Hello, and welcome to The Australian's Money Puzzle podcast. I'm James Kirby. Welcome aboard everybody. Now, look, it's indisputable. I think we can say at this stage that investment markets share market in particular are at an inflection point. And this obviously is based on credible, logical, rational concern over the unleashing of the tariff policy in the US and the consequences of that for markets. Some of the biggest names and best minds, if you like, in investment are openly expressing concerns. Ray Dally, Oh, I'm sure a lot of you have read or heard of talking great concern over ever recent days. On our own show, Chris Coff in the which you shouldn't miss if you did miss it, which was the last before Easter, and he talked about his concerns for the market, and you know, I thought it was great that he came out and expressed clearly what he was thinking. Now we don't no one knows who's right and who's wrong just now. No one knows the future. But he was extremely skeptical about buying the dip for instance, and this is someone who's outstanding fund manager legendary fund manager in Australia on the board of UNI Super, the fourth biggest super fund, on the board of RGO, the listed investment companies. Someone really plugged into investment committees and where they're coming from. So you have this issue that it is a time that you should have cash. This is the common denominator of you, like among what these people are saying. Now that's not to say that you shouldn't bargain hunter or whatever, but today I am going to concentrate on that single issue, okay, which is building cash buffers at a time of great unease in the markets, which is exactly where we're at. To help me with this, I have financial planner Liam short of the son of S Group, who has been on the show before and is particularly expert on this issue, and I talked to him regularly about this. How are you, Liam, Good morning.

Hello, and welcome to The Australian's Money Puzzle podcast. I'm James Kirby. Welcome aboard everybody. Now, look, it's indisputable. I think we can say at this stage that investment markets share market in particular are at an inflection point. And this obviously is based on credible, logical, rational concern over the unleashing of the tariff policy in the US and the consequences of that for markets. Some of the biggest names and best minds, if you like, in investment are openly expressing concerns. Ray Dally, Oh, I'm sure a lot of you have read or heard of talking great concern over ever recent days. On our own show, Chris Coff in the which you shouldn't miss if you did miss it, which was the last before Easter, and he talked about his concerns for the market, and you know, I thought it was great that he came out and expressed clearly what he was thinking. Now we don't no one knows who's right and who's wrong just now. No one knows the future. But he was extremely skeptical about buying the dip for instance, and this is someone who's outstanding fund manager legendary fund manager in Australia on the board of UNI Super, the fourth biggest super fund, on the board of RGO, the listed investment companies. Someone really plugged into investment committees and where they're coming from. So you have this issue that it is a time that you should have cash. This is the common denominator of you, like among what these people are saying. Now that's not to say that you shouldn't bargain hunter or whatever, but today I am going to concentrate on that single issue, okay, which is building cash buffers at a time of great unease in the markets, which is exactly where we're at. To help me with this, I have financial planner Liam short of the son of S Group, who has been on the show before and is particularly expert on this issue, and I talked to him regularly about this. How are you, Liam, Good morning.

Let's just talk to you, James.

Let's just talk to you, James.

I knew nothing at all about cash, but I knew I should have cash. I would be aware of a couple of things that the rate cycle, as far as I know, has topped out. So the RBA did its first cut in years, only one cut so far, everyone's talking about more cuts but in terms of cash, having cash, where to put it on, how much you could get for your cash at the moment. Can you give us an idea what the settings are and what the momentum is.

I knew nothing at all about cash, but I knew I should have cash. I would be aware of a couple of things that the rate cycle, as far as I know, has topped out. So the RBA did its first cut in years, only one cut so far, everyone's talking about more cuts but in terms of cash, having cash, where to put it on, how much you could get for your cash at the moment. Can you give us an idea what the settings are and what the momentum is.

Yeah, So you always need to be aware the banks are moving a lot faster than the Reserve Bank. So for example, four months ago, we were getting five point three percent for a one year term deposit. Now the best right we're seeing is about four point six. Okay, so even though there's only been one rate cut, we're almost priced in three rd cuts into the term deposit rights. So then we have to talk about this two types of cash. There's lazy money that you just leave sitting in a check account or a low interest savings account, and this cash that you get working for yourself, that you can afford to either not touch it for a month or longer, and that you can make sure it's working. What we're seeing is some of those some of the banks have still got their high interest cash accounts. So those cash accounts where they're adding the bonus interest if you put in an extra two hundred dollars or fifty dollars a month, they're really worth while taking care of, Okay, and using them. But you've got to use them smartly. If it says that you've got to put in an extra fifty dollars a month and you have to do four transactions, set those up as automatic. Set fifty dollars in there, automatically. Pay some small bills that you pay on a monthly basis, Set them up as automatic so you don't miss that key bonus interest because it's often the base interest rate is one point five or one point seventy five and the bonus is three or three and a half.

Yeah, So you always need to be aware the banks are moving a lot faster than the Reserve Bank. So for example, four months ago, we were getting five point three percent for a one year term deposit. Now the best right we're seeing is about four point six. Okay, so even though there's only been one rate cut, we're almost priced in three rd cuts into the term deposit rights. So then we have to talk about this two types of cash. There's lazy money that you just leave sitting in a check account or a low interest savings account, and this cash that you get working for yourself, that you can afford to either not touch it for a month or longer, and that you can make sure it's working. What we're seeing is some of those some of the banks have still got their high interest cash accounts. So those cash accounts where they're adding the bonus interest if you put in an extra two hundred dollars or fifty dollars a month, they're really worth while taking care of, Okay, and using them. But you've got to use them smartly. If it says that you've got to put in an extra fifty dollars a month and you have to do four transactions, set those up as automatic. Set fifty dollars in there, automatically. Pay some small bills that you pay on a monthly basis, Set them up as automatic so you don't miss that key bonus interest because it's often the base interest rate is one point five or one point seventy five and the bonus is three or three and a half.

And this is this is standard fair, now, isn't it like? This is really yeah, this is unfortunately you can't just it's almost rare that you get a clean cut. Here's the rate. It has to be sort of strings attached.

And this is this is standard fair, now, isn't it like? This is really yeah, this is unfortunately you can't just it's almost rare that you get a clean cut. Here's the rate. It has to be sort of strings attached.

Yeah, and don't be loyal to any one bank. Shop around and see what you can get. And then we're saying, if you've got money that's available for more than one month, look at term deposits, look at laddering term deposits. Six nine, twelve months before rights started dropping, we were lucky in two, three, four and five year term deposits and also some annuity, so we were.

Yeah, and don't be loyal to any one bank. Shop around and see what you can get. And then we're saying, if you've got money that's available for more than one month, look at term deposits, look at laddering term deposits. Six nine, twelve months before rights started dropping, we were lucky in two, three, four and five year term deposits and also some annuity, so we were.

Able to elain if you were to the listeners about what laddering means exactly, and they have this in bonds in the US, I know, but if you might just explain to listeners the concept behind laddering.

Able to elain if you were to the listeners about what laddering means exactly, and they have this in bonds in the US, I know, but if you might just explain to listeners the concept behind laddering.

Yeah, and I'd probably talk about it in terms of funding your retirement. We always want to have two to five years pension money or income that you require in cash and fixed interest. But if you don't need some money till the third year to finance the third year, instead of just constantly rolling it over one year, turn deposits, lock it into a three year, turn deposit, lock it into a two year, lock it into a four year, so that you're timing the maturities at the same time as when you'll actually need the funds, and not leaving yourself open to a variable interest rate on a savings account that's a more life you're going to drop fairly fast over that period. So it's all about making sure that the money is invested for the times you need it, for the timescale you need it on the timeline.

Yeah, and I'd probably talk about it in terms of funding your retirement. We always want to have two to five years pension money or income that you require in cash and fixed interest. But if you don't need some money till the third year to finance the third year, instead of just constantly rolling it over one year, turn deposits, lock it into a three year, turn deposit, lock it into a two year, lock it into a four year, so that you're timing the maturities at the same time as when you'll actually need the funds, and not leaving yourself open to a variable interest rate on a savings account that's a more life you're going to drop fairly fast over that period. So it's all about making sure that the money is invested for the times you need it, for the timescale you need it on the timeline.

Yeah, that's the laddering approach. So it's and it's working on the assumption, obviously, the fairly fundamental assumption that the longer you lock it up for the more you'll get, and then what would be the range at the moment between say a month and a year and four years.

Yeah, that's the laddering approach. So it's and it's working on the assumption, obviously, the fairly fundamental assumption that the longer you lock it up for the more you'll get, and then what would be the range at the moment between say a month and a year and four years.

So on one month you can some of the banks are paying as little as three percent. For one year, as I said, we can get four point six. With the average bank nails down to four point three, you can still get around four point six for two years and three years. So we've all some people have already missed about. Okay, you should always be thinking about these things before they actually happen. You need to be thinking where we're seeing. If the markets are going well, if they're economies doing well, then it's time to start putting money away for the bad times. And it was being met very clear that the Reserve Bank was holding or not reducing interest rights, but that there was a bias towards reducing them as soon as they got the unemployment figures where they wanted and inflation where they wanted it. So six months ago we knew this was going to be happening, and so the people who managing their own money should have been moving money into these longer term exposures at that stage.

So on one month you can some of the banks are paying as little as three percent. For one year, as I said, we can get four point six. With the average bank nails down to four point three, you can still get around four point six for two years and three years. So we've all some people have already missed about. Okay, you should always be thinking about these things before they actually happen. You need to be thinking where we're seeing. If the markets are going well, if they're economies doing well, then it's time to start putting money away for the bad times. And it was being met very clear that the Reserve Bank was holding or not reducing interest rights, but that there was a bias towards reducing them as soon as they got the unemployment figures where they wanted and inflation where they wanted it. So six months ago we knew this was going to be happening, and so the people who managing their own money should have been moving money into these longer term exposures at that stage.

And if somebody was of an opinion now a regular investor, but was saying, oh, hang on a second, I don't like the markets at the moment. They are highly volatile. We're seeing them moving up two and three percent. We had the worst day and the best day in since COVID inside a week recently. That's the signal if ever you saw wanted, it's highly volatized. So if somebody was saying, look, I never really had much cash. I like to be fully invested, but on this occasion, I am thinking about putting cash and investing it as an seeing it as an asset class for this period. And if someone was doing that, tell us that there's some guidelines. For instance, I go out and I see that I'm going to I'm going to use Combank. I don't know what the rates, however, I'm going to see that Combank has a rate for cash, and I'm going to see bank Zip Zip, that I've never heard of in my life, has a rate that's a percentage higher. They're both banks, they're both strictly and legally and technically approved depositive taking institutions, which means they're both covered by the guarantee. And this is the great thing about cash, which we must explain to listeners and the unlikely event, guys, that you don't already know it. All cash in banks or approved to posit taking institutions is guaranteed by the government in Australia to the tune of two hundred and fifty thousand per bank. So part I'm making Liam is if they're all guaranteed, need we worry about brand names or the fact that one bank is much smaller than another.

And if somebody was of an opinion now a regular investor, but was saying, oh, hang on a second, I don't like the markets at the moment. They are highly volatile. We're seeing them moving up two and three percent. We had the worst day and the best day in since COVID inside a week recently. That's the signal if ever you saw wanted, it's highly volatized. So if somebody was saying, look, I never really had much cash. I like to be fully invested, but on this occasion, I am thinking about putting cash and investing it as an seeing it as an asset class for this period. And if someone was doing that, tell us that there's some guidelines. For instance, I go out and I see that I'm going to I'm going to use Combank. I don't know what the rates, however, I'm going to see that Combank has a rate for cash, and I'm going to see bank Zip Zip, that I've never heard of in my life, has a rate that's a percentage higher. They're both banks, they're both strictly and legally and technically approved depositive taking institutions, which means they're both covered by the guarantee. And this is the great thing about cash, which we must explain to listeners and the unlikely event, guys, that you don't already know it. All cash in banks or approved to posit taking institutions is guaranteed by the government in Australia to the tune of two hundred and fifty thousand per bank. So part I'm making Liam is if they're all guaranteed, need we worry about brand names or the fact that one bank is much smaller than another.

Not really for the government guarantee. Remember also its per institution. So you can put two hundred and fifty thousand with Saint George and put another two fifty with Westpac, can expect the guarantee. It's both so and that goes back to thinking about what banks merged during the after the GFC and so come Bank Bank, West nab On, New Bank and West pack in c George. So you've got to think in terms of institutions.

Not really for the government guarantee. Remember also its per institution. So you can put two hundred and fifty thousand with Saint George and put another two fifty with Westpac, can expect the guarantee. It's both so and that goes back to thinking about what banks merged during the after the GFC and so come Bank Bank, West nab On, New Bank and West pack in c George. So you've got to think in terms of institutions.

Okay, So a great point, Liam, and folks. The problem is the bank's virtually conceal this. If you're with Bank of Melbourne, you would not necessarily know that you're with the same group that also owns Saint George, which is West Bank, because they tried to keep the brands distinct. As Lean pointed out, if you're with Bank West, don't think that if you had half your money with Bank West and half with Combank, in fact you only have it with the one banking institution, which is the parent company Comebank, which owns Bank West. Really good point, Liam, really good, especially for perhaps that's maybe older listeners that had money in banks or had some faith in their local bank, so Bank of Melbourne which is actually owned by a Sydney bank, Westpac, for instance.

Okay, So a great point, Liam, and folks. The problem is the bank's virtually conceal this. If you're with Bank of Melbourne, you would not necessarily know that you're with the same group that also owns Saint George, which is West Bank, because they tried to keep the brands distinct. As Lean pointed out, if you're with Bank West, don't think that if you had half your money with Bank West and half with Combank, in fact you only have it with the one banking institution, which is the parent company Comebank, which owns Bank West. Really good point, Liam, really good, especially for perhaps that's maybe older listeners that had money in banks or had some faith in their local bank, so Bank of Melbourne which is actually owned by a Sydney bank, Westpac, for instance.

Yeah.

Yeah.

Yeah.

Yeah.

The other thing is, yes, they're all covered by the government guarantee. But if you've got your one year money and you need to make sure that is liquid, yes the government guarantee is there, but you don't know how long it's going to be till it's paid. If a bank did collapse, okay, so possibly with six to twelve month money, we'd probably still say stick with the bank that's at least BBB triple B rated, so it's got a good credit rating. But overall, and I tend to not put the fill two fifteen. I'll put in two thirty five to make sure that any interest is covered.

The other thing is, yes, they're all covered by the government guarantee. But if you've got your one year money and you need to make sure that is liquid, yes the government guarantee is there, but you don't know how long it's going to be till it's paid. If a bank did collapse, okay, so possibly with six to twelve month money, we'd probably still say stick with the bank that's at least BBB triple B rated, so it's got a good credit rating. But overall, and I tend to not put the fill two fifteen. I'll put in two thirty five to make sure that any interest is covered.

You are conservatively sure I'm dealing.

You are conservatively sure I'm dealing.

With other people's money. So I've got a true I've got to take care of it and just making sure that don't have the loyalty to the banks. They have no loyalty to you anymore. So look for those best interest rates if possible, look for an abrary. Look for a facility that gives you access to more than one or two banks than going direct to each bank, because that can get complicated nowadays, having to prove your identity with all of them, having to have your logins and everything like that. So look at that. There are services out there like Australian Money Market and cashworks and stuff like that that that are offering access to twenty or thirty different banks, and you can have it all there spread across all the banks. At the end of the year, you get nice tax report for your SMSF for your all times.

With other people's money. So I've got a true I've got to take care of it and just making sure that don't have the loyalty to the banks. They have no loyalty to you anymore. So look for those best interest rates if possible, look for an abrary. Look for a facility that gives you access to more than one or two banks than going direct to each bank, because that can get complicated nowadays, having to prove your identity with all of them, having to have your logins and everything like that. So look at that. There are services out there like Australian Money Market and cashworks and stuff like that that that are offering access to twenty or thirty different banks, and you can have it all there spread across all the banks. At the end of the year, you get nice tax report for your SMSF for your all times.

Yeah, they're your channel through to the different banks and they clip the ticket. I assume somehow.

Yeah, they're your channel through to the different banks and they clip the ticket. I assume somehow.

They get paid by the banks, so roughly you get the same as you're paid in the actual bank branch. So the banks have allowed for what the branches custom similarly allowed for what these wholesalers customers.

They get paid by the banks, so roughly you get the same as you're paid in the actual bank branch. So the banks have allowed for what the branches custom similarly allowed for what these wholesalers customers.

Gee, yeah, a bit like I suppose a bit like mortgage brokers for the same sort of thing. They don't advertise much. They're not very well know what would the two you mentioned Again, we are not in any way picking these out as the best or anything, but two more popular ones. Liam.

Gee, yeah, a bit like I suppose a bit like mortgage brokers for the same sort of thing. They don't advertise much. They're not very well know what would the two you mentioned Again, we are not in any way picking these out as the best or anything, but two more popular ones. Liam.

Yeah, So Australian money market is my one, and then there's I'm not sure if cashworks called cashworks, it might be called term deposit, dot com, dot au. There's a few out there, but Australian honey markets tended to be the leader in the space.

Yeah, So Australian money market is my one, and then there's I'm not sure if cashworks called cashworks, it might be called term deposit, dot com, dot au. There's a few out there, but Australian honey markets tended to be the leader in the space.

Very good. One last thing before we go to the break about all that. It sounds very laborious because the banks do these honeymoon deals. So I go in, the bank says, listen, we're offering four point five percent right now on your cash. But three and a half of that is if you do this and this and you get a one percent basic rate. I forget to do it one week and it's all gone. And that is I don't get the rate. You're saying. Set up direct debits or automatic arrangements, which is very smart, but these honeymoon deeds they only last a year or so.

Very good. One last thing before we go to the break about all that. It sounds very laborious because the banks do these honeymoon deals. So I go in, the bank says, listen, we're offering four point five percent right now on your cash. But three and a half of that is if you do this and this and you get a one percent basic rate. I forget to do it one week and it's all gone. And that is I don't get the rate. You're saying. Set up direct debits or automatic arrangements, which is very smart, but these honeymoon deeds they only last a year or so.

Uh yeah, And that's why I use it for similar money market because at the end of the six months or nine months or twelve months, I just go in, I see the rates from twenty different banks from one month out of five years. Flicky button, and it moves to the other bank automatically.

Uh yeah, And that's why I use it for similar money market because at the end of the six months or nine months or twelve months, I just go in, I see the rates from twenty different banks from one month out of five years. Flicky button, and it moves to the other bank automatically.

Can I ask a technical question, if you had a self managed super fund and you linked up with one of those intermediaries cashworks, money market, whatever they are, is that it will that do you for all the banks because traditionally, as I record, if you had an SMSF and you wanted to put cash in a term deposit, you've got to show your superannuation deeds and everything.

Can I ask a technical question, if you had a self managed super fund and you linked up with one of those intermediaries cashworks, money market, whatever they are, is that it will that do you for all the banks because traditionally, as I record, if you had an SMSF and you wanted to put cash in a term deposit, you've got to show your superannuation deeds and everything.

So you do all that upfront one time with the actual provider, and then they researtified as advisors. It's on file. The money marketer whoever will use that then to open the account. So once a year we will update the IDs for example, but the trust needs is the trust aed.

So you do all that upfront one time with the actual provider, and then they researtified as advisors. It's on file. The money marketer whoever will use that then to open the account. So once a year we will update the IDs for example, but the trust needs is the trust aed.

So it will serve for all banks exactly. Lovely. Okay, that's interesting, okay, folks. So we'll be back in a moment. We're going to develop this way of thinking about building buffers fast if you need to in what is a fairly wild investment market. Just now, hello and welcome back. To The Australian's Money Positive podcast, a fairly sober episode this folks, and could could you blame us for having this approach? Everyone that's been on the show is concerned about the markets levels. As I speak. This is Easter Tuesday. We just had another three percent drop last night on Wall Street because of what Trump is trying to do around the Federal reserve. These are absolutely fundamental concerns about how the market that we have known all our lives works. How does the federal reserves work inside of the US, how does the global trade order work? These are open and under questioned just now. And it's no surprise that the share markets are showing that fairly severely. Our ASX is down for the year to date by about five percent. The global market represented by Wall Street S and P five hundred is down for the year to date this morning twelve percent. That's a fairly rough market to try and make money in. And that is why we're talking about cash and liquidity today. Liquidity obviously being the ability to catch out something fast. Right, So a notoriously i liquid investment would your property right? You can't you own an apartment? It's worth the three hundred thousands, but you can't take twenty grand out of it. You just can't deliquid. But if you have listed investments of any description, as opposed to unlisted investments, you should be able to get your cash out as much as you want really, at any time fast, with the exception perhaps of some small cap stocks. So Liam, just to develop it a little bit, could you repeat Also, at the start of the show, you mentioned this was obviously for investors. Well it wasn't all. This was investors who need their investments to pay their income. I suppose you were talking about emergency funds. But let's just talk about liquidity tools for any investor of any age at this time. If you were I, you've explained to us about what to do with cash? What about raising cash? If I came in to you when I was a fully diversified investor and I said to you, I've always been fully invested, but I and I never paid much attention to cash. I need to now, where would you start the compass?

So it will serve for all banks exactly. Lovely. Okay, that's interesting, okay, folks. So we'll be back in a moment. We're going to develop this way of thinking about building buffers fast if you need to in what is a fairly wild investment market. Just now, hello and welcome back. To The Australian's Money Positive podcast, a fairly sober episode this folks, and could could you blame us for having this approach? Everyone that's been on the show is concerned about the markets levels. As I speak. This is Easter Tuesday. We just had another three percent drop last night on Wall Street because of what Trump is trying to do around the Federal reserve. These are absolutely fundamental concerns about how the market that we have known all our lives works. How does the federal reserves work inside of the US, how does the global trade order work? These are open and under questioned just now. And it's no surprise that the share markets are showing that fairly severely. Our ASX is down for the year to date by about five percent. The global market represented by Wall Street S and P five hundred is down for the year to date this morning twelve percent. That's a fairly rough market to try and make money in. And that is why we're talking about cash and liquidity today. Liquidity obviously being the ability to catch out something fast. Right, So a notoriously i liquid investment would your property right? You can't you own an apartment? It's worth the three hundred thousands, but you can't take twenty grand out of it. You just can't deliquid. But if you have listed investments of any description, as opposed to unlisted investments, you should be able to get your cash out as much as you want really, at any time fast, with the exception perhaps of some small cap stocks. So Liam, just to develop it a little bit, could you repeat Also, at the start of the show, you mentioned this was obviously for investors. Well it wasn't all. This was investors who need their investments to pay their income. I suppose you were talking about emergency funds. But let's just talk about liquidity tools for any investor of any age at this time. If you were I, you've explained to us about what to do with cash? What about raising cash? If I came in to you when I was a fully diversified investor and I said to you, I've always been fully invested, but I and I never paid much attention to cash. I need to now, where would you start the compass?

Well, the first thing I'd say is stop any dividinary investment plans. You've got their fools game nowadays because of the fact that we've got dividends stripping funds out there that basically jump into shares before the dimendends are paid, stay the forty five days, and then exit. It means that usually when the d RP price is set, it's at the very peak of the share price. So the idea that you're getting a good deal by dividend reinvesting it's no longer true.

Well, the first thing I'd say is stop any dividinary investment plans. You've got their fools game nowadays because of the fact that we've got dividends stripping funds out there that basically jump into shares before the dimendends are paid, stay the forty five days, and then exit. It means that usually when the d RP price is set, it's at the very peak of the share price. So the idea that you're getting a good deal by dividend reinvesting it's no longer true.

That's very interesting, Yeah, very interesting. They have faded a bit. Have they Have you any sense of how many give them anymore? Maybe it seems to me, is it like, have you any idea how many of the top fifty give have DRPs that's dividend reinvestment plans folks, if you.

That's very interesting, Yeah, very interesting. They have faded a bit. Have they Have you any sense of how many give them anymore? Maybe it seems to me, is it like, have you any idea how many of the top fifty give have DRPs that's dividend reinvestment plans folks, if you.

Have honestly, I would say it's only third of it now. But as they are struggling to raise casher, they're trying to hold on to investors that some of them, especially unlisted funds for example, they're starting to offer discounts again under DRPs, so you can tell when they're stress for liquidity.

Have honestly, I would say it's only third of it now. But as they are struggling to raise casher, they're trying to hold on to investors that some of them, especially unlisted funds for example, they're starting to offer discounts again under DRPs, so you can tell when they're stress for liquidity.

Interesting, but you're telling me that in any event, the do is you're getting a raw deal because you're the listed company XYZ Limited that you have the d RP with they apply it on the day where the thing was at absolute peak because the dividends strippers are about to come in and play around that. See that's very interesting. So what your I don't want to go too far off track here, but are you are you generally do you generately tell people not to bother with dividend reinvestment plans because they do have a discipline leem I suppose, which is useful, just like investment property has a discipline makes you pay the mortgage.

Interesting, but you're telling me that in any event, the do is you're getting a raw deal because you're the listed company XYZ Limited that you have the d RP with they apply it on the day where the thing was at absolute peak because the dividends strippers are about to come in and play around that. See that's very interesting. So what your I don't want to go too far off track here, but are you are you generally do you generately tell people not to bother with dividend reinvestment plans because they do have a discipline leem I suppose, which is useful, just like investment property has a discipline makes you pay the mortgage.

But if you're disciplined, you can have the same discipline by taking the DRPs and every three months looking and saying, where's the best place to pace that toward lay uly putting it into your existing portfolio. It may be the time to diversify it. In a time like this, you might say, well, look, instead of just divilinearlyinvesting, I'm actually all the dividends that come out. I'm actually going to specifically target it at a high yield fund or targeted at something that has dropped pretty significantly. So it's far better to be an investor who's actually thinking about the investments rather than just sit and forget. Because as we've seen, if somebody was just pumping money into the Magnificent seven, that have done great for the last couple of years, they would have been smashed this year. I've got clients who they take their dividary investments and they pump that into gold and they've done really well to that over the last few years. And it's just for them. It's just basically it's a regular routine of what they do with it. But also then for younger people with a mortgage, take those any dividends you've got and shove them into your offset account and build up a cash reserve. It's not affecting your income, so the offset account doesn't earn interest and just saves your interest on your loan, so it's not adding any tax of linking to your account, and it's basically making sure you're paying down your mortgage quicker that the money is available. Money in an offset account is your money. Money in a redraw is the bank's money, so they can always take away the redraw. The offset account is your money. So just be smart on things like that and just something off the cuff. I've seen a lot of people now bilding up a cash reserve by just going around their house and seeing what they don't use anymore, selling it on Facebook Marketplace or gum Tree and just building up that cash reserve. And I think when we go two times like this, when the cost of living has gone up, people are more willing to look around and go, look, I haven't use that thing for a year. We bought that on a win that we're going to go off camping, and we bought the full setup. I'm gonna three hundred and fifty dollars King's Age refrigerator. It has just been sitting in the garage.

But if you're disciplined, you can have the same discipline by taking the DRPs and every three months looking and saying, where's the best place to pace that toward lay uly putting it into your existing portfolio. It may be the time to diversify it. In a time like this, you might say, well, look, instead of just divilinearlyinvesting, I'm actually all the dividends that come out. I'm actually going to specifically target it at a high yield fund or targeted at something that has dropped pretty significantly. So it's far better to be an investor who's actually thinking about the investments rather than just sit and forget. Because as we've seen, if somebody was just pumping money into the Magnificent seven, that have done great for the last couple of years, they would have been smashed this year. I've got clients who they take their dividary investments and they pump that into gold and they've done really well to that over the last few years. And it's just for them. It's just basically it's a regular routine of what they do with it. But also then for younger people with a mortgage, take those any dividends you've got and shove them into your offset account and build up a cash reserve. It's not affecting your income, so the offset account doesn't earn interest and just saves your interest on your loan, so it's not adding any tax of linking to your account, and it's basically making sure you're paying down your mortgage quicker that the money is available. Money in an offset account is your money. Money in a redraw is the bank's money, so they can always take away the redraw. The offset account is your money. So just be smart on things like that and just something off the cuff. I've seen a lot of people now bilding up a cash reserve by just going around their house and seeing what they don't use anymore, selling it on Facebook Marketplace or gum Tree and just building up that cash reserve. And I think when we go two times like this, when the cost of living has gone up, people are more willing to look around and go, look, I haven't use that thing for a year. We bought that on a win that we're going to go off camping, and we bought the full setup. I'm gonna three hundred and fifty dollars King's Age refrigerator. It has just been sitting in the garage.

Every house has some version of that. Sure, I'm sure there's one in my house. Starting to think what it is, but I'm sure it's there more for our investors. More typically, I suppose it would mean in if you were an accumulation phase, the younger investor, and you had your self, you had your contributions going into SUPER every month through your salary the concession that is the thirty thousand you can put into SUPER each year pre tax. I expect that it would mean that you don't that you use for cash accumulation.

Every house has some version of that. Sure, I'm sure there's one in my house. Starting to think what it is, but I'm sure it's there more for our investors. More typically, I suppose it would mean in if you were an accumulation phase, the younger investor, and you had your self, you had your contributions going into SUPER every month through your salary the concession that is the thirty thousand you can put into SUPER each year pre tax. I expect that it would mean that you don't that you use for cash accumulation.

Yeah, but what you do with that is during the year you save that in your offset account, so saving you interest, and then you just put it in the last month of the year. Okay, so you're still getting your tax deduction, but rather than sounding sacrificing or doing it early in the year, you put it into your offset account and then when it comes to June you do a lump sum and claim it as a tax deduction straight away.

Yeah, but what you do with that is during the year you save that in your offset account, so saving you interest, and then you just put it in the last month of the year. Okay, so you're still getting your tax deduction, but rather than sounding sacrificing or doing it early in the year, you put it into your offset account and then when it comes to June you do a lump sum and claim it as a tax deduction straight away.

After that you put the thirty thousand one go.

After that you put the thirty thousand one go.

Well, you're already getting your employer contributions going in regularly, so you might only have ten.

Well, you're already getting your employer contributions going in regularly, so you might only have ten.

Or fifteen your voluntary contributions. Yeah, you've given one go yeah, yeah.

Or fifteen your voluntary contributions. Yeah, you've given one go yeah, yeah.

And that's it. Yeah, So you're getting the best of boath worlds there. You're saving a bit of money. And then if you know the money that you have outside, what we try and do with young accumulators is fifty percent goes well, thirty three percent goes to short term savings, medium term savings that's a cash high interest account or the offset. Thirty three percent goes for lifestyle okay, paying for a wholiday, paying for not grade of the car, whatever they feel like, and then thirty three percent goes into ETFs. Okay. The good thing about those ETFs is that you can sell them down and they'll settle to your back cabin in three days. So it's thinking long term, but having that short term plan b that if things go wrong, you can dip in and sell them if you need to.

And that's it. Yeah, So you're getting the best of boath worlds there. You're saving a bit of money. And then if you know the money that you have outside, what we try and do with young accumulators is fifty percent goes well, thirty three percent goes to short term savings, medium term savings that's a cash high interest account or the offset. Thirty three percent goes for lifestyle okay, paying for a wholiday, paying for not grade of the car, whatever they feel like, and then thirty three percent goes into ETFs. Okay. The good thing about those ETFs is that you can sell them down and they'll settle to your back cabin in three days. So it's thinking long term, but having that short term plan b that if things go wrong, you can dip in and sell them if you need to.

Does your skepticism about the dividend reinvestment plans apply to ETFs as well.

Does your skepticism about the dividend reinvestment plans apply to ETFs as well.

Yeah, for a dividend stripper, it's very attractive for them to go in there. But again it comes back to don't do lazy investing, Try and be smart. Take the dividends from the ETFs and every three to six months look and see where the opportunities are, or look and see where's the best place for my dollar. And it may be in a time with this for the best place, it's in the opposite the cat and you just leave it there. And as Chris Cuff said, it's probably not the time to buy the dip in the moment because we're not sure this is the dick. There's a ninety day tariff free zone that could come back in. Well, Trump could turn change his mind at any state and just bring it back in. So now the time to build up that buffer, and the buffers not just for your emergency funds, it's an opportunity fund as well.

Yeah, for a dividend stripper, it's very attractive for them to go in there. But again it comes back to don't do lazy investing, Try and be smart. Take the dividends from the ETFs and every three to six months look and see where the opportunities are, or look and see where's the best place for my dollar. And it may be in a time with this for the best place, it's in the opposite the cat and you just leave it there. And as Chris Cuff said, it's probably not the time to buy the dip in the moment because we're not sure this is the dick. There's a ninety day tariff free zone that could come back in. Well, Trump could turn change his mind at any state and just bring it back in. So now the time to build up that buffer, and the buffers not just for your emergency funds, it's an opportunity fund as well.

Yes, well, thinking like that, of course, yes, yeah, that it's a think of it. When I say build up cash buffers, I'm not suggesting that you go to cash, folks. I'm suggesting that you accumulate cash for either defending yourself your portfolio, or taking opportunities of what could be lower levels than we are have at the moment. One other thing, Liam, I supposed to go back to the thing about dividend reinvestment plans is there was always the notion that if your investor was good enough, it was good enough to do a d ORP plan with at the start. So let's say I select my investment, and there was always that theory that if if it's good enough, it's good enough to d orp. Is do you see a weakness in that theory.

Yes, well, thinking like that, of course, yes, yeah, that it's a think of it. When I say build up cash buffers, I'm not suggesting that you go to cash, folks. I'm suggesting that you accumulate cash for either defending yourself your portfolio, or taking opportunities of what could be lower levels than we are have at the moment. One other thing, Liam, I supposed to go back to the thing about dividend reinvestment plans is there was always the notion that if your investor was good enough, it was good enough to do a d ORP plan with at the start. So let's say I select my investment, and there was always that theory that if if it's good enough, it's good enough to d orp. Is do you see a weakness in that theory.

The weakness is that ninety five percent of trading now is computer training. So those different stripping algorithms are looking and saying if a stock is good value, well, they'll buy into it just before the evident I stripped the dividend, and then it will actually fall back down as that money leaves. So yes, long term, if you still believe in a company, you can still put money into it. But I don't believe that I believe that the d ORP you could be leaving three to five percent on the table, which in a lot of cases is you diffident.

The weakness is that ninety five percent of trading now is computer training. So those different stripping algorithms are looking and saying if a stock is good value, well, they'll buy into it just before the evident I stripped the dividend, and then it will actually fall back down as that money leaves. So yes, long term, if you still believe in a company, you can still put money into it. But I don't believe that I believe that the d ORP you could be leaving three to five percent on the table, which in a lot of cases is you diffident.

The exactly So the algorithms have have won on that one. Interesting, and I suppose that that ruling, or that that rule of thumb came from a different time. Okay, take a short break, got some very interesting questions. Hello and welcome back to The Australian's Money Positive podcast. James Kirby here with Liam short s h o Orte of the Sonnets Group. Is now Liam a couple of questions. Would you like to read the first one from Andrew.

The exactly So the algorithms have have won on that one. Interesting, and I suppose that that ruling, or that that rule of thumb came from a different time. Okay, take a short break, got some very interesting questions. Hello and welcome back to The Australian's Money Positive podcast. James Kirby here with Liam short s h o Orte of the Sonnets Group. Is now Liam a couple of questions. Would you like to read the first one from Andrew.

Yeah, there's been a lot of discussion about the capital Gains tax discount being unfair. Correct me if I'm wrong. However, it's in the purpose of the discount to address the inflationy component of the capital gain. In other words, when an acid appreciate and value due to inflation, why should the investor pay tax on it? Does something CGT discount offset the inflation component, And that's exactly why inflate why the CGT discount was brought in nearly forty years ago. But basically originally it was tied to inflation. So every year you've got you indexed the discount was indexed to the CPI, but the government or somebody decided that this was way too complex to do longer term, so they decided that they would put a flat fifty percent discount discount. I think it was held for more than twelve months.

Yeah, there's been a lot of discussion about the capital Gains tax discount being unfair. Correct me if I'm wrong. However, it's in the purpose of the discount to address the inflationy component of the capital gain. In other words, when an acid appreciate and value due to inflation, why should the investor pay tax on it? Does something CGT discount offset the inflation component, And that's exactly why inflate why the CGT discount was brought in nearly forty years ago. But basically originally it was tied to inflation. So every year you've got you indexed the discount was indexed to the CPI, but the government or somebody decided that this was way too complex to do longer term, so they decided that they would put a flat fifty percent discount discount. I think it was held for more than twelve months.

That's right. I think it was Peter Costello. I think maybe Andrew and obviously never advise or information only, but Andrew, maybe the discussion is more often that the capital gains discount is not so much unfair as unfairly large.

That's right. I think it was Peter Costello. I think maybe Andrew and obviously never advise or information only, but Andrew, maybe the discussion is more often that the capital gains discount is not so much unfair as unfairly large.

At the issue, James, is the CGT discount can seem very unfair in a period where we've had low inflation for a long time, okay, but if we've had high inflation for a good number of years. So think in terms of an investment you did for one hundred thousand if when CPI was index link, if inflation went on only two or three percent a year, and you what you're the value of your funders worth two hundred thousand at the end of a ten or fifteen year period. You've got a very good deal because you're getting the fifty percent capital gain tax discount on it. But in a period where you've got very high inflation, that one hundred thousands. It would have to probably grow to two hundred thousand just to keep its own value over a ten or fifteen year period. Yet you're going to have to pay fifty percent capital gains tax on that rise of one hundred thousand. So in periods of high inflation, the capital gains tax discount is not actually a great deal. It's a poorly yes.

At the issue, James, is the CGT discount can seem very unfair in a period where we've had low inflation for a long time, okay, but if we've had high inflation for a good number of years. So think in terms of an investment you did for one hundred thousand if when CPI was index link, if inflation went on only two or three percent a year, and you what you're the value of your funders worth two hundred thousand at the end of a ten or fifteen year period. You've got a very good deal because you're getting the fifty percent capital gain tax discount on it. But in a period where you've got very high inflation, that one hundred thousands. It would have to probably grow to two hundred thousand just to keep its own value over a ten or fifteen year period. Yet you're going to have to pay fifty percent capital gains tax on that rise of one hundred thousand. So in periods of high inflation, the capital gains tax discount is not actually a great deal. It's a poorly yes.

Right, And what would you classify as high inflation plus five percent?

Right, And what would you classify as high inflation plus five percent?

Plus? Yeah?

Plus? Yeah?

Right, which we nearly touched. We came close to, didn't wait in recent times? Okay, very good? All right, Peter asks, reading between the lines of a recent episode, your bias towards managed funds versus index is apparent. Nothing wrong with that. I'm sure you have declared your interest elsewhere, But for the sake of transparency, don't you think it would have been prudent to declare this bias during the podcast? Okay, thank you, Peter. Your claim that I'm biased in favor of I have to remember who I'm supposed to be in favor of managed funds versus index. No, that not the case. I would respectfully suggest it's not the case I recently had. We had another piece correspondence was it two weeks ago saying I was a bias against industry funds. There's no bias, please, I would hope that there is no bias of we're really looking for the best for all. Investors sometimes get over enthusiastic about something or other. But there's different strokes for differ from folks, let me tell you, and there is no there is. I think we could do a show one investor bias if I could get the right person to talk about it. Karen Neilson. Years ago, I saw him give an investment lecture which was one of the best lectures I ever saw, and it was all about sort of unconscious bias in our subconscious bias by investors. But that's a different thing that the notion that we are the show is pro x or y not really we're looking for the best deal. I would respectfully suggest to you, Peter, but thank you very much for the correspondent. Okay, Paul, there, Liam, if you want to have a go on that one.

Right, which we nearly touched. We came close to, didn't wait in recent times? Okay, very good? All right, Peter asks, reading between the lines of a recent episode, your bias towards managed funds versus index is apparent. Nothing wrong with that. I'm sure you have declared your interest elsewhere, But for the sake of transparency, don't you think it would have been prudent to declare this bias during the podcast? Okay, thank you, Peter. Your claim that I'm biased in favor of I have to remember who I'm supposed to be in favor of managed funds versus index. No, that not the case. I would respectfully suggest it's not the case I recently had. We had another piece correspondence was it two weeks ago saying I was a bias against industry funds. There's no bias, please, I would hope that there is no bias of we're really looking for the best for all. Investors sometimes get over enthusiastic about something or other. But there's different strokes for differ from folks, let me tell you, and there is no there is. I think we could do a show one investor bias if I could get the right person to talk about it. Karen Neilson. Years ago, I saw him give an investment lecture which was one of the best lectures I ever saw, and it was all about sort of unconscious bias in our subconscious bias by investors. But that's a different thing that the notion that we are the show is pro x or y not really we're looking for the best deal. I would respectfully suggest to you, Peter, but thank you very much for the correspondent. Okay, Paul, there, Liam, if you want to have a go on that one.

Okay, Suppaul says, I have a question regarding binding death nominations within super I've seen it written that a BDN is normally a more efficient and an effective way to get cash to adult children rather than through the traditional will process. Can you clarify there if there is a downside to using the BDN approach to leaving money to your children.

Okay, Suppaul says, I have a question regarding binding death nominations within super I've seen it written that a BDN is normally a more efficient and an effective way to get cash to adult children rather than through the traditional will process. Can you clarify there if there is a downside to using the BDN approach to leaving money to your children.

Very good question, Paul. Can we just liam before we answer it? Can we just make it really clear what's going on here? The will traditionally was the key instrument for all inheritance. Many people now most of their money is in super apart from their family home, and so this binding death nomination is the will dimension of super isn't it right? So putting that on the table, then to go back to Pau's question, you might cover off on what he asked.

Very good question, Paul. Can we just liam before we answer it? Can we just make it really clear what's going on here? The will traditionally was the key instrument for all inheritance. Many people now most of their money is in super apart from their family home, and so this binding death nomination is the will dimension of super isn't it right? So putting that on the table, then to go back to Pau's question, you might cover off on what he asked.

So the first thing to understand is with our little children, you're super is a separate entity to your will, So your super will not automatically go to your will. So, especially with adult children, you have to use a binding death nomination either way and either send it to your will or send it directly to your children. Okay, The plus side of sending it to your children directly is that it will often go there quicker, and nowadays there's also a lot more chance of a will being challenged. So if if all the money goes into a will, then it becomes a bigger part and people look naturally, when there's money on the table, people are looking to get more of it. So one of the benefits of doing a binding nomination is basically it goes directly out of the children. One of the downsides is if it goes out to them directly, you're looking at the seventeen percent tax on the taxable component of your super So that's any money that you put into your employment or true salary sacrifice, that's called your taxable component. If that passes to your adult children or anybody else out of super you're going to pay seventeen percent. If you send us through the will, he saved two percent, okay, so you don't pay the Medicare levey on that part of it that goes should have.

So the first thing to understand is with our little children, you're super is a separate entity to your will, So your super will not automatically go to your will. So, especially with adult children, you have to use a binding death nomination either way and either send it to your will or send it directly to your children. Okay, The plus side of sending it to your children directly is that it will often go there quicker, and nowadays there's also a lot more chance of a will being challenged. So if if all the money goes into a will, then it becomes a bigger part and people look naturally, when there's money on the table, people are looking to get more of it. So one of the benefits of doing a binding nomination is basically it goes directly out of the children. One of the downsides is if it goes out to them directly, you're looking at the seventeen percent tax on the taxable component of your super So that's any money that you put into your employment or true salary sacrifice, that's called your taxable component. If that passes to your adult children or anybody else out of super you're going to pay seventeen percent. If you send us through the will, he saved two percent, okay, so you don't pay the Medicare levey on that part of it that goes should have.

A very good information just to wind back a little bit, Liam, just to finish off for Paul. So the binding denominations in super should everyone do them if they have a super fund? And how often should they update them?

A very good information just to wind back a little bit, Liam, just to finish off for Paul. So the binding denominations in super should everyone do them if they have a super fund? And how often should they update them?

Yeah? Well, look, thankfully nowadays there used to be almost three years maximum. Okay, So one I believe everybody should do them. And with a software superman, it's often a lot of lawyers will argue that it's better not to do it, to leave it up to the trustee because it's a husband and wife and it's the partner. I just believe the demand of blended families nowadays you need more certainty, So I believe a bonding nomination is essential. Now most funds will offer you the ability to have a non lapsing body nomination. That means that it doesn't expire every three years, it actually keeps on going beyond. That doesn't mean you don't review it. It just means that just in case your circumstances change, your mental capacity declinent, or something goes wrong, that it's still locked in what your wishes are locked in. And we back that up by saying, if you're doing an empower enduring power of attorney, mention in that enduring power of attorney the power to make a boding nomination on your behalf or make sure that no, I want it fixed as to where my super goes. I don't want the power of attorney to have the ability to change it. So think you're the big picture.

Yeah? Well, look, thankfully nowadays there used to be almost three years maximum. Okay, So one I believe everybody should do them. And with a software superman, it's often a lot of lawyers will argue that it's better not to do it, to leave it up to the trustee because it's a husband and wife and it's the partner. I just believe the demand of blended families nowadays you need more certainty, So I believe a bonding nomination is essential. Now most funds will offer you the ability to have a non lapsing body nomination. That means that it doesn't expire every three years, it actually keeps on going beyond. That doesn't mean you don't review it. It just means that just in case your circumstances change, your mental capacity declinent, or something goes wrong, that it's still locked in what your wishes are locked in. And we back that up by saying, if you're doing an empower enduring power of attorney, mention in that enduring power of attorney the power to make a boding nomination on your behalf or make sure that no, I want it fixed as to where my super goes. I don't want the power of attorney to have the ability to change it. So think you're the big picture.

Cutting through here. It's talking about fixing for sure where your super goes, and if you want to fix it for sure, permanently. That is permanently until you in your mind, a non lapsing binding death nomination should be made so that you say, my super goes to jack and jail whatever in the future. And that's how you wanted it divided separate to your will, because your will doesn't cover effect. Does your will not cover your super? How does it work?

Cutting through here. It's talking about fixing for sure where your super goes, and if you want to fix it for sure, permanently. That is permanently until you in your mind, a non lapsing binding death nomination should be made so that you say, my super goes to jack and jail whatever in the future. And that's how you wanted it divided separate to your will, because your will doesn't cover effect. Does your will not cover your super? How does it work?

No? So, because the super is a separate trust, it's a totally separate entity. So to have it go to your will, you must specifically send it there. So you'll see on that binding nomination there's an option to put in your children or your spouse. At the bottom does the option legal personal representative and that's your state. That's the executor of your state. But that you have to use those specific world where it's legal person representative. So you'll find a lot we'll do hunder present to the legal personal representative and then deal with a trigger will. With the amount of will's being challenged nowadays, the amount of money we're talking about, you really need to get expert advice or from a lawyer and from your financial panel to ook, look, what are you actually trying to achieve? Where do you want this money to go to? And also through the way you got your will set up. Is it set up a testamentary trust so that there's flexibility for your beneficiary. So it's a big picture thing.

No? So, because the super is a separate trust, it's a totally separate entity. So to have it go to your will, you must specifically send it there. So you'll see on that binding nomination there's an option to put in your children or your spouse. At the bottom does the option legal personal representative and that's your state. That's the executor of your state. But that you have to use those specific world where it's legal person representative. So you'll find a lot we'll do hunder present to the legal personal representative and then deal with a trigger will. With the amount of will's being challenged nowadays, the amount of money we're talking about, you really need to get expert advice or from a lawyer and from your financial panel to ook, look, what are you actually trying to achieve? Where do you want this money to go to? And also through the way you got your will set up. Is it set up a testamentary trust so that there's flexibility for your beneficiary. So it's a big picture thing.

Yes, but don't assume your will covers your super rock bottom piece of information from Liam shot this morning. Okay, terrific. Hey, thank you Liam. Great to have you on the show again.

Yes, but don't assume your will covers your super rock bottom piece of information from Liam shot this morning. Okay, terrific. Hey, thank you Liam. Great to have you on the show again.

Loved it. Thank you very much, James.

Loved it. Thank you very much, James.

That was Liam Short of Sonna's Wealth Group and I thought that was something we should do folks. As I say, I think it's a time that you can have your own view as to where the markets are going, whether this is a risk or whether it's an opportunity. But certainly to be cash less in this environment is risky and obviously the older you are, the more that is a pertinent and Liam basically covered that at the start of the show. Terrific. Okay, we've got lots of questions coming in, keep them rolling, please, love to have some more. The Money Puzzle at the Australian dot Com dot Au and Today's Who was produced by Leah Sammerglue. Talk to you soon.

That was Liam Short of Sonna's Wealth Group and I thought that was something we should do folks. As I say, I think it's a time that you can have your own view as to where the markets are going, whether this is a risk or whether it's an opportunity. But certainly to be cash less in this environment is risky and obviously the older you are, the more that is a pertinent and Liam basically covered that at the start of the show. Terrific. Okay, we've got lots of questions coming in, keep them rolling, please, love to have some more. The Money Puzzle at the Australian dot Com dot Au and Today's Who was produced by Leah Sammerglue. Talk to you soon.