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.
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.