Medium-term fixing makes sense
If you have money to invest, a term deposit is the best place to put it, writes George Cochrane.
If you have money to invest, a term deposit is the best place to put it, writes George Cochrane. MY HUSBAND and I are both 37, with three children aged under eight. We own our home valued at $800,000 and a commercial property valued at $350,000. We also have a residential investment property worth $450,000, with a $360,000 debt. We have a self-managed super fund that has $170,000 cash. We have the ability to contribute the maximum $25,000 each per annum to the SMSF. How should we invest this money? E.B.Under present market conditions, I would invest in a range of bank and credit union term deposits and lock in the high rates, though I note some banks have already begun to reduce their deposit rates.This is a medium-term strategy and you should plan for a more balanced portfolio at some stage. However, shares are showing a great many negative signals and even a resource stalwart such as BHP Billiton is selling on a low price-earnings ratio of 11.5. Usually, one would expect BHP to sell on a much higher P/E ratio in a resources boom, possibly even double the present level. For some reason, the market is already valuing the stock down and this is not a positive signal.Super benefits for widowsRECENTLY, a correspondent told you he was a member of NSW State Super for 18 years and elected to receive a lump sum on his retirement in 1987. He was aware that when he died his wife could claim two-thirds of the pension or lump sum. He asked if the consumer price index increases began from the date of retirement in 1987 and continued until his death and what those CPI increases would be up to now. I didn't think this applied to lump-sum payments and applied only to pensions taken from State Super. I thought the wife was entitled to all that was left of the lump sum when her husband died, not two-thirds of the original lump sum (indexed for CPI). What am I misunderstanding? L.C.When a member retires from the NSW State Super Fund, he or she has a choice of lump sum or pension. Whichever one is taken, the widowed spouse is entitled to a death benefit and again has a choice of lump sum or pension, based on two-thirds of the full pension being paid (including indexation) at the time of death, or that which would have been paid if the member had not taken a lump sum. Remember that fact sheets are available at statesuper.nsw.gov.au.Play safe with windfallI'M 84, receive a part pension and will soon inherit about $140,000. I have $28,000 in an AMP trust fund. Would it be worth adding to the trust? Any other suggestions? B.D.Given the state of the markets, I would hesitate to put it into any fund containing equities. Two possible items come to mind. Given your age, do you plan to move into any aged-care residence in the foreseeable future? If so, have you checked what fees and accommodation bond would be required? Or does your home need renovations to maintain its value? If you have no need to consider either of these, I suggest a secure term deposit with a bank or credit union.If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW 2026. Helplines: Banking Ombudsman, 1300 780 808 pensions, 13 23 00.