Ask Paul: What should we do with $650k in CBA shares?


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Q. My husband and I are retired (69 and 67). We have a SMSF which comprises $650,000 in CBA shares and $615,000 in fixed deposit.

I have $80,000 in VicSuper and AustralianSuper. We also have shares in two apartments outside super. These generate only about $5000 each.

Our dilemma is whether the shares are going to continue to pay a decent dividend and fixed deposits to pay nothing.

ask paul clitheroe cba shares

We are contemplating keeping the shares, as it is too late to sell at a profit, and putting cash into an industry fund. Is it practical or viable to run two funds paying two sets of fees.

Or should we sell shares, cut our losses and put the whole lot in an industry fund.

We are sick of worrying over the whole issue of superannuation and its complications, and also paying for advice where everyone has a different opinion. But while we are procrastinating we are not generating enough income. - Glenda

A. Crikey, Glenda, you are more punters than investors - 50% in one share and the rest in a term deposit is not the way to go.

And you are paying high SMSF fees to hold two investments. I also note you are worried about this. I would be too.

If my wife Vicki and I were in your situation we would shut the SMSF, after taking advice, and put the money in a very low-fee balanced fund, giving us a terrific level of diversification, very low fees and little worry.

Your accountant will hate the idea - he or she will lose fees, so they are hopelessly biased. See an independent person.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Click here to ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. Please view our disclaimer here.
Peter Ralph
September 12, 2018 5.45pm

In terms of the number of shareholdings, Charlie Munger (Warren Buffet's long term partner) says that three investments is more than enough diversification and Buffet defines diversification as deworsification. They both subscribe to the view of having few investments but knowing an awful lot about them.
A low fee balanced fund will not give you a much better return than buying the index and possibly worse. Buffet's will provides: "Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund." The numbers support Buffet. According to Morningstar, the Vanguard 500 Index has beaten 70% of the funds that buy shares in large U.S. companies.
My question is: What are your SMSF fees? Surely, only accounting/audit fees as with two investments you couldn't/shouldn't be paying for management or investment advice.
This is not a criticism of Paul's advice, just an alternative view.

October 6, 2018 6.32pm

It seems like a very high price to pay for managing something basic.

Since Buffett was mentioned, he did prove that a low-cost managed fund which merely tracks the top companies is likely to do better than a more "hands-on" and more expensive service. And you get to diversify across all sectors - not just banking - which means you're not putting all your eggs into the one basket.

Paul and Warren both come across as giving simple, down-to-earth, common-sense advice. And that usually wins out in the long run.

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