What Do We Do With La Z Y $800 A Week?

Sun Herald

Sunday February 14, 1999

George Cochrane

WE have a combined income of $180,000 a year, save $800 a week and have no loans. We have $30,000 invested in a bank term deposit and we're happy to rent until we start a family. Should we diversify our investments and put some of our savings into shares and/or a mixed management fund? Also, is it advisable to borrow money to invest in shares for negative gearing? N W, Sydney THE first thing you should do is seek in-depth advice.

Talk to two or three sources, such as an accountant and one or two advisers, and come up with a strategy that you are confident is right for you.

Remember, investment strategy is an opinion, not a science. You have to be comfortable with the plan you pursue.

If you will be looking to buy a home over the next couple of years, you will probably want a deposit of $50,000 or so.

So, for the short term, keep saving for that.

The next step is to consider the long term and how to save on tax. The most obvious step is to salary sacrifice.

(Incidentally, I note that the State Government is relaxing its ban on salary sacrificing by public servants. I cannot understand, however, why Department of Education workers can salary sacrifice while Department of Health workers cannot. Perhaps it has something to do with their respective union negotiations.)

Buying a home can make people happy, so focus first on buying a house for your future family.

The ultimate goal in life should be to be happy. Saving on tax comes second, but the two often occur simultaneously. Buy low, sell highI HAVE $100,000 to invest in something that offers capital growth and a modest income. It is now invested in a so-called bonus saver account at an annual interest rate of 4.2pc. As I am not interested in shares and do not own a house, property investment seems the most suitable option. What do you think? S F, Sydney THIS is not the time to buy property or shares. Results of property sales appear to be getting patchy, with some sales still in advance of reserve prices but many proving disappointing.

Industrial shares are now showing a price earnings ratio above 20, which means you are buying more than 20 years' worth of profits.

That does not mean prices will fall immediately, nor that they will not go higher, which I suspect they will.

It does mean that they will fall sooner (within months) rather than later (within years).

I strongly believe in the axiom buy low and sell high. Everything now appears to be high.

This is a time for sensible people to watch and wait with most of their cash, possibly dabbling in high-tech stocks with 5pc of their portfolio while expecting to lose.

In a few years' time, buy a house in which you will enjoy living.