Warren Buffett’s $5.4 BILLION Warning to investors

Scott,
 
Why haven’t you written about your idol Warren Buffett selling BILLIONS of dollars worth of his Bank of America shares? Sounds like he knows something we don’t …
 
Chris
 
Hi Chris,
 
So I’m guessing you picked this up from that prestigious financial news digest Daily Mail – which ran this typical Daily Mail headline this week:
 
“Warren Buffett’s $5.4 BILLION warning to investors after he dumps popular stock – and Wall Street better pay attention”
 
“Oh my god”, I thought to myself.
 
Then I spat out my coffee and violently jerked my mouse towards the headline on the screen.
 
DOUBLE-CLICK!
 
However, as I read the actual article, I started frowning. Shockingly, it didn’t live up to the headline.
 
(Does it ever?)
 
Yes, it’s true that Buffett has sold $5.4 billion in Bank of America shares (well, the actual figure is $7 billion, but … close enough).
 
So, is he sending investors a warning?
 
No.
 
How can I be so sure?
 
Well, firstly, because the 94-year-old has said publicly thousands of times over his career:
 
“I have never made any investment decision based on an economic prediction.”
 
So there’s that.

Yet what was missing from the headline was context:
 
His Bank of America sale represents … just 0.7% of Berkshire’s overall assets.
 
(And he still owns a whopping 882 million Bank of America shares, worth US$33.7 billion.) A more likely explanation is that he was taking a profit, given the stock is up 70% since October.
 
Anyway, just for kicks, I decided to get my Daily Mail on and ask ChatGPT to come up with a clickbaity headline on Buffett that investors could actually use.
 
Here’s what it came up with:
 
“Shocking Move: Warren Buffett Bets His Entire Fortune on Just ONE Stock”
 
It’s true.
 
For context, in his will, the 94-year-old billionaire is investing his inheritance into one low-cost index fund.
 
The reason is that Buffett argues that index funds are the best investment for everyone and advises that we should be buying them consistently throughout our lives, saying:
 
“The temptation when you see bad headlines in newspapers is to say, well, maybe I should skip a year or something. Just keep buying.”

Scott.

This is going to hurt

This week, I found myself standing in my underwear while a man took photos of me.
 
“Oh, this doesn’t look good” he said, getting right up in my grill. “Best we freeze this sunspot off,” said my doctor, walking back to his desk.
 
He returned with a giant metal canister and pointed it at my temple, Terminator style.
 
“This … is going to hurt”, he said matter of factly.
 
“Hey! You are not supposed to say that!” I protested.

Yet it was too late. I felt a stinging sensation for a couple of seconds … and then it was all over.
 
Contrast this approach to that of another doctor – our Federal Treasurer, Dr Jim Chalmers.
 
(He’s not a medical doctor, he’s a doctor of political science … in other words, he’s a spin-doctor).
 
In the past few weeks the Treasurer has thrown a little bit of inner Karen at the Reserve Bank, whining that they are ‘smashing the economy’ by their decision not to cut interest rates.
 
I actually agree with Jim.  
 
There is no doubt that interest rates are hurting our economy, just as they are in other parts of the world, like the United States, the United Kingdom and New Zealand, all of which, it has to be said, have higher rates than us right now.
 
Having said that, the Treasurer is doing the equivalent of protesting against a sting on the side of the forehead, while the Reserve Bank is focused on eliminating a potentially cancerous melanoma … in the form of entrenched inflation.
 
As we’ve experienced since Covid, the effects of runaway inflation are cancerous to the economy … and they hurt people on the lowest incomes the most.
 
So now I’m going to pick up a giant metal canister and aim it at your temple:
 
Too many people (and journalists!) have anchored their expectations to ultra-low interest rates. It’s high time we pulled up that anchor and sailed into the sea of sustained higher rates.
 
(And to be clear, I expect them to be consistently higher than we’ve experienced in the past few years, whether it’s Labor, the Coalition or the Breakdancing Party – don’t discount her: Raygun has better name recognition than Albo or Whatshisname).
 
Last week, RBA Governor Michele Bullock spoke about the small number of borrowers who can’t make ends meet, suggesting that some “may ultimately make the difficult decision to sell their homes”.
 
That’s the “this is going to hurt” line my doctor gave me. Which is a ballsy thing to say in her position, but also good advice: if I had a dollar for every time I’d told people in financial stress that they need to consider selling their home, I could rent a house in Ouyen (for a week).
 
Yet, as a spin doctor (especially one on the eve of an election), Jim sadly can’t say that. Still, if the thought of that causes you heart palpitations, right now is a very good time to get a financial check-up!
 
Tread Your Own Path!

Blowing Smoke Up Your Backside

Hi Scott,
 
Your financial advice, as always, is second to none … but this short email is to confirm you also scored a bull’s-eye with your suggestion a few weeks ago to Bella to buy Allen Carr’s book to help her husband give up smoking. Years ago, I was so addicted to cigarettes that, even after watching BOTH my mum and brother die prematurely from smoking-related illnesses, I STILL wasn’t able to quit.
 
But then I bought a copy of that book –   and quit immediately after reading the last page. This was after smoking a pack a day for about 20 years and genuinely believing that life wasn’t worth living if I couldn’t smoke. Not to mention the fact that I had tried EVERY SINGLE other method in an attempt to quit.
 
Keep up the good work, and never stop recommending Allen Carr’s book to smokers. As a former confirmed smoker, I can only describe the feeling of genuinely never wanting another cigarette again after finishing the book as magic. I hope Bella and her husband take your advice and I wish them the same success.
 
Andy
 
Thanks, Andy!
 
I aim to be helpful in these pages. If this helps people escape the prison of addiction, it’s a good day for me. Well done for giving up the darts.

Scott.

Barefoot Book Week!

Hi Scott, 
 
Book Week time again and Barefoot was the only person Hamish wanted to dress as! He has read Barefoot Kids and is now nearly finished your original Barefoot Investor book. He has all his buckets and a great plan. Keep inspiring my kids, please!
 
Nicky

View fullsize

Hey Nicky,
 
I absolutely love Book Week (and Father’s Day).  
 
Every year I get kids who dress up as me (well, except for my kids, who think I’m super embarrassing).
 
Please thank Hamish for reading both books, and let him know that I think he’s a legend.
 
(And a shout-out to all the other kids who had a Barefoot Book Week too.)

Scott.

Guru Predicts Tesla Shares will Go Up 1,000 per cent

Hi Scott,
 
I’m wondering if you have changed your tune on investing in Tesla? Ark Invest guru Cathie Wood has just added to her stake in the company in anticipation of the robot taxi revolution. She forecasts it will be a $10 trillion global market, says Tesla will capture the bulk of that, and predicts it will boost Tesla’s share price tenfold. Elon is obviously a genius and he has said that robot taxis are the future for Tesla. So, given the share price has been whacked recently, is now the time to buy some shares?
 
Trevor
 
Hi Trevor
 
Well, paint me red and call me Randy, but I’m shocked.
 
For years I’ve been highly skeptical that fully autonomous driving would happen.
 
Yet I’m happy to admit I was wrong.
 
Waymo, Google’s robotaxi company, has not only got driverless taxicabs, they’re now taking 100,000 paid rides each week in the US (up from 50,000 a few months ago).
 
Even better, they’re safer than us humanoids. Well, at least the company claims that their robots are much safer: they’ve recorded just 0.4 injury-causing collisions per million miles driven, whereas humans are involved in 2.78 per million miles.
 
So, in major cities at least, it looks like robotaxis really are the next big thing.  
 
Yet it’s here that guru stock picker Cathie Wood and I conk out.  
 
I wouldn’t want Cathie in the cockpit of my portfolio: her Ark Invest has destroyed US$14 billion in wealth over the past decade, according to Morningstar, which tracks her funds.
 
And, looking over her Tesla research, I can understand why. It’s pure spin from a fund manager who is trying to boost the stock price of a company she already owns.  
 
How did she come up with the ‘1,000 per cent’ return assessment?
 
Well, Cathie is predicting that, in less than five years, an unbelievable 90% of Tesla’s future earnings will come from something that doesn’t exist yet:
 
Robotaxis.
 
To be fair, Elon Musk announced that Tesla was on track to have 1 million robot taxis on the road … by 2020.
 
Today?
 
Tesla has zero robotaxis. In fact, the fine print on their website says that Tesla’s Autopilot feature “does not make the vehicle autonomous”.
 
Now I don’t doubt that Tesla will move into robotaxis … but this brings us to the crucial point: 
 
Will these robots make investors rich?
 
On this point, I’m still very sceptical. After all, in China, the main selling point of robotaxis is that they’re cheap as chips. According to a report in the Global Times, base fares start as low as 4 yuan (83 cents), compared with 18 yuan ($3.73) for a taxi driven by a smelly human.

That sounds like a driverless race to the bottom to me.

Scott.

Speaking Gigs

Hi Scott,

“Hands up if you want to come on a trip with Dad to the … GOLD COAST?” I yelled.

All hands shot up around the family dinner table (apart from Liz, whose arms were firmly folded).

“And what about if we went to … Hawaii? Who’d want to come along with good old Dad?” I roared.

“Oh me! Me! Me! Pick me, Dad!” shrieked my eight-year-old, pushing his hand higher than his three siblings’ hands and almost dislocating his shoulder in the process.

“Well, I’ve just signed with a speaking agency and they’re putting me forward for corporate keynotes”, I told the kids.

Blank stares.

Then again, I haven’t done a paid gig since I became a dad – by choice – so my kids have no concept of me being a public speaker (or having a career away from the farm, to be honest). So I explained that we’d be heading to some pretty fancy places. Sometimes on a plane. And we’d stay in fancy hotels. And have a fancy buffet breakfast. And after the speech we’d go somewhere awesome …  like Wet’n’Wild!    

“I’m doing 10 speeches a year”, I announced, like I was Willy Wonka.

(Yes, my decision to do corporate speaking is largely motivated by the opportunity to peel off one of my kids and spend some rare one-on-one time with them – Disneyland-dad style.)

So I’ve spent a hundred hours or so creating a speech for big corporates, but I’ll give you the guts of it:

Basically, since writing the bestselling book in Australian history, I’ve had thousands of people write to me and tell me what they got out of it. Patterns emerge. Here are the three things that people say really moved the dial for them.

First, it was the buckets (of course).

Second, it was the clarity of the Barefoot Steps to instantly know what to do next.

Finally, it was doing the Barefoot Date Nights, where people actually changed their financial lives.

(Okay, so there’s a little more than that, of course, but that’s the gist of it.)
The really cool thing about doing this speech is that it inspires people to start doing them again … and, at times like this, that’s a bloody good thing!

The only problem?

Thus far, it’s the mining companies that have shown the most interest in booking me.

“So, kids, who wants to go to the middle of nowhere and sleep in a donga with Daddy?” quipped Liz.

No hands went up.

Tread Your Own Path!

P.S. I actually love talking to miners (even if my minors don’t want to come). In fact, on my last speaking trip I ended up on the front page of the Kalgoorlie Miner after landing in the local jail (speaking to the soon-to-be-released prisoners)!

P.P.S If you’re a big corporate with a conference coming up (Hamilton Island? Hawaii? Heck, I’ll even take Wollongong at this stage), click here for more details on booking me as a speaker: www.barefootinvestor.com/speaking.

Mum Won’t Give Me $30,000 Because of YOU, Barefoot

Hi Scott,
 
My mum is withholding a $30,000 inheritance for me from my late great aunt because she thinks I wouldn’t use it the ‘Barefoot way’. I’m a 26-year-old woman, living with my partner, and we have money of our own saved up for a house deposit. I told my mum that, if she gives me the $30,000 from my great aunt, I would also put it in our high-interest savings account to earn interest until we buy a house. But she says you would tell me to invest it in shares or use it to pay off my HECS. Is that true? Until I agree to the ‘Barefoot Way’, she’s not going to let me have it.
 
Olivia
 
Hey Olivia
 
Order! Order!
 
Judge Barefoot is in the house. Please all rise, while I give the verdict:
 
In the matter between you and your mother, I find in favour of …. YOU!
 
You are up to Barefoot Step 4: Buy Your Home, so you should definitely put the inheritance towards your house deposit savings in an online saver.
 
Once you’ve done that, you’ll move up to Step 5: Increase Your Super to 15%. That’s when you’ll be tax-effectively investing long term into the share market via your low-cost super fund.

Well done, and please say g’day to your mum for me!

Scott.

Artificial Intelligence Stole $300,000 From Me

Hi Scott,
 
I have just read your response to Craig regarding Robert Irwin and Trade 6000 Alrex. I just want to confirm what you have said and warn Craig to ignore this and any other get-rich-quick offers on the internet. I got sucked in by a deep-fake advertisement of Elon Musk and lost over $300,000 – plus at least five years of my life going through stress with the follow-up scams telling me it could be recovered.   Without going into the whole catastrophe, just be aware that it starts off as such an amazingly easy process – you think to yourself “Why isn’t everyone doing it?” The answer is because not everyone is as gullible as me! Please do not use my name.
 
Anonymous
 
Hi Anonymous,
 
Thanks for sharing.
 
Scam losses are like cockroaches: for every one who admits it, there are hundreds hiding in the dark.
 
Your experience mirrors the hundreds of conversations I’ve had with other victims.
 
Losing the dough is financially shocking and in many cases life-changing.  
 
And, as you’ve said, dealing with the follow-up scams (“We can recover some money for you … if you give us more money”) can go on for years and can give victims PTSD.  
 
(Which is why anyone who has been scammed should go to IDCARE.org – call 1800 595 160 – and have them douse their online profile with hospital-grade bleach.)
 
The money loss is one thing, but by far the biggest losses I see with scam victims is with their mental health. Most of the time their self-confidence is shattered by the experience – their sense of shame and disgust eats away at them.
 
I totally understand why you don’t want to share this experience publicly. However, I’m pleading with you to share it with a counsellor, who can help you move forward. The scammers stole your money – don’t let them rob you of your future.

Scott.

My Husband Has Been an Addict for 31 Years

Hi Scott,
 
My partner and I, both in our mid-forties, have been Barefooters for years. We live in the outer south-eastern suburbs of Melbourne and have two kids, aged 10 and 13. We should have our mortgage paid off within the next two years, currently have no other debts, and have discussed plans to invest in Vanguard. My partner is focused on eliminating debt and growing our financial future but, sadly, he is not ‘investing’ in his physical health. He’s now heading into his 31st year of smoking and doesn’t want to give it up. I’m hoping you might be able to provide him with the motivation – for financial reasons – to butt out for good!
 
Bella
 
Hey Bella!
 
I’ve had a lot of experience helping addicts, so let me tell you the bad news first:
 
Beating them up about how much money they’re wasting on their drug of choice will not only not work; it will more than likely stress them out and make them use more!
 
To a non-addicted brain, this sounds completely ludicrous, but not to anyone who is in a pit of addiction.
 
This is as true for those who are sending thousands of dollars up in smoke as it is for gambling addicts losing hundreds of thousands of dollars a year.
 
What would I do?
 
Well, it sounds simple: if you treat the addiction the money will sort itself out.
 
And how the hell do you do that after 31 years of smoking?
 
Easy.
 
First, in the Father’s Day cards get your two kids to write about how much they love their dad, but also how afraid they are that he’ll get sick and be lost to them.
 
Second, get your kids to buy him a very special Father’s Day present:
 
Allen Carr’s Easy Way to Quit Smoking Without Willpower
 
(This book has 7,680 reviews on Amazon with a 4.6 star rating and has been around in various forms for 40 years.)
 
Finally, give him the peace and quiet to read the book.  
 
Health is the ultimate form of wealth.
 
Good luck!

Scott.

Haters gonna hate

God Dang!
 
Last week I wrote about my road trip through the most dangerous city in America. While I came out of it whistling Dixie, I didn’t realise the violence that would be waiting in my inbox this week:
 
“You know what I really hate? When Australians try to make themselves feel better about their boring, rotten country that is too scared to leave the monarchy, by insulting the US.” 
 
“I’d rather drive a Mustang than a Holden. Do they even make any cars in Australia anymore?”
 
“I can only hope this crap you’ve written was in fact deep-fake Scott Pape.”
 
“No one gives a rodent’s rectum about your political views. They are an abuse of the platform you have developed.”

“Is your goal to get a safe Labor Party seat?”
 
(I’ve been labelled a radical lefty, a right-wing nut, and a gun-toting country hick – which is probably the closest.)
 
And these were the slightly nicer ‘PG’ responses I could publish. The worst emails I got this week were actually threats designed to make me ‘rethink’ my political views.
 
But don’t cry for me, Arkansas.
 
I’ve been writing this column for 21 years, and I’ve copped more curry than an Indian chef:
 
Industry super funds hate it when I question them about their expensive fees, their empire-building, and their aggressive valuations on unlisted investments.
 
Insurance companies don’t like what I’ve written about their rubbish policies and their price-gouging.
 
And the banks … well, let’s just say to this day I still have nightmares about the Dollarmites mascots murdering me in my sleep!
 
Anyway, my mother always says “You can’t please everyone”.
 
That’s true but, in the classic mum sense, it’s a way of sugarcoating the truth:
 
The fact is, if you’re out there trying to make a difference, you’re going to piss a lot of people off (especially rich people and companies who have an army of lawyers who threaten to sue … which happens more than you think).
 
Yet my job isn’t to kowtow to yanks (or cranks), to fluff up my social media (don’t use it), or build my brand (whatever that means). Truth be told, I never got into this game to be popular … which turned out to be a very wise decision!
 
Tread Your Own Path!

Crikey!

Hi Scott,
 
I don’t want to make a huge mistake with what little I have ... so is this Trade 6000 Alrex, as recently revealed by Robert Irwin, still worth a try? I can find $375, but this is scary. What if I go there via a scam website that looks real and so lose everything? Advice please!

Craig
 
Hey Craig,

It’s a scam, man.
 
Robert Irwin handles crocodiles, he’s not an investor.
 
They’ve deep-faked him, the same way they did me.
 
If you deal with these crooks they’ll rip your bloody arms off.

Scott.

Have We Bred a Monster?

Hi Scott,
 
My teenage daughter has had a private school education. This has cost my husband and I (average working-class people) upwards of $40,000 per year. Early on we saved hard to pay off our modest house and were pleased we could offer our only child a private education. We were looking forward to her finishing secondary school this year, going to the local uni, and thus giving us a break from the inexorable fees! 
 
But now she wants to attend university in another city – at $40,000 per year for a live-in college – to get the ‘full city experience’. (I commute each day to the city but she insists it is too far for her to commute to a uni nearer to home.) She says she is desperate to leave home, and will move to the city with or without our help. She has no idea of how to be financially independent! Is this ‘normal’ privileged teenage behaviour or have we bred a monster?
 
Patty
 
Hi Patty,
 
You’ve bred a monster.
 
Look, even though 18 is the new 13 for COVID-kids, she’s biologically an adult, so you can have a grown-up conversation with her.
 
Here’s how:
 
Explain that you have already spent upwards of $500,000 (pre-tax) on her education … and now you have to focus on saving for your retirement.
 
However, there is absolutely no reason she should be deprived of what she calls the ‘big city experience’.  In fact, part of that experience should involve working a minimum-wage job, occasionally drinking from a goon bag, and sometimes dining on two-minute noodles to make her money stretch.
 
In other words, I’d not only encourage her to move to the city, I’d help pack her bags. The education she’ll receive will make her a much more grounded human being. (And if she can’t hack it, then she can always go to the local uni!)
 
Scott.

My walk through the most dangerous city in America

“I’m goin’ to Jackson, I’m gonna mess around, Yeah, I’m goin’ to Jackson, Look out Jackson town”
 
The top is down on our convertible, it’s 100 degrees (fahrenheit), and the stereo is blasting Johnny Cash’s Jackson as we drive into Jackson, Mississippi.
 
My mate Pete and I have been driving through the deep South … otherwise known as Trump country – Texas, Louisiana, Mississippi, (Sweet Home) Alabama, and finally Nashville, Tennessee – for a work conference (well, that’s the excuse we gave our wives anyway).
 
We hired a Mustang, of course. It may be billed as the quintessential American muscle car, but in reality it has about as much grunt as Joe Biden before his morning nap.
 
We’ve also been adhering to a strict American roadside-diner diet of approximately 11,000 calories a day. After a week of bacon-on-bacon, my pre-diabetes has made my hands swell up so bad that I can’t remove my wedding ring.
 
Yee-haw!
 
We parked the Pony out the front of the Mississippi Capitol building – one of the grandest and most beautiful political buildings I’ve seen in my life – and took a walk downtown to stretch our legs.

Though looking back on it now, that turned out to be a big mistake …
 
Welcome to the Trump road trip.
 
Right now it feels like America is in the grips of a binge-worthy Netflix show:  
 
I’m calling it, ‘The final season of the United States’.
 
This show has it all … an assassination attempt. Pornstars. A coup against a (sleeping) President. And the star of the show is an overweight, 78-year-old white man with a spray-on tan.
 
Everywhere I went I asked people about the election.
 
And everywhere I went I got the same response:
 
A big ole cup of nutt’in.
 
Asking Americans about the election seemed to generate the same visceral response as that creepy in-law you’ve only met a handful of times, who stretches out their arms and says “where’s my hug”?
 
No-one wanted to touch it.
 
They may be the United States, but they are a deeply divided people. Nearly every person I spoke to admitted they’d lost friends based on the tribe they supported.
 
“It’s just so scary and … exhausting”, sighed Tyrone, my Uber driver.
 
Now I’ll tell you what’s scary – the streets of Jackson.
 
We didn’t know it, but it turns out that Jackson is actually a very dangerous city.  
 
In fact, it’s the most dangerous place in America, based on the number of homicides, which seems like a very appropriate yardstick for danger.
 
“Something about this place doesn’t feel good,” I said to Pete.
 
Pete pointed to a car that drove by us: “Maybe it’s the bullet holes in the doors?”
 
“Let’s get outta here now!” we both said in unison.
 
Snap!
 
Jackson has been called a ‘failed state’ …   a place where the government no longer functions.
 
Again, that’s not hyperbole.
 
After decades of mismanagement, and years of warnings about the city’s crumbling infrastructure, it all came to a head in 2022.
 
The city's water supply was badly contaminated and shut off, leaving its residents without drinking water (or flushing toilets) through the heat of the Summer. Even today, many residents live with brown water that smells of sewage and they refuse to drink it.
 
There are similarities to what’s going on on the national stage. Throughout this election the Democrats have read passionately from teleprompters at Hollywood-style rallies about the pressing problems the country faces … which they haven’t addressed in the last three-and-a-half years. While Trump has spent a lot of time arguing about the size of his … crowds. Neither has given much time to discussing the actual policies that would benefit the American people.
 
How does the show end?
 
Well, no-one knows, of course.
 
The only thing we do know is that Trump is incapable of losing (even if he loses, again) … and that is the ultimate cliffhanger that keeps us all watching.
 
Tread Your Own Path!

P.S. The night before we flew out, we went to a bar in Hollywood and met a young rooster who was crowing about the fact that he’d marched on Capitol Hill. He swore that Biden was already dead – “Weekend at Bernie’s style, man”.  Though I think he’d had one too many Harvey wallbangers.

Another barfly piped up and said that Kamala has it in the bag. He reckoned that in the next few weeks Joe Biden will have a medical ‘turn’ and announce that he has to stand down as the sitting President, which will officially make Kamala Harris the first black woman President – and she’ll ride that honeymoon period all the way to election day.
 
To add to the weirdness, TV star Sofia Vergara was standing right behind us, patiently waiting for a drink.
 
God Bless America!

Screen-free Sunday

Dear Scott, 
 
I wanted to let you know we were impressed with Screen-free Sunday and have instituted it for the second week running. (Though my kids point out that it should be followed swiftly by Mum-free Monday!) I just can’t get over how many families don’t do it, and I suspect it’s because many parents are attached to their devices too. In fact, that’s what is revolutionary about Screen-free Sunday – everyone has to participate!

Kelly
 
Hey Kelly
 
Congratulations!
 
We’re still doing it as well – and, like you, loving it! The only problem we’ve encountered is when the Melbourne Demons are playing an away game. My daughter is very much a stickler for the rules, which means we have to listen to it on the tranny!

Scott.

Trouble on the menu

Dear Scott,
 
I am a single divorcee, recently retired at 70 with about $650,000 in super after selling my inner-city house and relocating to the far north coast of NSW. My son is 37 and absolutely passionate about his chosen career as a chef, at which he is excelling. He used to talk about opening his own restaurant, but this hasn't been mentioned for a while. 
 
My ex-brother-in-law (a real estate agent) is trying to convince me to go into partnership with my son in a restaurant by gifting/loaning him $100,000 out of my super, saying that we will both make a motza. But I am really concerned about this for several reasons: Firstly, I’m pretty sure it would take a lot more than that to open a new restaurant! Secondly, my son and I are in a good place now (after some rocky times) and I don’t want to spoil that with the possible stresses of a business partnership. Lastly, I want to spend time travelling, and I don't feel that I can afford to lose that $100,000 if things were to go pear-shaped.

I trust my son with the money and I know absolutely that he would do his best, but I also know that hospitality is not all roses at any time. Am I being reasonable or simply overcautious?

Cautious mum

Hi Cautious Mum
 
You’re doing me out of a job!
 
Literally, I couldn’t have answered your question any better than you just did.
 
Do not doubt yourself … you are 100% right.
 
The only thing I’d add is to remind your ex-brother-in-law that he’s an EX for a reason – and to butt out of your business!

Scott.

Single Mum Turns Down $3 Million

Dear Scott,
 
I’m a single mother raising two children on my nursing wage. I have just paid off my house in Tasmania and am now adding 10% to my super each pay. I don’t renovate or travel far. No dishwasher and a broken oven. It has come to my attention that I am to inherit $3 million from a relative. This is generous but wealth like that brings complexity. I have set myself up to retire on $42,000 per year when I’m 65. I don’t need more and I prefer the simple life of living within my means. And I want my children to do well in their own right and own a home eventually. However, I don’t want to take the satisfaction of doing it themselves away. I was thinking of purchasing a large parcel of land in Southern Tasmania to protect it from developers in the future. What would you do?
 
Grace
 
Hi Grace
 
You are obviously a weirdo.
 
However, your weirdness comes from a place of deep contentment, wisdom, and living your values.
 
You have something that most people will never have:
 
ENOUGH!
 
Yet while it’s true that wealth does bring complexity, it also has its advantages, especially for a single working mother. So if I were in your shoes I’d divide the inheritance into three accounts:
 
First, I’d put a small amount in an online savings account for emergencies (and to fix your oven!).
 
Second, I’d put a large amount into an ethically invested index share fund (given you’re bent that way).
 
Why would you want to do this?
 
So you can be in a position to do the ‘Barefoot Property Ladder’ with your kids. You can incentivise your kids to save as hard as they can by matching their house deposit savings, dollar for dollar. (And remember, your kids may not choose to live in Tassie. If they instead choose to live in Sydney, you’ll need a bloody big ladder!)
 
Finally, I’d set up a private ancillary fund (PAF), which is a type of charitable trust. You donate money into the PAF and receive an immediate tax deduction. Then each year you can use the money to give to the charities you choose. The key is to get your kids involved in deciding where to donate this money. Who knows, hopefully some of what you’ve got will rub off on them!

Scott.

Best Returning Super Funds

Hey Scott,
 
I was reading about the best performing super funds, which were Mine Super, Colonial FirstChoice, and IOOF – all of which earned over 10% and easily beat my super fund (AustralianSuper). Have you looked at these super funds in detail, and would you consider switching if you were me?
 
Russell
 
Hi Russell
 
I view annual super fund returns tables like I do a tacky beauty pageant:
 
Fake tans. Fake nails. And the winning fund managers strutting around in evening dresses, posing for investors. Pass me the vomit bag!
 
The truth is that you do not want to be in the latest ‘hot’ fund.
 
Why?
 
Because statistics show that the lucky fund this year is just as likely to be next year’s dog.

Standard and Poor’s looked at the top-performing share fund managers two years ago and found that only 2% of them remained top performers today.
 
That explains why, over the past five years, 95% of Aussie share fund managers have underperformed an equivalent index fund ETF, after fees.
 
That’s why I think we should rejig the current super fund table – and instead rank them on fees. Any super fund charging its members over 1% should be made to get in a bikini and parade down Martin Place.
 
Scott.

A warning to all investors

Last week I watched my share portfolio get hammered as markets plunged across the globe.
 
And in response I’m doing something I rarely do …  I’m issuing a warning to all investors:  
 
It’s time to play dead.
 
Seriously.
 
I’ll have more on the how and the why in a moment, but for now let’s dip our hat to the headline writers, who well and truly earned their peanuts last week. Take this one for example:
 
“Bloodbath strikes Australia’s sharemarket … $102 billion wipeout!”
 
Scary stuff.
 
However, you could rewrite that headline as:
 
“Shares fall to levels not seen since January.”
 
Not so scary.
 
However, if I was allowed to write the headline last week, here’s what I’d have written:
 
“Investors rejoice: shares go on sale!”
 
Most people are still working and are therefore still adding to their superannuation, so they should be cheering on the chance to buy at lower prices.
 
No one ever does, of course. Instead, they totally freak out!
 
And that’s why, many years ago, I made the decision to put my investing plan on autopilot. Each month I automatically buy the same index funds.
 
It’s what I call a ‘one and done’ decision, and it works in my favour: you see, the truth is that, on average, the share market has a drop of 10% or more almost every year. And it’s also true that shares have never failed to recover and hit new highs.
 
So, finally, why do I think it’s time for investors to play dead?
 
Well, Fidelity, one of the biggest asset managers on the planet, did a study on their top-performing client accounts. Guess what they found? Over 10 years, the best returns came from clients who had either forgotten about their investments, or were dead!
 
Tread Your Own Path!

My Parents Don’t Support Me

Hi Scott,
 
My name is Laura and I’m 12 years old. A couple of months ago I was given a copy of Barefoot Kids. I’ve come to inform you that I’ve read it many times and it has inspired me to become a better person when it comes to money. But I have one problem: how can I convince my parents to let me go ahead with my money-making schemes? I write down plans, and I do a bit of a presentation, and I do research, but nothing works. My parents own their own small and successful business, which is why I have always wanted to be an entrepreneur myself. I get that they would rather me starting small and helping out with their business, but all I dream of is owning my own. Please help!

Laura
 
Hi Laura
 
Right now, there are thousands of parents who have just read your question and their mouths are as wide open as Joe Biden’s (and they also have the same dumbfounded look on their faces).
 
Here’s why: all that most parents get with their tweens is grunting, slamming doors, and eye-rolls … lots of eye-rolls.
 
You, on the other hand, are doing research and presentations, and pleading with your parents for their approval to let you use your initiative to work hard, learn, make money and grow as a person.
 
Some parents don’t know how good they’ve got it.
 
Here’s what I want you to do: put this under their nose. It doesn’t matter if they read my answer – it’s your question that I want them to read. After all, you said that they are your inspiration for wanting to become an entrepreneur.  
 
Sweet Baby Jesus!  
 
If any of my kids said that to me, I’d be a blubbering mess. That’s what every parent dreams of!
 
And after that, if they still don’t want to help you, I will.
 
Good luck.

Scott.

My Beautiful Little Tax Deduction

Hi Scott,
 
I have just been told of a way I can save more money on taxes as a sole trader that is perfectly legal and above board. Apparently I can employ my 14-year-old son on minimum wage to help me as a personal assistant, thus giving me a deduction of up to $18,500 on my taxes. I know I would still need to pay him super. I would pay that money into his account and deduct things like school fees from those earnings, effectively paying for his education, but he would pay no tax as he would be under the tax-free threshold. He would get some pocket money and I would pay less tax and also help with his school fees. This sounds too good to be true. What am I missing?
 
Natalie
 
Hi Natalie
 
What you’ve described has the whiff of tax evasion to me.

This will be like a game of pong for the ATO’s supercomputers – they’re likely to hit you eventually.
 
So all I can say is be ready: you’ll need the appropriate work contracts, documented hours and specific jobs, plus a payroll system and super payments.
 
The tax office says: “There are heavy penalties for taxpayers that deliberately attempt to gain an advantage of the tax system. This behaviour can lead to criminal prosecution.”
 
Is it worth the risk?

Scott.