WEBVTT - How to build a cash buffer...fast 0:00:10.080 --> 0:00:13.080 Hello, and welcome to The Australian's Money Puzzle podcast. I'm 0:00:13.160 --> 0:00:16.759 James Kirby. Welcome aboard everybody. Now, look, it's indisputable. I 0:00:16.760 --> 0:00:19.680 think we can say at this stage that investment markets 0:00:19.680 --> 0:00:22.960 share market in particular are at an inflection point. And 0:00:23.040 --> 0:00:31.080 this obviously is based on credible, logical, rational concern over 0:00:31.320 --> 0:00:36.000 the unleashing of the tariff policy in the US and 0:00:36.080 --> 0:00:38.960 the consequences of that for markets. Some of the biggest 0:00:39.040 --> 0:00:44.560 names and best minds, if you like, in investment are 0:00:45.000 --> 0:00:49.559 openly expressing concerns. Ray Dally, Oh, I'm sure a lot 0:00:49.600 --> 0:00:52.559 of you have read or heard of talking great concern 0:00:52.960 --> 0:00:55.360 over ever recent days. On our own show, Chris Coff 0:00:55.960 --> 0:00:57.840 in the which you shouldn't miss if you did miss it, 0:00:58.080 --> 0:01:01.360 which was the last before Easter, and he talked about 0:01:01.400 --> 0:01:03.480 his concerns for the market, and you know, I thought 0:01:03.480 --> 0:01:06.320 it was great that he came out and expressed clearly 0:01:06.720 --> 0:01:09.440 what he was thinking. Now we don't no one knows 0:01:09.640 --> 0:01:11.399 who's right and who's wrong just now. No one knows 0:01:11.400 --> 0:01:13.880 the future. But he was extremely skeptical about buying the 0:01:13.920 --> 0:01:17.040 dip for instance, and this is someone who's outstanding fund 0:01:17.040 --> 0:01:20.679 manager legendary fund manager in Australia on the board of 0:01:20.800 --> 0:01:23.160 UNI Super, the fourth biggest super fund, on the board 0:01:23.200 --> 0:01:27.440 of RGO, the listed investment companies. Someone really plugged into 0:01:27.680 --> 0:01:31.720 investment committees and where they're coming from. So you have 0:01:31.840 --> 0:01:34.679 this issue that it is a time that you should 0:01:34.680 --> 0:01:37.760 have cash. This is the common denominator of you, like 0:01:37.840 --> 0:01:40.360 among what these people are saying. Now that's not to 0:01:40.400 --> 0:01:43.559 say that you shouldn't bargain hunter or whatever, but today 0:01:43.600 --> 0:01:47.639 I am going to concentrate on that single issue, okay, 0:01:47.680 --> 0:01:51.000 which is building cash buffers at a time of great 0:01:51.040 --> 0:01:53.880 unease in the markets, which is exactly where we're at. 0:01:54.120 --> 0:01:56.960 To help me with this, I have financial planner Liam 0:01:57.040 --> 0:01:59.120 short of the son of S Group, who has been 0:01:59.160 --> 0:02:03.720 on the show before and is particularly expert on this issue, 0:02:03.800 --> 0:02:06.880 and I talked to him regularly about this. How are you, Liam, 0:02:07.800 --> 0:02:08.360 Good morning. 0:02:08.440 --> 0:02:09.560 Let's just talk to you, James. 0:02:09.600 --> 0:02:11.639 I knew nothing at all about cash, but I knew 0:02:11.639 --> 0:02:14.280 I should have cash. I would be aware of a 0:02:14.320 --> 0:02:17.320 couple of things that the rate cycle, as far as 0:02:17.360 --> 0:02:20.799 I know, has topped out. So the RBA did its 0:02:20.840 --> 0:02:23.800 first cut in years, only one cut so far, everyone's 0:02:23.840 --> 0:02:28.279 talking about more cuts but in terms of cash, having cash, 0:02:28.880 --> 0:02:30.919 where to put it on, how much you could get 0:02:31.040 --> 0:02:33.360 for your cash at the moment. Can you give us 0:02:33.360 --> 0:02:37.480 an idea what the settings are and what the momentum is. 0:02:38.440 --> 0:02:40.880 Yeah, So you always need to be aware the banks 0:02:40.880 --> 0:02:43.520 are moving a lot faster than the Reserve Bank. So 0:02:43.600 --> 0:02:46.399 for example, four months ago, we were getting five point 0:02:46.480 --> 0:02:49.160 three percent for a one year term deposit. Now the 0:02:49.200 --> 0:02:52.000 best right we're seeing is about four point six. Okay, 0:02:52.000 --> 0:02:54.240 so even though there's only been one rate cut, we're 0:02:54.240 --> 0:02:57.520 almost priced in three rd cuts into the term deposit rights. 0:02:57.880 --> 0:03:00.399 So then we have to talk about this two types 0:03:00.440 --> 0:03:02.640 of cash. There's lazy money that you just leave sitting 0:03:03.120 --> 0:03:06.720 in a check account or a low interest savings account, 0:03:07.000 --> 0:03:09.240 and this cash that you get working for yourself, that 0:03:09.320 --> 0:03:11.960 you can afford to either not touch it for a 0:03:12.000 --> 0:03:14.959 month or longer, and that you can make sure it's working. 0:03:15.480 --> 0:03:17.760 What we're seeing is some of those some of the 0:03:17.800 --> 0:03:20.600 banks have still got their high interest cash accounts. So 0:03:20.639 --> 0:03:23.440 those cash accounts where they're adding the bonus interest if 0:03:23.440 --> 0:03:25.560 you put in an extra two hundred dollars or fifty 0:03:25.560 --> 0:03:29.800 dollars a month, they're really worth while taking care of, Okay, 0:03:29.840 --> 0:03:32.680 and using them. But you've got to use them smartly. 0:03:32.840 --> 0:03:34.520 If it says that you've got to put in an 0:03:34.560 --> 0:03:36.920 extra fifty dollars a month and you have to do 0:03:36.960 --> 0:03:40.880 four transactions, set those up as automatic. Set fifty dollars 0:03:41.040 --> 0:03:46.119 in there, automatically. Pay some small bills that you pay 0:03:46.120 --> 0:03:48.800 on a monthly basis, Set them up as automatic so 0:03:48.880 --> 0:03:52.200 you don't miss that key bonus interest because it's often 0:03:52.480 --> 0:03:54.520 the base interest rate is one point five or one 0:03:54.560 --> 0:03:57.360 point seventy five and the bonus is three or three 0:03:57.360 --> 0:03:57.880 and a half. 0:03:58.360 --> 0:04:00.520 And this is this is standard fair, now, isn't it like? 0:04:00.560 --> 0:04:04.960 This is really yeah, this is unfortunately you can't just 0:04:05.640 --> 0:04:07.760 it's almost rare that you get a clean cut. Here's 0:04:07.800 --> 0:04:10.160 the rate. It has to be sort of strings attached. 0:04:10.360 --> 0:04:12.560 Yeah, and don't be loyal to any one bank. Shop 0:04:12.640 --> 0:04:17.120 around and see what you can get. And then we're saying, 0:04:17.160 --> 0:04:19.280 if you've got money that's available for more than one month, 0:04:19.720 --> 0:04:22.880 look at term deposits, look at laddering term deposits. Six nine, 0:04:22.960 --> 0:04:27.000 twelve months before rights started dropping, we were lucky in two, three, 0:04:27.080 --> 0:04:30.080 four and five year term deposits and also some annuity, 0:04:30.200 --> 0:04:31.080 so we were. 0:04:31.000 --> 0:04:33.320 Able to elain if you were to the listeners about 0:04:33.320 --> 0:04:37.000 what laddering means exactly, and they have this in bonds 0:04:37.000 --> 0:04:39.200 in the US, I know, but if you might just 0:04:39.240 --> 0:04:42.039 explain to listeners the concept behind laddering. 0:04:41.880 --> 0:04:44.039 Yeah, and I'd probably talk about it in terms of 0:04:44.120 --> 0:04:48.159 funding your retirement. We always want to have two to 0:04:48.240 --> 0:04:52.080 five years pension money or income that you require in 0:04:52.120 --> 0:04:54.760 cash and fixed interest. But if you don't need some 0:04:54.839 --> 0:04:57.000 money till the third year to finance the third year, 0:04:57.400 --> 0:05:01.120 instead of just constantly rolling it over one year, turn deposits, 0:05:01.560 --> 0:05:03.640 lock it into a three year, turn deposit, lock it 0:05:03.640 --> 0:05:05.480 into a two year, lock it into a four year, 0:05:05.520 --> 0:05:09.160 so that you're timing the maturities at the same time 0:05:09.200 --> 0:05:11.720 as when you'll actually need the funds, and not leaving 0:05:11.760 --> 0:05:14.480 yourself open to a variable interest rate on a savings 0:05:14.480 --> 0:05:16.600 account that's a more life you're going to drop fairly 0:05:16.640 --> 0:05:19.800 fast over that period. So it's all about making sure 0:05:19.839 --> 0:05:23.480 that the money is invested for the times you need it, 0:05:23.560 --> 0:05:26.160 for the timescale you need it on the timeline. 0:05:26.400 --> 0:05:30.239 Yeah, that's the laddering approach. So it's and it's working 0:05:30.240 --> 0:05:32.800 on the assumption, obviously, the fairly fundamental assumption that the 0:05:32.839 --> 0:05:34.760 longer you lock it up for the more you'll get, 0:05:35.560 --> 0:05:37.239 and then what would be the range at the moment 0:05:37.279 --> 0:05:40.080 between say a month and a year and four years. 0:05:40.440 --> 0:05:42.960 So on one month you can some of the banks 0:05:43.000 --> 0:05:45.920 are paying as little as three percent. For one year, 0:05:45.960 --> 0:05:48.640 as I said, we can get four point six. With 0:05:48.680 --> 0:05:52.000 the average bank nails down to four point three, you 0:05:52.000 --> 0:05:54.200 can still get around four point six for two years 0:05:54.200 --> 0:05:57.040 and three years. So we've all some people have already 0:05:57.040 --> 0:05:59.600 missed about. Okay, you should always be thinking about these 0:05:59.600 --> 0:06:03.559 things before they actually happen. You need to be thinking 0:06:03.600 --> 0:06:06.800 where we're seeing. If the markets are going well, if 0:06:06.839 --> 0:06:09.280 they're economies doing well, then it's time to start putting 0:06:09.320 --> 0:06:12.680 money away for the bad times. And it was being 0:06:12.720 --> 0:06:15.440 met very clear that the Reserve Bank was holding or 0:06:15.480 --> 0:06:17.480 not reducing interest rights, but that there was a bias 0:06:17.520 --> 0:06:20.320 towards reducing them as soon as they got the unemployment 0:06:20.360 --> 0:06:22.920 figures where they wanted and inflation where they wanted it. 0:06:23.200 --> 0:06:25.039 So six months ago we knew this was going to 0:06:25.040 --> 0:06:27.760 be happening, and so the people who managing their own 0:06:27.800 --> 0:06:30.719 money should have been moving money into these longer term 0:06:30.760 --> 0:06:32.120 exposures at that stage. 0:06:32.200 --> 0:06:35.920 And if somebody was of an opinion now a regular investor, 0:06:36.000 --> 0:06:38.239 but was saying, oh, hang on a second, I don't 0:06:38.320 --> 0:06:40.880 like the markets at the moment. They are highly volatile. 0:06:41.200 --> 0:06:43.120 We're seeing them moving up two and three percent. We 0:06:43.200 --> 0:06:46.599 had the worst day and the best day in since 0:06:46.680 --> 0:06:50.160 COVID inside a week recently. That's the signal if ever 0:06:50.240 --> 0:06:52.800 you saw wanted, it's highly volatized. So if somebody was saying, look, 0:06:52.880 --> 0:06:55.800 I never really had much cash. I like to be 0:06:55.839 --> 0:06:59.560 fully invested, but on this occasion, I am thinking about 0:06:59.600 --> 0:07:03.080 putting cash and investing it as an seeing it as 0:07:03.080 --> 0:07:06.560 an asset class for this period. And if someone was 0:07:06.640 --> 0:07:10.480 doing that, tell us that there's some guidelines. For instance, 0:07:10.480 --> 0:07:12.600 I go out and I see that I'm going to 0:07:12.640 --> 0:07:14.280 I'm going to use Combank. I don't know what the rates, however, 0:07:14.320 --> 0:07:16.880 I'm going to see that Combank has a rate for cash, 0:07:17.160 --> 0:07:19.360 and I'm going to see bank Zip Zip, that I've 0:07:19.400 --> 0:07:21.520 never heard of in my life, has a rate that's 0:07:21.520 --> 0:07:25.560 a percentage higher. They're both banks, they're both strictly and 0:07:25.640 --> 0:07:29.680 legally and technically approved depositive taking institutions, which means they're 0:07:29.720 --> 0:07:33.320 both covered by the guarantee. And this is the great 0:07:33.320 --> 0:07:36.040 thing about cash, which we must explain to listeners and 0:07:36.080 --> 0:07:38.440 the unlikely event, guys, that you don't already know it. 0:07:38.880 --> 0:07:43.000 All cash in banks or approved to posit taking institutions 0:07:43.160 --> 0:07:45.600 is guaranteed by the government in Australia to the tune 0:07:45.600 --> 0:07:49.080 of two hundred and fifty thousand per bank. So part 0:07:49.080 --> 0:07:52.800 I'm making Liam is if they're all guaranteed, need we 0:07:52.880 --> 0:07:55.600 worry about brand names or the fact that one bank 0:07:55.640 --> 0:07:57.040 is much smaller than another. 0:07:57.000 --> 0:08:01.840 Not really for the government guarantee. Remember also its per institution. 0:08:02.680 --> 0:08:04.840 So you can put two hundred and fifty thousand with 0:08:05.160 --> 0:08:08.040 Saint George and put another two fifty with Westpac, can 0:08:08.120 --> 0:08:12.120 expect the guarantee. It's both so and that goes back 0:08:12.160 --> 0:08:15.280 to thinking about what banks merged during the after the 0:08:15.400 --> 0:08:19.800 GFC and so come Bank Bank, West nab On, New 0:08:19.840 --> 0:08:22.880 Bank and West pack in c George. So you've got 0:08:22.920 --> 0:08:24.400 to think in terms of institutions. 0:08:24.840 --> 0:08:27.880 Okay, So a great point, Liam, and folks. The problem 0:08:27.920 --> 0:08:30.880 is the bank's virtually conceal this. If you're with Bank 0:08:30.920 --> 0:08:33.640 of Melbourne, you would not necessarily know that you're with 0:08:33.840 --> 0:08:36.520 the same group that also owns Saint George, which is 0:08:36.559 --> 0:08:39.560 West Bank, because they tried to keep the brands distinct. 0:08:39.600 --> 0:08:42.839 As Lean pointed out, if you're with Bank West, don't 0:08:42.840 --> 0:08:45.160 think that if you had half your money with Bank 0:08:45.200 --> 0:08:47.160 West and half with Combank, in fact you only have 0:08:47.240 --> 0:08:50.120 it with the one banking institution, which is the parent 0:08:50.160 --> 0:08:52.760 company Comebank, which owns Bank West. Really good point, Liam, 0:08:52.800 --> 0:08:55.840 really good, especially for perhaps that's maybe older listeners that 0:08:56.040 --> 0:08:58.959 had money in banks or had some faith in their 0:08:59.040 --> 0:09:01.719 local bank, so Bank of Melbourne which is actually owned 0:09:01.720 --> 0:09:03.440 by a Sydney bank, Westpac, for instance. 0:09:03.520 --> 0:09:03.760 Yeah. 0:09:04.000 --> 0:09:04.280 Yeah. 0:09:04.440 --> 0:09:07.839 The other thing is, yes, they're all covered by the 0:09:07.880 --> 0:09:12.120 government guarantee. But if you've got your one year money 0:09:12.240 --> 0:09:14.600 and you need to make sure that is liquid, yes 0:09:14.600 --> 0:09:16.560 the government guarantee is there, but you don't know how 0:09:16.559 --> 0:09:19.000 long it's going to be till it's paid. If a 0:09:19.000 --> 0:09:23.400 bank did collapse, okay, so possibly with six to twelve 0:09:23.440 --> 0:09:25.840 month money, we'd probably still say stick with the bank 0:09:25.880 --> 0:09:28.240 that's at least BBB triple B rated, so it's got 0:09:28.240 --> 0:09:31.920 a good credit rating. But overall, and I tend to 0:09:31.960 --> 0:09:33.840 not put the fill two fifteen. I'll put in two 0:09:33.840 --> 0:09:38.400 thirty five to make sure that any interest is covered. 0:09:38.640 --> 0:09:42.280 You are conservatively sure I'm dealing. 0:09:42.080 --> 0:09:44.439 With other people's money. So I've got a true I've 0:09:44.440 --> 0:09:48.480 got to take care of it and just making sure 0:09:48.520 --> 0:09:50.640 that don't have the loyalty to the banks. They have 0:09:50.679 --> 0:09:53.120 no loyalty to you anymore. So look for those best 0:09:53.160 --> 0:09:55.520 interest rates if possible, look for an abrary. Look for 0:09:55.559 --> 0:09:58.760 a facility that gives you access to more than one 0:09:58.840 --> 0:10:01.800 or two banks than going direct to each bank, because 0:10:01.840 --> 0:10:04.360 that can get complicated nowadays, having to prove your identity 0:10:04.400 --> 0:10:06.439 with all of them, having to have your logins and 0:10:06.520 --> 0:10:09.040 everything like that. So look at that. There are services 0:10:09.040 --> 0:10:12.000 out there like Australian Money Market and cashworks and stuff 0:10:12.000 --> 0:10:14.559 like that that that are offering access to twenty or 0:10:14.640 --> 0:10:17.240 thirty different banks, and you can have it all there 0:10:17.760 --> 0:10:19.400 spread across all the banks. At the end of the year, 0:10:19.400 --> 0:10:22.080 you get nice tax report for your SMSF for your 0:10:22.120 --> 0:10:22.480 all times. 0:10:22.520 --> 0:10:24.560 Yeah, they're your channel through to the different banks and 0:10:24.600 --> 0:10:26.839 they clip the ticket. I assume somehow. 0:10:26.880 --> 0:10:29.920 They get paid by the banks, so roughly you get 0:10:29.920 --> 0:10:31.800 the same as you're paid in the actual bank branch. 0:10:32.120 --> 0:10:34.640 So the banks have allowed for what the branches custom 0:10:35.000 --> 0:10:37.480 similarly allowed for what these wholesalers customers. 0:10:37.480 --> 0:10:39.120 Gee, yeah, a bit like I suppose a bit like 0:10:39.160 --> 0:10:42.080 mortgage brokers for the same sort of thing. They don't 0:10:42.080 --> 0:10:44.319 advertise much. They're not very well know what would the 0:10:44.320 --> 0:10:46.320 two you mentioned Again, we are not in any way 0:10:46.440 --> 0:10:48.360 picking these out as the best or anything, but two 0:10:48.400 --> 0:10:49.520 more popular ones. Liam. 0:10:49.880 --> 0:10:52.480 Yeah, So Australian money market is my one, and then 0:10:52.520 --> 0:10:55.960 there's I'm not sure if cashworks called cashworks, it might 0:10:56.000 --> 0:10:58.440 be called term deposit, dot com, dot au. There's a 0:10:58.440 --> 0:11:01.360 few out there, but Australian honey markets tended to be 0:11:01.400 --> 0:11:02.360 the leader in the space. 0:11:02.920 --> 0:11:04.360 Very good. One last thing before we go to the 0:11:04.360 --> 0:11:08.280 break about all that. It sounds very laborious because the 0:11:08.320 --> 0:11:10.360 banks do these honeymoon deals. So I go in, the 0:11:10.400 --> 0:11:12.960 bank says, listen, we're offering four point five percent right 0:11:13.040 --> 0:11:15.520 now on your cash. But three and a half of 0:11:15.559 --> 0:11:16.920 that is if you do this and this and you 0:11:16.920 --> 0:11:19.520 get a one percent basic rate. I forget to do 0:11:19.600 --> 0:11:22.120 it one week and it's all gone. And that is 0:11:22.120 --> 0:11:24.760 I don't get the rate. You're saying. Set up direct 0:11:24.800 --> 0:11:28.320 debits or automatic arrangements, which is very smart, but these 0:11:28.320 --> 0:11:30.080 honeymoon deeds they only last a year or so. 0:11:30.160 --> 0:11:32.319 Uh yeah, And that's why I use it for similar 0:11:32.559 --> 0:11:34.960 money market because at the end of the six months 0:11:35.000 --> 0:11:37.000 or nine months or twelve months, I just go in, 0:11:37.040 --> 0:11:39.480 I see the rates from twenty different banks from one 0:11:39.520 --> 0:11:42.320 month out of five years. Flicky button, and it moves 0:11:42.360 --> 0:11:43.640 to the other bank automatically. 0:11:43.760 --> 0:11:45.439 Can I ask a technical question, if you had a 0:11:45.480 --> 0:11:47.559 self managed super fund and you linked up with one 0:11:47.559 --> 0:11:52.080 of those intermediaries cashworks, money market, whatever they are, is 0:11:52.080 --> 0:11:53.640 that it will that do you for all the banks 0:11:53.679 --> 0:11:56.600 because traditionally, as I record, if you had an SMSF 0:11:56.600 --> 0:11:59.600 and you wanted to put cash in a term deposit, 0:11:59.640 --> 0:12:01.880 you've got to show your superannuation deeds and everything. 0:12:02.120 --> 0:12:04.680 So you do all that upfront one time with the 0:12:04.720 --> 0:12:08.960 actual provider, and then they researtified as advisors. It's on file. 0:12:09.480 --> 0:12:12.520 The money marketer whoever will use that then to open 0:12:12.559 --> 0:12:14.880 the account. So once a year we will update the 0:12:14.920 --> 0:12:17.880 IDs for example, but the trust needs is the trust aed. 0:12:18.040 --> 0:12:21.880 So it will serve for all banks exactly. Lovely. Okay, 0:12:21.960 --> 0:12:24.040 that's interesting, okay, folks. So we'll be back in a moment. 0:12:24.080 --> 0:12:27.040 We're going to develop this way of thinking about building 0:12:27.080 --> 0:12:30.800 buffers fast if you need to in what is a 0:12:30.840 --> 0:12:47.320 fairly wild investment market. Just now, hello and welcome back. 0:12:47.360 --> 0:12:52.800 To The Australian's Money Positive podcast, a fairly sober episode 0:12:52.840 --> 0:12:56.319 this folks, and could could you blame us for having 0:12:56.320 --> 0:12:58.920 this approach? Everyone that's been on the show is concerned 0:12:58.920 --> 0:13:04.559 about the markets levels. As I speak. This is Easter Tuesday. 0:13:04.920 --> 0:13:07.120 We just had another three percent drop last night on 0:13:07.160 --> 0:13:09.280 Wall Street because of what Trump is trying to do 0:13:09.320 --> 0:13:16.400 around the Federal reserve. These are absolutely fundamental concerns about 0:13:16.440 --> 0:13:19.640 how the market that we have known all our lives works. 0:13:20.400 --> 0:13:23.000 How does the federal reserves work inside of the US, 0:13:23.040 --> 0:13:25.360 how does the global trade order work? These are open 0:13:25.480 --> 0:13:29.920 and under questioned just now. And it's no surprise that 0:13:30.000 --> 0:13:34.079 the share markets are showing that fairly severely. Our ASX 0:13:34.320 --> 0:13:38.400 is down for the year to date by about five percent. 0:13:38.960 --> 0:13:42.360 The global market represented by Wall Street S and P 0:13:42.440 --> 0:13:44.560 five hundred is down for the year to date this 0:13:44.640 --> 0:13:49.000 morning twelve percent. That's a fairly rough market to try 0:13:49.000 --> 0:13:50.760 and make money in. And that is why we're talking 0:13:50.800 --> 0:13:54.560 about cash and liquidity today. Liquidity obviously being the ability 0:13:54.640 --> 0:13:58.400 to catch out something fast. Right, So a notoriously i 0:13:58.480 --> 0:14:02.600 liquid investment would your property right? You can't you own 0:14:02.600 --> 0:14:04.520 an apartment? It's worth the three hundred thousands, but you 0:14:04.559 --> 0:14:07.280 can't take twenty grand out of it. You just can't deliquid. 0:14:07.760 --> 0:14:11.400 But if you have listed investments of any description, as 0:14:11.440 --> 0:14:14.280 opposed to unlisted investments, you should be able to get 0:14:14.320 --> 0:14:17.000 your cash out as much as you want really, at 0:14:17.040 --> 0:14:19.880 any time fast, with the exception perhaps of some small 0:14:19.920 --> 0:14:22.640 cap stocks. So Liam, just to develop it a little bit, 0:14:24.040 --> 0:14:25.920 could you repeat Also, at the start of the show, 0:14:25.960 --> 0:14:30.560 you mentioned this was obviously for investors. Well it wasn't all. 0:14:32.000 --> 0:14:35.240 This was investors who need their investments to pay their income. 0:14:35.280 --> 0:14:37.920 I suppose you were talking about emergency funds. But let's 0:14:37.960 --> 0:14:41.200 just talk about liquidity tools for any investor of any 0:14:41.240 --> 0:14:45.120 age at this time. If you were I, you've explained 0:14:45.120 --> 0:14:46.960 to us about what to do with cash? What about 0:14:47.080 --> 0:14:49.200 raising cash? If I came in to you when I 0:14:49.240 --> 0:14:52.360 was a fully diversified investor and I said to you, 0:14:52.440 --> 0:14:54.960 I've always been fully invested, but I and I never 0:14:54.960 --> 0:14:58.880 paid much attention to cash. I need to now, where 0:14:58.920 --> 0:15:00.720 would you start the compass? 0:15:01.040 --> 0:15:03.760 Well, the first thing I'd say is stop any dividinary 0:15:03.800 --> 0:15:07.440 investment plans. You've got their fools game nowadays because of 0:15:07.480 --> 0:15:10.240 the fact that we've got dividends stripping funds out there 0:15:10.680 --> 0:15:14.000 that basically jump into shares before the dimendends are paid, 0:15:14.040 --> 0:15:17.080 stay the forty five days, and then exit. It means 0:15:17.120 --> 0:15:19.600 that usually when the d RP price is set, it's 0:15:19.600 --> 0:15:22.840 at the very peak of the share price. So the 0:15:22.920 --> 0:15:26.360 idea that you're getting a good deal by dividend reinvesting 0:15:26.720 --> 0:15:27.760 it's no longer true. 0:15:27.760 --> 0:15:30.640 That's very interesting, Yeah, very interesting. They have faded a bit. 0:15:30.720 --> 0:15:32.240 Have they Have you any sense of how many give 0:15:32.280 --> 0:15:35.400 them anymore? Maybe it seems to me, is it like, 0:15:35.960 --> 0:15:37.840 have you any idea how many of the top fifty 0:15:37.880 --> 0:15:41.320 give have DRPs that's dividend reinvestment plans folks, if you. 0:15:41.240 --> 0:15:43.680 Have honestly, I would say it's only third of it now. 0:15:43.760 --> 0:15:47.040 But as they are struggling to raise casher, they're trying 0:15:47.080 --> 0:15:50.000 to hold on to investors that some of them, especially 0:15:50.120 --> 0:15:53.640 unlisted funds for example, they're starting to offer discounts again 0:15:53.800 --> 0:15:57.040 under DRPs, so you can tell when they're stress for liquidity. 0:15:57.440 --> 0:15:59.640 Interesting, but you're telling me that in any event, the 0:15:59.720 --> 0:16:03.760 do is you're getting a raw deal because you're the 0:16:03.880 --> 0:16:07.280 listed company XYZ Limited that you have the d RP 0:16:07.480 --> 0:16:09.840 with they apply it on the day where the thing 0:16:09.960 --> 0:16:12.720 was at absolute peak because the dividends strippers are about 0:16:12.720 --> 0:16:16.680 to come in and play around that. See that's very interesting. 0:16:16.920 --> 0:16:19.360 So what your I don't want to go too far 0:16:19.400 --> 0:16:23.280 off track here, but are you are you generally do 0:16:23.320 --> 0:16:25.680 you generately tell people not to bother with dividend reinvestment 0:16:25.720 --> 0:16:27.960 plans because they do have a discipline leem I suppose, 0:16:28.000 --> 0:16:30.480 which is useful, just like investment property has a discipline 0:16:30.480 --> 0:16:31.560 makes you pay the mortgage. 0:16:31.840 --> 0:16:33.800 But if you're disciplined, you can have the same discipline 0:16:33.800 --> 0:16:37.640 by taking the DRPs and every three months looking and saying, 0:16:37.680 --> 0:16:40.720 where's the best place to pace that toward lay uly 0:16:40.720 --> 0:16:43.520 putting it into your existing portfolio. It may be the 0:16:43.560 --> 0:16:46.200 time to diversify it. In a time like this, you 0:16:46.280 --> 0:16:49.440 might say, well, look, instead of just divilinearlyinvesting, I'm actually 0:16:49.760 --> 0:16:51.440 all the dividends that come out. I'm actually going to 0:16:51.480 --> 0:16:54.920 specifically target it at a high yield fund or targeted 0:16:54.960 --> 0:16:58.480 at something that has dropped pretty significantly. So it's far 0:16:58.600 --> 0:17:00.920 better to be an investor who's actually thinking about the 0:17:00.960 --> 0:17:05.040 investments rather than just sit and forget. Because as we've seen, 0:17:05.080 --> 0:17:07.800 if somebody was just pumping money into the Magnificent seven, 0:17:07.840 --> 0:17:09.960 that have done great for the last couple of years, 0:17:10.080 --> 0:17:12.680 they would have been smashed this year. I've got clients 0:17:12.720 --> 0:17:15.199 who they take their dividary investments and they pump that 0:17:15.240 --> 0:17:17.880 into gold and they've done really well to that over 0:17:17.880 --> 0:17:20.960 the last few years. And it's just for them. It's 0:17:21.000 --> 0:17:23.639 just basically it's a regular routine of what they do 0:17:23.720 --> 0:17:27.440 with it. But also then for younger people with a mortgage, 0:17:27.960 --> 0:17:30.239 take those any dividends you've got and shove them into 0:17:30.280 --> 0:17:32.800 your offset account and build up a cash reserve. It's 0:17:32.840 --> 0:17:37.000 not affecting your income, so the offset account doesn't earn 0:17:37.040 --> 0:17:39.439 interest and just saves your interest on your loan, so 0:17:39.480 --> 0:17:42.280 it's not adding any tax of linking to your account, 0:17:42.560 --> 0:17:44.720 and it's basically making sure you're paying down your mortgage 0:17:44.760 --> 0:17:47.560 quicker that the money is available. Money in an offset 0:17:47.560 --> 0:17:50.600 account is your money. Money in a redraw is the 0:17:50.640 --> 0:17:52.840 bank's money, so they can always take away the redraw. 0:17:53.440 --> 0:17:55.520 The offset account is your money. So just be smart 0:17:55.560 --> 0:17:58.280 on things like that and just something off the cuff. 0:17:58.320 --> 0:18:00.399 I've seen a lot of people now bilding up a 0:18:00.440 --> 0:18:03.280 cash reserve by just going around their house and seeing 0:18:03.280 --> 0:18:06.159 what they don't use anymore, selling it on Facebook Marketplace 0:18:06.240 --> 0:18:08.800 or gum Tree and just building up that cash reserve. 0:18:09.160 --> 0:18:11.320 And I think when we go two times like this, 0:18:11.400 --> 0:18:13.679 when the cost of living has gone up, people are 0:18:13.720 --> 0:18:16.000 more willing to look around and go, look, I haven't 0:18:16.119 --> 0:18:18.359 use that thing for a year. We bought that on 0:18:18.400 --> 0:18:20.080 a win that we're going to go off camping, and 0:18:20.119 --> 0:18:23.639 we bought the full setup. I'm gonna three hundred and 0:18:23.680 --> 0:18:27.080 fifty dollars King's Age refrigerator. It has just been sitting 0:18:27.119 --> 0:18:27.879 in the garage. 0:18:28.119 --> 0:18:30.960 Every house has some version of that. Sure, I'm sure 0:18:31.000 --> 0:18:33.080 there's one in my house. Starting to think what it is, 0:18:33.080 --> 0:18:35.680 but I'm sure it's there more for our investors. More typically, 0:18:35.680 --> 0:18:41.199 I suppose it would mean in if you were an 0:18:41.240 --> 0:18:46.679 accumulation phase, the younger investor, and you had your self, 0:18:46.880 --> 0:18:50.520 you had your contributions going into SUPER every month through 0:18:50.560 --> 0:18:53.359 your salary the concession that is the thirty thousand you 0:18:53.400 --> 0:18:56.880 can put into SUPER each year pre tax. I expect 0:18:56.960 --> 0:18:59.840 that it would mean that you don't that you use 0:18:59.880 --> 0:19:00.840 for cash accumulation. 0:19:01.400 --> 0:19:03.119 Yeah, but what you do with that is during the 0:19:03.200 --> 0:19:05.600 year you save that in your offset account, so saving 0:19:05.640 --> 0:19:07.639 you interest, and then you just put it in the 0:19:07.720 --> 0:19:10.639 last month of the year. Okay, so you're still getting 0:19:10.640 --> 0:19:13.480 your tax deduction, but rather than sounding sacrificing or doing 0:19:13.520 --> 0:19:16.199 it early in the year, you put it into your 0:19:16.240 --> 0:19:18.080 offset account and then when it comes to June you 0:19:18.080 --> 0:19:20.200 do a lump sum and claim it as a tax 0:19:20.240 --> 0:19:21.480 deduction straight away. 0:19:21.480 --> 0:19:23.399 After that you put the thirty thousand one go. 0:19:24.000 --> 0:19:27.120 Well, you're already getting your employer contributions going in regularly, 0:19:27.119 --> 0:19:28.480 so you might only have ten. 0:19:28.400 --> 0:19:33.920 Or fifteen your voluntary contributions. Yeah, you've given one go yeah, yeah. 0:19:33.720 --> 0:19:35.840 And that's it. Yeah, So you're getting the best of 0:19:35.880 --> 0:19:38.399 boath worlds there. You're saving a bit of money. And 0:19:38.400 --> 0:19:40.200 then if you know the money that you have outside, 0:19:40.640 --> 0:19:43.639 what we try and do with young accumulators is fifty 0:19:43.680 --> 0:19:47.479 percent goes well, thirty three percent goes to short term savings, 0:19:47.520 --> 0:19:50.560 medium term savings that's a cash high interest account or 0:19:50.600 --> 0:19:54.359 the offset. Thirty three percent goes for lifestyle okay, paying 0:19:54.359 --> 0:19:55.920