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.

ask paul clitheroe where to invest

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.


Paul Clitheroe AM is a respected financial adviser and Money's founder and editorial adviser. He is chair of the Australian Government Financial Literacy Board, and author of several personal finance books. Click here to email Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section.
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