A couple who spend their lives on the high seas need a safe harbour for their investments
NAME: Jody Bedson
STATUS: Married, retired and sailing around the world.
QUESTIONS: Where do I invest $100,000 in a conservative but high-return portfolio? Should I cull or add to my existing shares?
ANSWERS: Keep your investments simple and place your extra money into AustralianSuper, where investment earnings are tax free and you can draw it down when you need it. Sell your shares and invest the money in AustralianSuper so you won’t have to keep an eye on how they are performing. But if you want to keep the shares, consider cutting back on banks and retail stocks.
Seven years ago, Jody and her husband flew from Melbourne to Florida and bought a 13-metre ketch built in 1980.
“In two weeks we bought the perfect boat,” says Jody. The couple, in their early 50s, named it Blue Pelican and set sail for the Bahamas.
After 30 years in corporate life, they decided to sail the world while they were still young and able.
“Over the past seven years we have lived a simple life on our sailing vessel and are continuing our circumnavigation this year,” she says.
How can they afford to stop working? It is a clever strategy of not needing too much money and living off the rental income from their apartment.
“We just don’t spend much and we are very content. We used to spend so much money but now our priorities are different,” says Jody.
They sailed throughout the Bahamas, in the Caribbean, up the east coast of the US into New York harbour past the Statue of Liberty, past Guatemala, Jamaica and Cuba and backpacked through five Central American countries.
They transited the Panama Canal and for 39 days saw no one at sea before reaching French Polynesia, then sailed across the Pacific to Brisbane.
They sold their apartment and built up their account with AustralianSuper, drawing down a pension of around $4000 a month.
“We are really happy with AustralianSuper. You can see it all online and usually talk to someone pretty quickly,” she says.
They are now setting sail for Asia and then Suez and the Mediterranean. Jody has inherited shares worth about $50,000 that include BHP, CBA, Centuria Industrial REIT, Healthscope, NAB, Origin, Sonic Healthcare, Telstra, Wesfarmers and Woolworths. Do they need culling? They have around $100,000 to invest.
“I was going to buy more shares but the world is so volatile, I thought I would sit on them and watch a while,” says Jody. “It’s important to me not to take on too much risk.”
They would like a set-and-forget investment but be able to access the funds within three months if necessary.
“We may retire in Asia or Mexico. We don’t know.”
Diversify to reduce risk, says James Carlisle, research director at Intelligent Investor and author of Value: Intelligent Investor’s Guide to Finding Hidden Gems on the Sharemarket
It’s great that you’re making such good use of the wealth you’ve built up but remember that it’s got to last. Life expectancies are increasing and you could be in for a lot of sailing!
I’ll leave the overall wealth advice – including the vehicles through which to invest – to others and stick to the share portfolio.
It’s generally best to have at least a dozen stocks (probably more) to provide diversification, so on its own this portfolio will probably be a bit too concentrated.
It’s not just about the number of stocks but their percentage weighting. Held equally, they’d each be 10%, which is high, but if any are well above this then it could bring in a lot of risk.
There might also be significant sector concentrations. For example, we recommend keeping your overall bank exposure below 20%, or closer to 10% for conservative investors. With both CBA and NAB, you could be well above this. Having both Wesfarmers and Woolworths might also leave you overexposed to retail.
However, you have to consider all this in terms of your overall wealth. If the portfolio is only a 30th of your total net worth then even a 30% weighting in this stock portfolio would only translate to 1% of everything taken together.
Bear in mind, though, that your other equity investments could have similar concentrations, particularly in the banks.
You should think about it altogether to get an idea of your overall exposures.
It’s also worth noting that all these are Australian stocks. Given that you’re considering retiring abroad, it will probably make sense to have plenty of international exposure, so check to see that you’re getting this from your other investments.
You could use the extra $100,000 to fill in the gaps and broaden your diversification.
It’s true that stocks can be volatile but over the long term they tend to provide higher returns than bonds and cash.
Having retired early, you need to keep a long-term focus. Property may also be a good option for getting specific exposure to a particular country if you’re serious about finally settling there.
In terms of the actual stocks, we have “hold” recommendations on them all, except Centuria, which we don’t cover. Sonic Healthcare, Wesfarmers and Woolworths are close to our buy prices, while Telstra is getting towards a point where we might sell.
Bear in mind that price and value will move about, and our recommendations will change over time. That needn’t worry you unduly. Good investing is generally lazy investing – too much activity often does more harm than good.
The less balanced your portfolio is to begin with, though, the more quickly it could get more unbalanced. If you’re going to go months without looking at it, then you’ll probably want to consider either a fully passive strategy or finding someone to manage your portfolio actively.
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