The Big Purchase

Hi Scott,

My little boy’s ‘Save’ jar just got emptied for this little beauty! He paid for it with six months of chores plus selling some old toys on Gumtree — a ‘Money Challenge’ that was in your book The Barefoot Investor for Families. He managed to save $143 in small change, which he counted out to a very patient store manager.

It took a whole day for him and his dad to build, and it sleeps next to his bed with its own special blanket. (We are now slightly worried that he is calculating the cost of other household items to sell for LEGO.) He has blown us away with his tenacity to work for the three jam jars.

Thanks, Scott!

Gail

Hi Gail,

Look at how proud this little guy is!

Can you imagine the swagger of having $143 in his pocket? He’ll never feel that rich again, right?Awesome!While we’re all stuck at home (particularly here in locked-down Victoria), there’s only one thing better than going ‘Marie Kondo’ and turning trash into cash … getting your kids to do it.

Thank-you for reading,

Scott

Kochie Gets Into Bitcoin?

Hi Scott

I have always liked David Kosch … and now he appears to be advertising Bitcoin trading. The ad promises, like other get-rich-quick schemes, instant wealth. My question is, though Bitcoin has recently crashed, is it OK now as the ad is saying? Could you advise me on a $500 investment with Bitcoin in this lousy viral climate?

Gill

Hey Gill,

Two things: firstly, it’s David Koch … and, secondly, the ad you’ve seen is a scam. 

It has absolutely nothing to do with Kochie, or Bitcoin for that matter. I know this because scammers have used my name and image in the past. And right now they’re using Dick Smith in their ads quite a bit too. 

They can afford to plaster these ads right across the internet because (a) they’re obviously not paying talent fees and (b) they’re making out like bandits — literally! — making millions of dollars ripping people off.  

Stick to the Sunrise Cash Cow. 

Scott

Mortgage Wars

Hi Scott, 

After reading ‘Mortgage Month’ in Step 3 of your book, I apprehensively (as I avoid confrontation) called the bank and stuck to your script. Our rate was dropped from 4.03% to 2.74%, no questions asked. I shared this idea with my sister (single mum with mortgage, whose employer just announced her contract will not be renewed). Her rate dropped from 4.1% to 2.94%. A teary (because those bastards charged us so much for so long) and heartfelt thanks from both of us!

Sarah

Hey Sarah,

Sweet as! 

If there’s one thing you can do when you’re stuck at home, it’s to get a better deal on your home loan. The big four banks have all been reducing their basic variable offerings to around 2.7%. They’re really slugging it out on fixed rates -- though I’d stick with a variable rate.  I had a window-shop this week and saw three small lenders were offering deals below 2%. I have never, ever seen rates this low. Time to get the banker off your back!

Scott

I Turned $30,000 into $900,000 — Now What?

Hi Scott,

Many years ago when I was single I invested $30,000 into Apple shares, and this has grown to just over $900,000. I have a young family, and a mortgage, and due to COVID my work has dried up. My big worry is that holding so much of Apple means all my eggs are in one basket. I have a ‘glove puppet’ argument in my head, with one puppet (Warren Buffet) telling me Apple is a great business and to never sell, and the other puppet panicking about the need to diversify. It does not help that Apple shares are rocketing! Should I take my profits and diversify, or am I suffering from FOMO?

Dennis

G’day Dennis,

You think you have FOMO? I bought my first iPhone way back in 2007. If I’d spent the money on Apple shares instead, I’d have $20,000 today.

Here’s a way to think about your question: if I gave you $900,000 right now, would you invest the lot into Apple? Only you can answer that, but I’m guessing your answer might be “probably not”.

Yes, Warren Buffett is a big fan of Apple, saying “it’s probably the best business in the world”.

His company, Berkshire Hathaway, owns 245 million shares in Apple, which makes up a staggering 43% of the Berkshire portfolio. (Fun fact: his Apple shareholding has increased in value by $40 billion since March. Funner fact: Buffett traded his old-school flip phone for an iPhone … last year.) 

However, despite Buffett’s love for Apple, there’s a reason he’s decided to put his wife’s entire estate into a simple index fund — to stop what you’re going through. Life’s too short for imaginary arguments with glove puppets!

Scott

I’m in trouble with Racial Discrimination Act, apparently

Last week’s column on gold generated a lot of, well, gold in my inbox.

Like passive-aggressive Paul:

Hey mate,

You ramble on with such garbage. Who has time to read your anecdotes?

Paul

Obviously not you, Paul!

However, by far the shiniest nugget came from a woman who threatened to dob me in to the feds ...

You’re a Misandrist, Barefoot

Scott,

You really do have a way with you to regularly throw backhander insults at mainly ageing, bald white males. Last week you wrote: “Secondly, you’re 71, mate — where are you getting your income to pay for things from?”

Really! Be careful, young Scott — although not so young anymore — for one day you too will be 71 and some cocky young person will make a mockery of you and the money you have made. Please stop being ageist and misandrist in your writing or you may find yourself in court charged with an offence under 18C(1)(a). 

Your otherwise useful Barefoot Investor book, which I have bought for my teenage grandchildren, is littered with similar offensive, misandrist, ageist statements. They need to be removed. 

Karen 

Hi Karen (well, that’s the name I’m giving you),

Thank you for writing, and for teaching me a new word/insult:

‘Misandrist’.

At first I thought you were calling me a citrus fruit, but then I looked it up in the dictionary and found that it means “a person who dislikes, despises, or is strongly prejudiced against men”.

Boom!

I’ve been called many things, but never a misandrist!

It was news to my wife, who in the past has complained that I “spend far too much time in the shearing shed”.

(Click go the shears! The truth is that white, wealthy, middle-aged men — of which I’m one — screw most things up when it comes to finance. Really, how often do you hear about conwomen?)

Anyway, thankfully my counselling studies (and now practice) have helped me understand, appreciate and connect with people from different backgrounds at a much deeper level.

Even you, Karen.

You’re totally entitled to feel offended, to insult me, to even threaten me with the Racial Discrimination Act.

Heck, I’m publishing your complaint about me to millions of my readers!

However, I stand by the quote you pulled out:

The fact is that a 71-year-old (Jimmy, who described himself as an ‘old, and not a very bright bugger’) was considering investing in gold, which pays no income.

So I asked a very simple question: “Where are you getting your income to pay for things from?”

Questions like this are universal, and it’s my job to ask them.

Tread Your Own Path!

The 12-Year-Old Miner

Scott,

My 12-year-old son wants to become a Bitcoin miner. He wants to purchase a special device for $120 and believes he will earn around $30 a day. We have researched online and based on the power consumption of the unit, he will be lucky to make even $1 a day, as the difficulty level is extremely high. What is your opinion of Bitcoin mining ? Is it worth the effort or expense? I am more worried about the risk of the house burning down or having our computers hacked. 

Bec

Hi Bec,

A dollar a day is maybe on the high side … however if my kid was more interested in Bitcoin than, say, Fortnite, I’d be mining that hobby for everything it’s worth. So double down on antivirus software, keep a fire extinguisher at the ready, and HODL away!

Scott

Crash Landing

Hi Barefoot,

My wife and I live in regional Australia, earning good dough. Our problem is our rental in Brisbane. Our tenants (no problem up to this point) have been stood down due to COVID. He is a pilot and the main income-earner for his family of six. For the past three months we have discounted their rent by 50%. They have just come back requesting a further discount period because he is still on stand-down. Shouldn’t they have their finances sorted so that my wife and I are not subsidising their lifestyle? Or do I show a level of compassion and continue with discounted rent on the basis that some rent is better than zero?

Gary

Hi Gary,

You seem like a good bloke. Many landlords haven’t been as generous as you, judging by a report out this week from Better Renting which found that fewer than 10% of tenants who asked for rental relief received a satisfactory discount. Yet, if I were you, I wouldn’t simply approve their request for a further discount period.

Instead I’d write to them explaining that the fairest thing you can do is give their family time to make some tough financial decisions. Nominate a certain date you’re willing to give them to make that decision, and, importantly, spell out the amount that this will cost your family. At that date they need to come to you with an acceptable offer, or move out.

Scott

I Used My Mojo to Buy a $10,800 Handbag

Hi Scott,

I am a long-time Barefooter and, overall, have made money decisions I think you would be happy with: I have a good job ($110,000 a year), have paid off my bad debts, have started maxing out my super, own my car, pay extra on my mortgage, and have started a share portfolio. Most importantly, I have three months of Mojo — until yesterday, that is, when I walked into a Chanel store and bought a flap bag for $10,800 (my 38th birthday present to myself). I’m giddy with happiness and anxiety all at once. This is a classic bag I will have for life. Chanel raises their prices each year (it cost $6,000 five years ago), so I will never lose money on resale. Yet I also feel sick as it is an enormous amount of money — am I insane?

Elisha

Hi Elisha

So I learned something this week: handbags are an investment.
In fact, research from Knight Frank found that, over the last decade, handbags have more than doubled in value.

Well, not every handbag. (Liz’s is like a lucky dip to another world: you can pull out half-eaten crumbly cruskits, a hairy hairclip, a Wiggles concert ticket from 2018, but never the ringing mobile phone that she’s desperately searching for.)

Elisha, you seem to have worked hard to get your financial life in good shape. And if the bag makes you “giddy with happiness”, well, that sounds like a good purchase to me. You may as well enjoy it!

The only thing I’d say is that you raided the wrong bucket: it should have come from your ‘Smile’ bucket (the savings account for longer term purchases that will put a smile on your dial). 

Having a well-stocked Mojo bucket is not nearly as flashy as a Chanel bag, but it will give you the inner confidence to face any financial fires coming your way.

Scott

Should I Buy Gold?

Uh-oh.

I’ve caused a fight with Jimmy and his missus.

All the poor bloke wants to do is to buy his lovely wife some gold … but it turns out she’s not having a bar of it.

Take it away, Jimmy...

Hi Scott,

I am old (71), and not a very bright bugger. I only know one thing: that my wife drives me up the wall because she regards you as her financial guru. I have tried to convince her that gold is a safe and profitable investment. She does not believe me, as you apparently take the Warren Buffet view that gold is not a good investment. Have you changed your opinion as the price of gold keeps skyrocketing daily?

Jimmy

Awesome question!

Yes, you are right, I’ve previously written that I don’t invest in gold, and since then the price has risen spectacularly.

Yes, the price could go much higher as the boom takes off and speculators chase higher prices.

So to your question: have I changed my opinion?

Not at all.

Let me explain:

The possibilities for investing your money can be overwhelming. There are more fads in finance than there are in fashion, and there’s always something more exciting to invest in: Bitcoin, shares, bonds, infrastructure, private equity — and of course gold and other precious metals.

So, I’ve come up with a simple, time-tested rule for deciding where to invest my money:

I only invest in things that regularly put money back in my pocket.

Chief of which are companies that pay dividends and properties that generate rent.

And that’s the rub: gold doesn’t generate any income. Which means that the only way you can make money is by hoping the price goes up, and then selling.

Yet that’s not how I invest. I actually don’t focus too much on the price of my shares, because I know that share prices can — and often do — move around quite dramatically in the short term.

So what do I focus on?

The dividends that are sent to my bank account four times a year. 

And, over the long term, owning a portfolio of businesses is the best way to not only safeguard your wealth but grow your income faster than prices rise.

A study by Wharton finance Professor Jeremy Siegal found that if you had invested $1 in gold it would be worth (approximately) $3 today. Yet if you’d invested that $1 in the share market in 1802 it would be worth $1,033,487 today.

That’s not to say that gold isn’t having an amazing run: it’s up 80% since its lows of 2015.

How long will it continue?

I have no idea — and no-one else knows either. But I think that’s the wrong question to ask.

Here are three better questions for you and your wife to ask yourselves:

Firstly, are you buying gold because you’ve got FOMO from watching it go up each day?

Secondly, you’re 71, mate — where are you getting your income to pay for things from?

And, finally, what would you do if gold went down 30%? Would you start panicking and sell at a loss?

If I watched my shares go down 30% (and I did, a few months ago!) I’d grin and bear it, knowing that my dividends were still rolling in.

Tread Your Own Path!

The Broke Accountant

Hi Scott,

I am a single parent of two kids and, financially, I am hemorrhaging. I have been trying to domino my debts for three years, often paying off too much and leaving myself struggling (then ending up in more debt). I have multiple family debts and multiple payday loans that end up costing me a fortune to repay. I have accessed my super twice in the last five years, and have only $9,000 left in super. But here’s the kicker: I am a qualified CPA accountant — I should know better.

Jane

Hi Jane,

That must have felt good to get off your chest, right?

Well, I’ll let you in on a dirty little secret: I know a couple of financial pros who are broke. I also know a doctor who smokes, and a manic-depressive motivational speaker.

Look, let’s be honest, going to school and learning how to read a balance sheet doesn’t stop you from ordering $50 worth of UberEats instead of cooking a $5 spag bol. Managing your money is about your behaviour and the story you tell about yourself. Which for you currently is, “I’m a fraud, and I’m ashamed of myself, and things won’t get better.”

It sounds like your life is out of control.

And you know what?

As long as you believe it, you’re right. Your life will continue to spin out of control, and you’ll end up bankrupt.

So you need to find a new story. For example, you could say to yourself, “I’m an educated single mum raising two beautiful kids. I’ll do anything for them. No one messes with my family.”

You Got This. 

Scott

Life-Changing Money

Hi Scott,

I am currently listening to a crowd who are selling a trading program to get into ‘call’ and ‘put’ options. I do not understand a thing about the stock market, and do not have a lot of time to sit in front of my screen watching the stock market to earn “life-changing money”. But in this tragic time, where people are dying worldwide, is options trading something I should look into?

Terry

Hi Terry,

No, it’s not.

Scott

Nor Way! My Mother-in-Law is a Thief!

Hi Scott

We have had a bit of a shocker the past few days. My mother-in-law, who was visiting us from Norway, was arrested for shoplifting. We thought it was all a misunderstanding over a jar of manuka honey but, shockingly, she later admitted it was deliberate as she “didn’t feel like she’s worth much”. She also shared that she had incurred a huge debt (AU$1.7 million) on a bad business deal. She is 54 and is super-fit and organised, but she has not worked full time in a while and her main source of income is renting out rooms in her home, plus government handouts.

With my daughter-in-law hat on, I tried to encourage my husband to get her to see a counsellor. And, with my Barefoot hat on, I suggested she could sell an apartment she has that is worth $1 million. (She refuses to downsize from her main home as she is very attached to it.) Most importantly, I suggested she should get a job — any job! — because, aside from the financial upside, it would give her some purpose and a social life. But my husband tells me “she won’t get her government handouts” if she does. ARGH! What would be your 2 cents’ worth on all this?

Lexie

Hi Lexie,

Oh, I would be staying the hell away from this.

It sounds like your mother-in-law needs to sit down with a counsellor to help with her mental health.

If I were in your shoes, I’d encourage her to make an appointment with her GP, or call Beyond Blue (1300 224 636).

They’re qualified to deal with her situation, and they can refer her to a free financial counsellor.

Just understand that if she doesn’t want to get help then there’s nothing you can do. So, after encouraging her to see a professional, that’s exactly what I’d do: stay out of it, not lend her any money, and support your husband. That’s my 2 cents!

Scott

Are You Like Chickens?

Working from home is great.

Until you want to get any work done. Then it’s the worst.

My almost-three-year-old daughter has taken on the role of my annoying interrupting coworker — so much so that we had to put a kiddie rail at the bottom of the stairs to stop her coming up to my office.

But that just made it more fun.

This morning she MacGyver’d over the rail, raced up the stairs, burst through the door, and — now completely out of puff — blurted out: “Are you like chickens?”

Huh? As in for dinner tonight? Or in general? Or wait … are you trying to psyche me out?

She didn’t say, and began rolling around on the floor, staring up at the ceiling.

Good chat.

This, however, was far from the only nonsensical thing that happened this week … let me tell you about a few.

Let’s start off with my Barefoot inbox. Questions flood in from people all over the country, giving me a good insight into what the man on the street in a mask is thinking. 

You’d think that people would be asking about COVID, JobKeeper or JobSeeker. 

You’d be wrong. For the past few months the questions have been dominated by how to buy and trade stocks. And, with gold hitting fresh highs, people are now asking me about how to buy that too.

Next, there’s my day job. As a volunteer financial counsellor, you’d think I’d be run off my feet, with so many people out of work.

You’d be wrong. Last year our agency would get a dozen calls a day from people in financial crisis … yet at the moment the phone barely rings. There’s a certain financial pain-point people need to get to to seek out our services. The government stimulus has largely — though temporarily — taken that away.

The final nonsensical thing I came across this week was when I went to pick up some photos of Mini-MacGyver from the local camera shop.

The owner confessed that last year he’d been thinking about shutting up shop. Things were that tough. And then came the lockdown. You’d think he’d be struggling to stay afloat.

And again … you’d be wrong. Instead, something weird happened. “I’ll be blowed”, said the owner, “but since we came out of the first lockdown the shop has been going absolutely mental … our sales are through the roof! In fact, I don’t think we’ll qualify for JobKeeper this time around because our figures are too good.”

“People are buying cameras in Sicktoria?” I enquired. “To shoot what? The inside of their homes?”

He shrugged his shoulders.

“So I’m thinking I’ll spend a bit on doing the shop up ... I reckon things have turned the corner”, he said, smiling.

Maybe … or perhaps the $42 billion raid on super, combined with the government stimulus, has served as a short-term sugar hit. We may not have found a vaccine, but plenty right now are double-dosing on retail therapy.

Tread Your Own Path!

From the Depths of Despair

Hi Scott,

Not a question. I just want to say THANK YOU!

I know you receive hundreds of messages like this, probably each week if not each day, but I just wanted to share my experience of going Barefoot. At 31, having been married the year prior, I sat in my GP’s office crying my heart out, feeling suffocated by my $27,000 debt, feeling depressed like there was no way out. My GP listened to every word I said (in between sobs) and finally said, “I think we need a longer appointment”, and asked me to come back the next day.

Around that time a friend had suggested I read The Barefoot Investor. I had of course scoffed at the suggestion, but that day I decided I needed something, anything, to help. I read the book cover to cover in a day and felt so empowered that I began to draw my buckets and to have the conversation with my husband.

Two-and-a-half years on, I never did rebook that appointment! My husband and I are completely debt free! We own (outright) two cars, have had a baby, have been on a four-month holiday overseas, have saved $40,000, and are ready to buy our first home. Thank you, Scott. You will never know what your book did for our family.

Nikki

Hi Nikki

You bloody ripper!

In the sea of doom and gloom and depressing news, I’m craving good news stories, and hope — and that’s exactly what your story offers people.

You Got This! 

Scott

Hell’s Kitchen

Hi Scott,

My wife and I are in our early 30s and are both nurses. She has decided she wants to put our money into starting a restaurant. I think it is a terrible idea, considering our lack of experience and the low success rate of restaurants. Please help me change her mind!

Gary

Hi Gary,

Order up!

I suppose your wife could argue that she’s being “greedy when other people are fearful”, as Warren Buffett says.

Though I couldn’t see Buffett investing his money into a start-up restaurant right now.

After all, figures from Treasury estimate that 441,000 jobs will be lost in the hospitality sector, and the industry’s peak body is warning that 20% of restaurants could go down the gurgler.

In reality, the industry was already struggling before the pandemic, as a result of fair work compliance off the back of high-profile wage theft cases. Most small business people buy themselves a job. Many restaurateurs discover they’ve been served up a shank sandwich.

My thoughts?

You’re both in one of the few pandemic-proof positions — nursing — so I wouldn’t be leaving it.

However, if she’s determined, why not suggest she work evenings in a restaurant for the next 12 months? She can think of it as a paid internship. It’ll give her an entree to the industry, and she’ll get to see just how hot it is in the kitchen. I’d say it’s the best way to work in a restaurant and come out ahead over the next 12 months.

Scott

Issue a Retraction, Now!

Hi Scott,

Firstly, love your work. You’ve changed our financial lives in a significant and very positive manner. But secondly, and more importantly, I hate to tell you but your article about weighted blankets is actually very risky. Weighted blankets are something that typically are only prescribed by occupational therapists and are not to be used while sleeping.

There have been many cases of people (particularly children) suffocating when these have been left on. As an occupational therapist myself, I would never recommend using one for sleep (it can be used as an aid to fall asleep but MUST be removed). Additionally, the weight should not be more than 10% of your body weight. So if a small person (or child) is given a 10 kg blanket, as suggested last week, the risk of suffocation is much higher.

May I kindly suggest retracting your column, or sending an additional disclaimer!

Yours in safety,

Ruth

Strewth, Ruth!

It’s bad enough that each week my finance column has to be vetted by lawyers (for disclaimers and defamation).

Now you’re telling me I have to worry about giving blanket statements … on blankets?!

In my defence, I was writing about my own experience as an adult and not suggesting you give them to your kids.

(Then again, with three kids under the age of seven, maybe tying them down a little so they don’t always end up in our bed doesn’t seem like such a bad idea …)

“Strike out that last line!” warned the lawyers.

“It was written in jest!” I pleaded.

Yet point taken, Ruth. You need to be careful with these blankets, especially if you’re a kid (or a supermodel).

Seriously, though, fair suck of the sav: surely no one takes my advice in the bedroom, right?

Scott

The people who are really getting screwed in this downturn (it's not who you think)

My editor emailed me with a request on Thursday:

“Can you do a piece on the Treasurer’s economic update to the nation?”

My answer?

Sure, and I can do it in one line:

“The Treasurer is throwing the kitchen sink at COVID like there’s no tomorrow.”

The rub, of course, is that for most voters there aren’t that too many more tomorrows left … especially those who read the newspaper!

So today I thought we’d talk about the people who are really getting screwed right now.

People like 17-year-old Louise, who sent me this question:

Hi Scott, I've been reading The Barefoot Investor as I am interested in kick-starting my financial freedom. However, I am only 17, and about to graduate, so I don't have a strong income. I am slowly working towards setting up the different bank accounts but I am having trouble with the advised percentages for each. Any advice on how to get ahead?

Yes, Louise is still a kid. She’s not old enough to vote, but she’s young enough to spend the rest of her working life paying off the multi-billion-dollar promises our politicians are making today.

Thankfully, the concept of shouldering an unfair amount of future government debt isn’t high on her priority list.

Louise is more focused on the here and now — and with good reason: her age group has been the worst hit in this crisis, with a staggering 44% of the jobs lost this year belonging to 15-to-24-year-olds.

Now, Louise, here’s the thing: our lives are shaped by our experiences, right?

My generation’s experience has been 29 years of non-stop economic growth, falling interest rates, and rising house prices.

Yours will be different. 

As you grow up and get the keys to the (err) Uber, you’ll be starting your working life at the bottom rung of the employment ladder, leaning up against the worst economic downturn in a century. 

Fact is, every generation must play the hand they’re dealt, and you just got a Joker (Donald Trump).

Contrast this to your parents and grandparents, who’ve enjoyed the greatest economic boom in history.

Lucky buggers, right?

Well, maybe. However, the irony is that this long boom has softened people up. It’s allowed them (well, many of them) to paper over their financial mistakes. And, as a result, many older Aussies have never had to learn much about managing their money.

You will, though.

You won’t have a choice.

Yet thankfully you’re two steps ahead of most people — you’re asking the right questions while you’re still a teenager. So don’t fret about the percentages; you’re already on the right track by setting up your savings buckets. What that tells me is that they’re going to fill up. It’s only a matter of time — and you’ve got plenty of that.

And if all this doom and gloom is getting you down, know this: the last generation that encountered genuinely tough times was that of your great-grandparents, who lived through the Depression. The tough times hardened them into one of the greatest generations in history.

Tread Your Own Path!

He’ll Be Okay

Scott,

You recently wrote about a father who was having problems with his son’s attitude. Sounds familiar. My youngest did average at school, played at uni for one semester, then sat back on his 10-hour-a-week checkout job. Despite lectures on my part, nothing changed — and I kept bailing him out. My husband and I wanted a different life, so we sold the big acreage house and bought a beautiful penthouse by the sea. We love it. My son had to move out, and he was livid for quite a while. But guess what? He is now 21, has a full-time job, rents a room in a share house, pays his own bills, is paying me back the money he ‘borrowed’, and has plans for his future. Now he shouts me lunch.

Juliet

Hi Juliet,

I actually had a lot of parents write to me this week sharing similar stories. It taught me a few things:

First, most kids learn more by fending for themselves than they do from well-meaning lectures.

Second, tough love may not feel good at the time (my parents threatened to change the locks after I moved out), but 20 years on they’ll thank you for it.

Finally, as a parent, you’re only ever as happy as your unhappiest kid.

Scott

Should I Get a Marginal Loan?

Hey Scott,

There is a lot of uncertainty at the moment and share prices (particularly for the banks) are very low. So I thought of getting a marginal loan for $100,000 and dropping an even spread across the Big 4. It seems a good idea to me, but you warn against it — so is there never a good time to get a marginal loan?

Xavier

Hey Xavier,

A ‘marginal loan’ could be very … marginal.

What you mean is a margin loan, where you borrow to buy shares, using your share portfolio as collateral.

But beware. If the shares go down in value, you’ll get a ‘margin call’ from the lender demanding that you put up more money … or they’ll sell your shares from under you, leaving you with potentially large losses.

Granted, in March as the stock market hit its lows, in this column I urged people to keep buying shares (which the Daily Mail ripped off and ran with the headline: “The Barefoot Investor’s warning on why young people should buy shares NOW”).

Since then, the share market has risen significantly, while — in my view — the economic conditions have got much, much worse.

Bottom line?

I would not be borrowing to invest in this market.

If you do, get ready for some sleepless nights that not even a weighted blanket can help you with.

Scott

Help! My Boyfriend is a Swinger

Hi Scott,

My boyfriend is interested in ‘swing trading’. He saw it on Facebook. He says you give them $100 and then you get $1,000 back in seven days. I think it is a scam and not a healthy way to manifest income. However, I have this bias because I hate get-rich-quick schemes. Would you please explain what it is and whether it is worth it.

Belinda

Hi Belinda, I’m with you — it’s a scam.

However, if he’s not going to listen to you then I think it’s worth encouraging him to go through with it.

Think of it this way: your boyfriend will get a real-world, lifelong lesson in greed and stupidity.

And all it’s going to cost him is $100?

Sounds like a good deal to me. Just let him know that I think he’ll probably lose a lot more than $100.

Why?

Well, firstly, because he is GIVING MONEY TO A CRIMINAL.

And, secondly, because the scammers fishing on Facebook may bait their hooks with $100, but their real aim is to reel in thousands of dollars from their victims ... and they’ll use whatever psychological tricks they can to extract more money. They may let him nibble on a bit of shrimp, but he’ll end up in a deep fryer eventually.

Sounds like a swinging good time, right?

Scott