Ask Paul: I followed your advice in 1997 and look where it got me


Gerard: Dear Paul, I followed your advice in 1997 on a Money TV show that year.

It was to invest $2000 in four shares: CSR, NMW and Lendlease, and I don't remember the last one.

I still own Lendlease but out of these four shares only one went up and up and up. I started with the $2000 and you can add two zeros these days, thanks to you.

paul clitheroe money magazine savings owe financial independence

Now my question is: I'm 66 years old, retiring next month with $200,000 in super and $200,000 in shares, mainly small caps, which don't give many dividends.

What should I do?

Paul: An excellent example of why I have always encouraged diversification, Gerard.

Despite my best efforts and a strong team of analysts who help me, the simple truth is the future is uncertain.

My portfolio is the same. A few shares, sadly, do poorly, most do pretty well and a few are superstars.

Anyway, I am delighted to hear that you can add two zeros to the money you put into shares.

We are similar ages - I am 62 this year - so we are in the same boat. My thoughts would be to better diversify as you get older, as I have done.

The risk of major losses is not a good idea as we hit retirement. You hold mainly small-cap shares in super and your portfolio.

As your super becomes tax free when you retire and convert to a pension, I'd suggest spreading your risk and adding some of our major companies that pay nice dividends.

I do love getting franked dividends into my super fund as, like you, I get the franking credits back in cash to my fund.

So an investment in many well-known companies is returning me income of around 7%, including the franking credits.


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.
Post a comment
Link to something vek5ICH5