The question that made Paul Clitheroe break one of his rules
Q. I am a 25-year-old South Australian planning to go backpacking overseas for at least a year from April 2020. Before I leave I intend to reserve about $10,000 to help get me back on my feet for when I return to Australia in mid-2021.
I am considering placing this money in a term deposit account as opposed to leaving it in a savings account (I won't be making further contributions to it).
But given the low interest rates at the moment, I am thinking that investing the money in some kind of managed fund, trust account or mixture of exchange traded funds (ETFs) may be a better option, albeit riskier.
What do you think is the best way to save and grow this money for when I return from my travels?
Hmmm. I feel I am about to break one of my longstanding rules.
Kieren, I have always argued that any investment in growth assets, such as shares, should be for a minimum of seven years.
But you are a lad of just 25 years, full of life and enthusiasm.
I suspect that when you get back, finding work won't be a huge deal for you and the $10,000 will be left alone.
Even if you need some of it, I doubt you will need it all.
So I am going to make an exception to my strongly held views and suggest you go with the mixture of low-cost ETFs giving you exposure to Australian and global markets.
Yes, you are right, this is more risky, but any 25-year-old can afford a bit of risk!
Send me a photo from somewhere financial, maybe a stock exchange overseas or similar. I'll see if we can publish it and check how your ETFs are doing.
Have a great trip.
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