Weeks 5-6

Week 6 - 11-17 Jan

Blimey. AH rates owning shares in one company as the highest risk on his 1-10 scale. This just reinforces the need for me to diversify. I will diversify! I don't think at this stage of the game I am ready to invest in debentures or futures and for obvious reasons, an investment property (given I don't have one for myself!). I think rather a managed fund through a company I trust. I have started to research online and am trying to wade through the complicated jargon. I am cross checking with AH's slides and PC's book and it is slowly making more sense to me. There's just so much to take in and I must admit I am finding this section of the course a little intimidating. I don't know how I'll go in the quiz.

Recently, I've been looking up my shares in the paper. I've never done this before and this course is reinforcing to me just how ignorant I've been about my financial situation. Whilst my shares are doing okay (they're now hovering around the 3.25 mark) I'm really seeing the need for me to diversify. It is something that is scary but also exciting. This course is also making me see that I need to do some pretty serious research!

There was an article in the SMH Weekend Business section Jan 9-10 by Annette Sampson about how predicting short-term market movements is a futile exercise. Investment in long term "middle path" investments are the way to go. She outlines the bull market run through the mid-2000s and goes through the performances of cash and fixed interest holdings, shares and stocks and reinforces what PC and AH are saying - think long term rather than trying to time the market. And you may just be able to sleep at night!

Week 5 - 4 Jan-10 Jan

Phew - Christmas over. I really wish I had enrolled in this course during the semester rather than Summer School. I found that the expense tracker comparisons will be skewed by the holiday season. However, I am going to use the expense tracker as inspiration and set up a spreadsheet that I will use all year to try and get my expenses down. Already, it has made a difference because I am seeing all that money that slips literally through my fingers. It couldn't be better timed because we will be living off one wage and we will need to know where every cent goes. Scary.

Have started reading the Investments section and it is a little daunting. I should be looking at it more like it is an exciting challenge. I like PC's racetrack analogy...speaks volumes, doesn't it? And it's one thing that I have not done in my investment portfolio - diversified - and it's for sentimental reason again! About 5 years ago, my Mum bought me shares in a medical company that she thought would do well. I just left them there because I didn't know what else to do with them - and the company seems to be surviving the crisis. I asked her if she kept her shares and she said she didn't have any - she couldn't afford them but she'd bought them for me and my brother. She's such a champion! I feel so grateful that my mother is so grounded and wise with money, as opposed to my father who is like a kid at the fairground.

The 10 tips are interesting and make complete sense. PC and AH both say that you need to understand the investment and to beware of marketing gimmicks. I think AH said it best when he outlined these people know what they're doing - they sink a lot of money into marketing to work out how to take money from you. Wise words.
It's just crazy that a glitzy annual report with the right photography can still sway investors. Are we that stoopid?

Anyway, the main message I am getting so far is to spread the risk by diversifying. This is something I really need to do. When we switch over our money management plan in February, I intend on splitting my wages into a balanced portfolio (when we use my boyfriend's wage to live on). I will invest some into cash management and then invest in a share portfolio. This is what I am thinking right now - obviously as I learn more I may change this!

I Googled Warren Buffett and was interested in a couple of things. Firstly, his website is terrible and this surprised me. But I guess the guy doesn't need to impress anyone in that way. Secondly, I listened to a YouTube interview where he says he pays less tax than his Receptionist because she pays payroll and he pays capital gains tax.

http://www.youtube.com/watch?v=3z_UrOKtjHk

He has offered $1 million to charity if any of the Forbes 400 richest people can prove that on average they pay a higher tax rate than their secretary. The guy is amazing!