Questions of the Week – the end is not nigh

Print This Post A A A

Question: I read with concern an article in the Financial Review, and also saw on a Foxtel Fareed Zakaia Global Public Square show, that the world governments and economies are not likely to be able to come together to work out a plan of attack, like they did with the G20, should there be another financial crisis. There is also a lot of talk about a possible world depression, bigger than the biggest the world has ever seen. My SMSF is 90% invested in the ASX and US listed shares and 10% in Cash. I’m 60 in January, and although I believe I will continue to work until at least 67, albeit part-time, I’m conflicted as to what to do now if anything.

Answer (By Paul Rickard): There are several doomsayers out there. In the Australian media, you only seem to get coverage if you predict “the end of the world’ is near. They will be right one day, but we don’t agree with their prognosis.

If you are worried about your exposure and market risk, then I suggest that you reduce your growth assets, and increase your ‘capital stable’ assets, such as fixed income and cash. It is not the call I would make for my portfolio, but I don’t share your concerns about an imminent financial crisis or world depression.

Question: I have two granddaughters who come to visit to get information about shares. I gave all my grandchildren 200 AFIC (Australian Foundation Investment Co.Ltd.) shares when they were 18, and another 200 when they were 21. Given they don’t have a lot to invest (all of them being millennials), are there some LICS that are better than others for that age group? And would LICS be better for them than putting a small amount into one share? Their needs are very different to mine (I am 87 now so I am not a long-term investor). 

Answer (By Paul Rickard): I think the investment in AFIC is fine. It will give them a broad-based exposure to the market. Hopefully, it might spark an interest in the share market in the medium term.

I don’t think there are any better alternatives. I hope they appreciate your generosity.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.

Also from this edition