Ask Paul: I have $160k and no idea where to invest it
Sally: I am 45 with $160,000 in the bank and I can't decide how to invest it. I do not own a house or any other assets and I have no debt. I desperately need help to decide what to do with my money.
Paul: Well, Sally, you are in a most unusual situation, with $160,000 cash at the bank and no other complicating financial factors. It may help to consider what not to do.
Cash at the bank is super secure and a great thing to have for part of your money.
But with low taxable returns and inflation, it has historically been about the worst place to leave your money for the long term. The bank is making money on your money, but after tax and inflation you are going backwards.
As I often say, with long-term money I'd prefer people to buy the bank by buying shares in it rather than leaving funds in it.
We need to chat about your comfort levels.
We agree you need to do something and you could easily buy a share portfolio.
It is riskier than money in the bank but with much better returns over time.
Equally, depending on your job and salary, you could use this as a very nice deposit to buy an investment property.
As you look past cash, property and shares really are your two most obvious assets.
If you look back in, say, 20 years, providing that you buy either shares or property with some thought, I think you will be pleased with the decision.
My personal thought is that if you do own a home, buying shares or topping up your super makes a lot of sense. If you don't own property, I really do like the idea of you owning one and getting it paid off over time.