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What shares/cash ratio should we have for our assets?

My wife and I are over 80 and we would like to protect our assets by putting 85 per cent of our $1.7 million in shares and 15 per cent as cash. Should we put more into cash?

Remember, this is not advice as I don’t know your personal circumstances. Given your age and your balances, I would have a greater exposure to cash. I would say you should be 50:50 and I really wish you had asked me this question before the GFC hit!

I don’t like people running totally to cash because all of the experts I respect argue that when this stock market nervousness is over there will be a big bounce in stocks. I think there will be a rally at the end of the year but next May all of these market sell-offs could happen again if Europe has not sorted out its mess.

If missing the bounce would annoy you then you have to keep some exposure to stocks. Of course, given you have $1.7 million, you could play it totally safe and still get a nice flow of income each year but it does depend on your spending patterns.

I think lots of people in your position would play it super safe in term deposits until the worst is behind us but that means you will be gambling on your timing, which can be fraught with danger.

By the way, if you’re doing a clean out, keep great stocks that have a history of paying great dividends which means even if your portfolio falls, temporarily, you could get a dividend flow of four to six per cent which compares well with term deposits and then there are franking credits which improve the overall tax-effective return of this strategy.

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.

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Published on: Wednesday, September 28, 2011

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