Ask Paul: We paid off the house, where to invest now?


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Q. My husband and I are both 46, self-employed and earning a gross wage of $43,000 each and have just finished paying off our house (valued at $850,000).

I have one Flexible Lifetime super account with AMP valued at $35,000 and another with Colonial Super Retirement Fund ($120,000); my husband has one Flexible Lifetime account with AMP ($107,000).

I also have 661 CBA shares with dividends reinvested and we have joint savings of $10,000.

ask paul clitheroe where to invest

We have three children: one who is 19 and has left home and a 17- and 13-year-old.

Now that we have paid off our home we are looking for the best way to invest our money.

We were thinking of a managed fund or something that would allow us to make regular deposits.

We do not live a lavish lifestyle and have always saved hard but have not gone without. Before our home was paid off we were making weekly deposits of $750 to it.

Are there any funds that you would recommend? - Sharon

A. It is such a big step when you pay off your home. Congratulations, Sharon, I am genuinely delighted for you.

Then your eldest leaves home, also a big step.

The first thing I would do is to combine your two super accounts into one. You are paying two sets of fees and quite possibly two lots of insurance.

Take a look at the performance of both your funds, then look at fees. If both are low fee, I'd go with the best long-term performer.

If both are high, I'd move them to a low-fee fund.

Next, I would add to super. Do check with your accountant, though, because as a self-employed person you may have various tax breaks that I am unaware of.

Finally, in the modern world there are many low-cost share funds, both listed on the sharemarket and unlisted.

I am sure Money will give you quite a few ideas but I am a bit of a fanatic about low fees, so managers like Vanguard or BlackRock, which have super low fees, do appeal to me. Take a bit of time to do some research.

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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.
October 24, 2018 7.48am

I guess there is another piece to the complex world of super - what happens if you have developed a medical condition after you start with your super fund and then decide to move between super funds (and therefore insurers usually follows as they all use different insurers)? Will your pre-existing condition be honoured if you move to a new fund and then years later need to make a claim for a medical event that occurs due to that condition?

October 24, 2018 8.30am

Hi Rad,

You do risk losing insurance through super by changing or consolidating funds.

Here is some more information on what to look out for:

- Money team

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