My Husband Knows Best?

Scott,

My husband is wanting to create a self-managed superannuation fund, and wants to put 80% of this into the stock market into high-risk assets that are US listed, with high volatility, mostly tech and crypto correlated. My husband and I have never put money into the stockmarket and do not know much about it, other than what my husband is learning from the people encouraging this. They are even suggesting which assets to invest in. They are promising that he will be able to create ‘intergenerational wealth’ through doing this, which has him excited. My husband and I have no savings, and have not put enough time and energy into planning our future financially. We are both in our late 40s. I am trying to convince my husband that we need to seek independent financial advice before we make a big mistake. I feel sick. Please help!

Zara

Zara,

You know that line, trust your gut?

Your gut is working perfectly.

The people “encouraging” your husband to invest your life savings, and “suggesting which assets to buy” are salespeople (at best) or scammers (at worst). Financial experts don’t promise “intergenerational wealth” to people with no savings and no investment experience. Spruikers do.

Here’s what’s actually being proposed: two people in their late 40s, no savings, no investment experience, hand their retirement money to a self-managed fund and punt most of it on high-volatility offshore crypto-correlated tech stocks. Based on the advice of weirdos on the internet.

Is your tummy rumbling?

Mine sure is!

Your husband isn’t stupid. He’s had his greed gland rubbed by people who are very good at making this sound exciting and easy.

So here’s what I want you to do. Show him this column. Then show him the ASIC MoneySmart website and look up the people who are “encouraging” him. If they’re not licensed to give financial advice in Australia, they cannot legally tell him what to buy. Full stop.

You are not trying to kill his dreams. You are trying to save his retirement.

So am I.

My Teenage Son Thinks I’m Stupid

Hi Scott,

My 17-year-old son says I’m holding him back because I won’t let him access $1,000 of the money we have saved for him, to invest on something called BloFin. When I ask where he got this idea, he says “people”. I ask who – real people? – but I never get a straight answer. I’ve told him that if he’s that keen to invest then he can get a school holiday job and risk that money instead. That’s when I’m accused of being old-fashioned and not understanding investing. He might be right, I don’t understand crypto-style platforms. But I do understand working, saving, and not gambling money at 17. The digital world moves fast, and I know I’m behind. I don’t even trust what I read online anymore. Am I being overcautious? Or are these online trading platforms something parents should be deeply wary of? How do you guide a teenage boy who thinks the internet knows more than his mum?

Chloe

Hi Chloe,

Your son is right about one thing: you don’t understand investing.

What you do understand is that losing money hurts a lot more when you’ve earned it.

He’s 17. He’s bulletproof. He could lose the entire $1,000 and still not admit you were right.

That comes with the ability to grow sideburns.

Here’s my advice: let him lose it.

I know that sounds crazy. Hear me out.

When I was younger than your son, my first investment was something called a “special situations” managed fund. I’m fairly sure “special situations” was code for “whatever the fund felt  like betting on”.

The fund had ridiculously high past returns.

Which of course was exactly why I invested in it.

Guess what happened?

The special situations became extenuating situations. Then terrible situations. Then “where did all my money go?” situations. (I think they were big into emus at one stage.)

I lost most of my money, and it turned out to be one of my best investments. It taught me more about risk, hype and human nature than any book, podcast or online ‘expert’ ever could.

So here’s what I’d do:

Tell him he can invest the $1,000 in BloFin – but I agree with you, only if he earns it first with a school holiday job. If he won’t work for it, he doesn’t get to risk it. Simple.

If he earns it and loses it? That’s an expensive lesson.

But it’s a cheap one compared to what he’ll lose later in life if he never learns it.

The goal isn’t to protect your kids from making mistakes … it’s to make sure the mistakes happen while the stakes are still small!

The Hottest Trade in the World Right Now

Scott, 

My grandfather bought two 1kg silver bars in 1987 for $701, which was all he could afford from his savings. He’s been hiding them in my parents’ house for 39 years as an investment for my sister and me. I just found out about them, and silver’s gone bananas. Should I cash out now and move the money into stocks for better long-term growth? What’s your take on precious metals versus equities?

Nathan

Hi Nathan,

For all the things Gramps could pull out at the kitchen table (his false choppers, a laminated funeral notice for someone named Trevor, his prostate exam results) … that is a pearler!

Silver is the hottest trade in the world right now:

Until it dropped an alarming 26% this weekend, it had notched up gains of 50% this month … and that’s on top of the 145% it gained last year.

“Traders are OBSESSED with Silver”, shouts a headline from CNBC.

Alright, enough of the shouting. Let’s see what it means for you:

Gramps’ silver bars have increased in value from $701 to around $7,836 over the past 39 years.

That’s a compound return of 6.4% per year.

That’s better than a slap on the rod with a Murray cod (as my grandfather would say).

But don’t forget: you’ll pay CGT on the profit. And silver dealers charge outrageous buy-sell spreads, so you’ll lose a decent chunk to margins.

Now if Gramps had instead invested that $701 into an Aussie shares index fund and ticked “reinvest the dividends”, that $701 would be worth around $20,200 today.

More than double.

Plus, unlike the metal bars, you’d be getting a tax-paid dividend of around $800 a year which you could spend, or reinvest to compound your money.

I know what I’d do!

I’d take Gramps out for a slap-up dinner and thank him for being the best granddad in the world. A lifetime ago he invested his savings into you and kept the faith.

And that’s worth its weight in gold (or silver).