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Gambling on Telstra

Against all better judgement, I put all of my meagre savings into Telstra. Should I hang on for a bit? I've been with the shares for a couple of years and am getting mixed messages from the experts. I'd appreciate your guidance, if that is within your charter. I'm a retired serviceman now on a pension.

This is a question that must be vexing over a million Telstra shareholders right around the country.

First up, I have to say that I am concerned that you have all your savings in one share but you did say they were “meagre”, so I don’t know how much we’re talking about. Generally, you shouldn’t put all of your eggs in one basket but I can understand why someone on the pension who doesn’t have a lot of savings might try a Telstra play, but it’s risky and I would not recommend it to others.

That said, Telstra pays a good dividend over eight per cent but this might not last for long. Martin Lakos of Macquarie said the proposed $11 billion Telstra would get under the NBN deal will help it keep paying a healthy dividend but a CEO could change that convention.

On the other hand, David Tudehope, the CEO of rival telco, Macquarie Telecom, thinks a new Telstra, post-NBN, could be more nimble, innovative and capable of doing well as a changed organization.

Julia Lee from Bell Direct tipped Telstra at $2.92 but sold out at $3.33 after the NBN deal was announced. She is a short-term trader but she did tell me that she thought Telstra does look interesting, which was meant to indicate she had a tentatively positive outlook on the company.

Joe Youssef from Bell Potter in WA also had that view but he was worried about the transparency with Telstra. Throw in the election and the fact that an Abbott Government would kill the NBN deal and you have confusion and complication that makes it hard to be confident about the stock.

If it were in a portfolio of 20 stocks, where your wealth was only five per cent exposed to a shock Telstra development, I would say this is a hold stock all day, everyday but as the one only stock with all your savings, I have to say you are gambling.

It’s a bit like a red hot favourite in a horse race and you are betting for the place but certainties can get beaten.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: 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. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Monday, July 05, 2010

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