. So my advice to your parents — and you, if you’re helping them — is to hold tight on the finance front for a few weeks. Don’t sign anything, don’t agree to anything — and if you do, remember there’s a cooling-off period.

However, there is something you can do: hook your parents up with a rural financial counsellor (1800 007 007). The counsellor will be able to take down your parents’ details, read through their insurance policies, and investigate what grants are available – or might become available in the weeks and months ahead.
Finally, after such a traumatic event, being with them is probably the best thing you can do right now. Good luck.

Scott.

A Mother’s Tragedy

Scott

My son tragically took his life earlier this year and I need help sorting out his estate. Nick was 30 and was fighting for custody of his two children, aged seven and three, as their mother is an ice addict (as is her new partner). Her mother is now fighting her own daughter for custody! My grandkids have not only lost their dad but also have been traumatised by neglect and abuse from their mother and the new partner. I am still grieving but I am having to sort out some sort of investment for the children for their future. I have nearly half a million dollars from Nick’s estate, and my ex-husband and I are the beneficiaries. How do I set up an investment, and what should I do?

Nicole

Hi Nicole,

My heart breaks for you, and your grandchildren.

So I think you need to go and see a lawyer, pronto.

There are two issues:

First, to see if you can get custody of your grandkids.

Second, to protect the half a million bucks and ensure that it benefits your son’s kids.

My Barefoot lawyer, Dr Brett Davies, tells me that the rules are complex and different in each state. But, typically, one-third of a deceased person’s legacy would go to their spouse and two-thirds to their children. So you may want to talk to your lawyer about bringing an action so that 100% of the money goes to the kids, to be held in trust by the grandparents.

As for where you’d invest the money, it depends on who gets custody (also another thing to get legal help with), and what the day-to-day costs would be to look after the kids. Once you’ve worked this out, you could invest a portion of the money long term for their future, probably via a low-cost high-growth share fund from the likes of Vanguard.

Good luck.

Scott.

Reminder: I first wrote about this years ago and highlighted the low costs. Today there are better deals on offer. How do I know? Because my readers constantly email me about them! So before you do anything, do a quick google.

My Husband Took a Secret to His Grave

Hi Scott,

When my husband died in 2007 I was left with nothing, because he had gambled everything away secretly. Since then I’ve managed to raise our three children and keep a roof over our heads, even though I’ve had to rent. I don’t expect you to reply, but just know this: I have always classed myself as a moron with money, but you made me feel like a superhero. That’s the most important thing I got out of your book. It was simple and you made me feel confident and happy.

Tracey

Hi Tracey,

It’s way past bedtime at the Pape household and I’m sitting here at the end of my daughter’s bed, reading your question on my laptop. My daughter sat upright in bed and asked me why I looked so sad. I explained that I was actually happy, because I’d just read a lovely letter from an amazing woman. Thank you for sharing.

You Got This, Tracey.

Scott.

Money Meals

Hi Scott,

I recently sent a thankyou email to your team for the amount you’ve helped my family save on our life/income/TPD insurance. We saved $132,690 up to the age of 65! So then we phoned our home insurance. We swapped providers and will save $2,286.24 per year with a better package. Then energy, a 25% discount per year. Then gas … 13% less per bottle. Yesterday we had our second Money Meal with the kids. THANK YOU from us all.

Leonie

Hey Leonie

That’s awesome — you’ve saved a lifetime’s worth of fees in a few nights. Oh, and good work on the Money Meals with the kids … with your savings it’s Magnums for dessert!

Scott.

I just called … to say … I WANT ALL YOUR MONEY

Hi Scott,

I got a random call from a financial advisor that I have never dealt with before. I have been meaning to get some advice for a while now, so the timing was great. He projects to add $500,000 to $1 million in compounding interest by the time I retire in 22 years, plus savings on my life insurances and income — for an $8,000 set-up fee, plus a 3.5% ongoing annual management fee on my super. How do I work out if it’s legit?

Belinda

Hi Belinda,

You had me at “random call from a financial advisor that I have never dealt with before”.

What would you do if a random bloke called and began chatting you up – talking about candlelight dinners, long walks on the beach, and getting financially frisky. What would you say to him?

You’d tell the creep to bugger off!

Well, this salesperson is trying to sweet-talk himself into your financial pants, Belinda!

Instead, I’d suggest you call your super fund (hopefully a not-for-profit industry fund) and book an appointment with one of their fee-for-service financial advisors. As a general rule the first hour is free, and there’s no smutty talk.

Scott.

Our Kids Don’t Know How Broke We Are

Hi Scott,

My family is in a highly stressful situation. Currently our children all go to private schools that cost us a combined $35,000 a year, yet we are struggling because I am the only one working, as my husband has been out of work for over six months. I can’t tell my children that they will need to leave their school because we can’t afford it! However, we have absolutely no money to spare. We are desperate. We have paid for the first term, but the new bill will be issued in April. We are extremely stressed. What can we do?

Pari

Hi Pari,

Oh boy, what a stressful situation.

It’s all wrapped up in the emotions of guilt and shame and the desire to provide for your kids.

So the make-or-break factor is your husband getting work … any work, even if it’s not in his area of expertise. You just need money coming in the door.

And you’re not the first parents who have been in this situation. The key with all creditors is communication: let the school know what’s going on and ask for their help.

Yet you’ve probably already tried that.

So here’s another way to think about it.

Politicians often say you should never waste a good crisis – and it’s actually good advice. Pari, you’re in a crisis right now, so it’s a good idea to put everything on the table and look at your options.

And the bottom line is this: if you can’t afford it … you can’t afford it.

Putting your kids into a decent public school won’t damage them. In fact, if they’re old enough, talking to them straight about the realities of your financial situation could be one of the great learning lessons of their life.

Scott.

You can taste the danger in the air

Right before a bushfire, you can taste the danger in the air.

You can smell the smoke.

You can often see the flames flickering way off in the distance.

You can hear the fire engine sirens, and see the emergency services’ utes buzzing around.

You tune in to the ABC radio to hear the latest warnings from the authorities.

And then you brace yourself as the head of the fire roars through and destroys everything in its path.

It’s sheer madness. Utter destruction.

And then moments later it’s … eerily quiet. You can walk around and survey the damage.

Floods are the exact opposite:

All you hear is rain. Then the water starts rising. It’s relentless.

Yet the water doesn’t quickly recede. It just sits there and ruins everything you own, covering everything you hold dear with rot and faeces.

There is no quick escape. Most people are trapped, and isolated, and hungry, and traumatised.

I called up a colleague of mine, Kimbah, who is right in the middle of the floods.

“I’m really just heartbroken, Scott”, she said, her voice cracking.

Kimbah runs one of the oldest financial counselling services in the country. Her office is located in the heart of Lismore, in the grand old council building that was built in 1886.

“The last time the floods came through, the water made it into the office and reached about 40 cm up the wall, which meant the bottom of all the filing cabinets got soaked. So this time, I told the team to stack things on the desks … just to be safe.”

This time, the water level reached 3.3 metres.

This time, they lost absolutely everything.

Now, you don’t sign up to be a not-for-profit financial counsellor if you want to make a quid. You do it because you care deeply about your community. And right now Lismore, and surrounding areas, are suffering through what Kimbah calls “a catastrophe of biblical proportions”.

Yet I tried to pull Kimbah back into the business of financial counselling for her clients:

“You and I know that a coping mechanism for people in a crisis is to want to get back to normal … which often results in them making poor decisions with their insurance claims. That’s something you can help with …”

“What insurance?” she snapped. “It costs people $28,000 a year for flood insurance in Lismore. Who the hell can afford that?”

Drop the anchor!

To me, what we are witnessing here is a failure of the system.

All too often it’s the most vulnerable people in our communities that become the collateral damage of these ‘once-in-a-hundred-year natural disasters’ … that seem to come around every few years.

Thankfully, the Lismore financial counselling service has been faithfully serving their community for decades … helping them stay afloat.

And, come hell or high water, Kimbah assures me they’re not going anywhere. So if you’ve been impacted by floods, call the National Debt Helpline 1800 007 007 and speak to a financial counsellor.

Tread Your Own Path!

All Clear from COVID

Barefoot,

We stupidly made the decision to withdraw the maximum $20,000 from my husband’s super when it was on offer due to Covid. Now we want to give it back. Is it as simple as depositing it back into his super account?

Narelle

Hi Narelle,

Good idea.

Almost five million people have withdrawn a combined $37 billion in early release Covid payments. And, given there were no conditions on how the dough was spent, some of it ended up being spent on boob jobs and Botox.

The good news is that the ATO has given an update, saying “individuals can now recontribute their COVID-19 early release payments without it counting towards their non-concessional (after-tax) contributions cap”.

Oh-kay.

Basically, it means you won’t be penalised for injecting the money back into your super, rather than into your lips. Give your fund a call and tell them your plan. They may need you to fill out a form before you BPay the dough.

Scott.

We need to talk about your job

Years ago I employed a kid fresh out of uni, mainly as a favour for his dad, who said he needed some work experience.

I had low expectations, so I put him on the standard minimum wage and told him we’d revisit it after a three-month probation period.

The three months flew by, and then one night I got an email from him requesting a meeting. The first red flag was when he arrived at the office in a suit. The second was when he pulled out a printed list of demands that he and his mother had obviously war-gamed on the weekend. He cleared his throat and squeaked out his opening offer:

“I am worth $100,000 plus super … and 5% of the profits of the business, paid quarterly.”

“Are you on drugs?” I said, laughing.

He just stared at me.

He checked his notes. Clearly this wasn’t one of the responses his mother had scripted for him.

And then? And then he started crying. Sobbing. It was so … awkward.

Don’t be that guy.

Yet you do need to ask for a raise.

Why?

Well, if you don’t get at least a 5% pay rise this year, you’ll be going backwards.

That’s because the prices of things are inflating at the fastest rate in years … and they haven’t stopped climbing.

Think of inflation like being stuck on a treadmill that keeps getting faster and faster. You have no choice but to keep running, otherwise you’ll faceplant and be ricocheted into the poorhouse.

Okay, the scary movie is over and I’ve put the exercise equipment away.

So, what can you do? Two things:

First, understand that the employment pendulum has swung in favour of workers.

The jobless rate is edging in on 50-year lows, so many employers are having to pay up to attract new hires. So the obvious thing to do is spend five minutes googling to make sure you’re getting paid the current market rate.

Second, try the ‘Career Compounding Strategy’ that I lay out in my Barefoot Investor book.

Basically, it’s a step-by-step process that gets you to look at your job from your boss’s perspective, choose their three most important outcomes (not yours), and write ambitious goals for how you are going to achieve them in the next 12 months.

You then share those goals with your boss and ask for regular feedback throughout the year. You never talk about money or promotion in these meetings, but instead ask what extra you can do to help make your boss’s life easier, without sounding like a brown-noser or bursting into tears. That’s when you can ask for a promotion and a hefty raise. (For more info, borrow my book from the library.)

It’s simple, sure.

Yet very few people actually do it. And yet you will spend around 90,000 hours of your life at work. When you factor in sleeping, eating and Netflixing, there’s not a lot of life left over. So spending a few hours working out how to compound your income can have a dramatic long-term impact on your wealth.

Better yet, over the years I’ve received letters from readers who’ve used it to get 20% increases, and often a lot more.

And what ever happened to the young guy?

Last time I heard he was working at Macca’s. I wonder if is paying a profit share?

Tread Your Own Path!

The Young (and Miserable) Multimillionaire

Hi Scott,

My partner and I have followed your advice to a ‘T’ for the last 10 years. We started our own business, worked full time, flipped properties as our side hustle, and aggressively paid down our debt. And it’s worked — we now have $3.5 million dollars, all from nothing. But we hate our life! We are burnt out, stressed out and worn out — and we’re not yet 40. My question is: how much is enough?!

Ellen

Hi Ellen,

Congratulations!

If you own your own home and can live off $100,000 a year in dividends, I’d say you’ve passed the financial finish line.

If so, take a victory lap, spray some champagne around, and prepare to start playing a brand-new game.

You need to start thinking and playing not like a millionaire but like a billionaire.

The most important thing to a billionaire is not money – it’s time – the only thing they can’t buy.

Ellen, you’re already a time billionaire (and so is anyone under the age of 47 … you have, on average, more than one billion seconds left in your life).

In other words, flogging yourself to earn a lot more money from here won’t make you any happier.

So what will?

Having control over your time. That’s real freedom. Investing time in being with your family, in travelling, in trying new and interesting hobbies, and in helping your broader community.

Scott.

Barefoot Blows Renters an Air Kiss

Hi Scott,

I’ve read your newsletters religiously over the past few years (and generally loved them), but this is the first time I’ve been compelled to write back. I am frustrated with your take on OwnHome last week — not because what you said is untrue but because you basically did not offer an alternative option to people in this sad situation. You started off your piece talking about how people trying to save a deposit are going backwards due to how much house prices are going up (so far I was nodding in violent agreement as I was reading), but then you ended the piece by telling them to basically keep doing that same thing!

Peter

Hi Peter,

Fair point.

That being said, I don’t offer magic wands, and I tell it like I see it.

Still, it feels a little like getting angry at your personal trainer when she pooh-poohs your idea of getting lipo to lose your belly. You need to do some crunches, tubby!

That’s also why I’m wary of any company – or any government policy – that ‘helps’ people to sidestep saving up much of a deposit. Given the sums people are having to borrow in a rising interest rate environment, I think it’s irresponsible.

Look, it’s not a sexy position, but I believe that spending a few years saving prepares you for the tough times that will come. And when they do, you’ll need some (firm) skin in the game.

Scott.

The Bonking Fund Manager

Hi Scott,

One of the funds I invest in is the Magellan Global Fund. I’ve since found out that the guy who was running it was bonking someone he shouldn’t have been and now the company has turned south. Do I hold tight or jump ship with everyone else?

Hayley

Hi Hayley,

That was actually another fund manager, not Magellan.

Though Magellan has had a couple of bust-ups: they lost their CEO, and then the founder (and star stockpicker) revealed he was getting a divorce, and then went on indefinite ‘Eat Pray Love’ leave.

Not surprisingly, Magellan Global’s performance is in the toilet.

So what should you do?

Well, to answer that let me tell you about a totally different fund that was coincidentally also called Magellan (well, Fidelity Magellan):

It was an investment legend – averaging a 29.2% annual return, the best 20-year history of any fund, ever.

That meant investors’ money was doubling every two-and-a-half years.

Yet get this: the average investor in the fund actually lost money.

How?

Instead of just leaving their money there … they traded in and out … just like you’re thinking of doing now.

Finally, let me tell you how I deal with this personally:

I invest with a robot.

It has no feelings. It doesn’t bonk anyone. It’ll never retire. It simply and automatically rebalances my portfolio each year (dud companies out, growing companies in). And it consistently achieves higher term returns than 80% of star stockpickers. Even better, this top-performing robot fund is dirt cheap.

It’s called an index fund.

Scott.

I’m a Grown Man, and I’m Scared

Hi Barefoot,

I’m worried about what to do with my superannuation. I want to retire in the next 12 months as I turn 66 in July. But I’m scared that if Russia or China invade, this would have an impact on the share market which will directly impact my super fund. What do you think?

Bill

Hi Bill,

I have absolutely no idea what Putin or Xi will do, or the effect it will or won’t have on the market.

After all, who’d have thought a global pandemic would cause a boom in the share market?!

Yet, I am very sure that by pouting about Putin you’re overlooking your biggest financial risk:

Inflation.

If you’re retiring on a fixed income, you need to ensure that money won’t be whittled away.

The price of stuff is currently rising at the fastest pace in 11 years. Ronald Regan once described inflation as “violent as a mugger, as frightening as an armed robber and as deadly as a hit man”.

So, how do you outrun inflation?

Generally by investing in businesses that can put their prices up. Of course, doing that buys you a ticket on the stock market rollercoaster … which will work out so long as you don’t jump off mid-ride!

Seriously, Bill, I don’t think it’s good for your wellbeing to worry about things you can’t control. I’d suggest you sit down with a financial advisor and work through a strategy that will make your money stretch.

Scott.