Have $32k for 3 months - what do I do with it?

Hi

I have the use of $32k for 3 months (it is money I have put aside for various taxes).

Unless I can come up with something more innovative that money will probably be linked to my loan and save myself interest.

As prudent as it may be, I dont find that option particularly appealing, so I am keen to explore alternatives for what I can do with that money between now and early August.

My only unbreakable rule is this - come August I need $32k.

This place is teeming with smart people, so opinions from the floor please.....

Mark

Pitt St said:

My only unbreakable rule is this - come August I need $32k.

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Hi PS,

You've said you want zero risk, so IMO expecting a return above that of an interest offset a/c is a big ask.

Slow, steady & boring often wins the race.

KJ

keithj said:

You've said you want zero risk

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No, I said that come August I need [access to] $32k. There is a difference.

But thanks for your thoughts.

Mark

Interest Offset

You will have access to the money in an offset. It sits in an account offsetting the loan until you need it. And because its effectively earning 6.75% while in there, and you dont pay tax on this saving, its saving you probably around 10% pa, which is damn good for such a short term investment.

Tubs

It is hard to beat tax free savings that a 10% offset account can give.

I'm not sure if 'loan sharking' is legal but I hear its returns can be good. You may need to employ some 'heavies' to ensure you can get your $32k back when you need it though. The 'heavies' may be tax deductable ;-)

Hi Pitts

You could have hung on to your IP at Walkerston for another 3 months.


Beat 2.5% relative return on $32K for three months? - That's around $800 tax free......EASY

-Buy approx 3700 BHP shares geared 50%.

IF the shares go up by $1.50 which they probably almost certainly without much of a doubt will,

You will sell in late July for a profit of around $2500 after tax.

IF the price goes down $1.50, well....

Have you considered the Casino?




Nothing in this advice is intended to be advice and you should consult a financial advisor before making investment decisions.

Hey MB,

With the short term money market the way it is atm your going to find it difficult to beat the returns of dumping it in your offset imho.

Something to do with that damn interest rate / bond market interaction I spose =)

XBenX

/me can sense a theme here....

Option 1 - Drop the $ into an offset account

Option 2 - Say the magic words to the croupier "$32k on red, thanks"

For those that are interested, I posed the same question on Property Talk in NZ.

Thanks for the replies

Mark

Hi Pitts,

BHP ............. today down another 1.7%

Buy Buy Buy!

Offset account looks pretty good but VERY boring.



P.S.
How's the weather in Invercargill?

Hehe Ray Brown - this is a good little ramp you've got going

Hi gang,

Certainly parking surplus short term funds in an offset account can sometimes be a good strategy. However as Sim pointed out quite sometime ago the return may not be quite as good as first thought depending on the situation. For example, if you have debt on an investment property with an offset account it needs to be remembered that any funds deposited into this account also reduce your tax deduction. So this needs to be factored into your calculations.

However despite this I personally park our surplus funds intended to pay our future tax liability into our trust's offset account. It is easy, the return it still good and I know the money will be there come tax time.

Regards - Gordon

True Austini - the calc would vary quite a bit depending on whether it would be offset against deductible or non deductible debt...

Austini

But consider the offset account against the PPOR debt and then tax does't count.

How many of us have PPOR debt? Most I would think.

cheers
quoll

Ray Brown said:

How's the weather in Invercargill?

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I'm in Sydney today and the weather here is no cooler than it was in
Townsville yesterday.

As for offset accounts, why would you have one if you don't use it? And I'd rather not incur an expense (or miss a saving) just to get a tax deduction. Anything other than the money market is going to have entry/exit costs so I'm all for the offset/LOC option.

Thommo

Pitt St said:

Hi

This place is teeming with smart people, so opinions from the floor please.....

Click to expand...

My opinion: You are a smart guy, the answer is within you.

As returns go higher, risks go higher.

Are you REALLY asking for a magic inv vehicle that can give a better return than parking it in an offset for a little while? (it can be done)

What are you GOOD at - can you use the money on something that you already know how to profit on, where your expertise will maximise the chance of success and the likely return. People profit by doing something really well, over and over, allowing them to lower the risk. I think you already apply this principle to your main investment capital - the game where you know the rules and have control.

The real question however is valid i reckon.

If you took the time to (fer example) to learn how to trade options/shares/futures/x for the very explicit purpose of maximising the return of your 'short term money' then that might be your answer. Devise a system that maximises your chances of profit, minimises the risk, whilst giving a better net return than parking dollars in an offset against your PPOR. I'm sure it can be done - and might be worth pursuing if you really wanna squeeze every last cent out of your available capital. Will it be easy initially? No. Could it work? I'm sure its already being done.

I dont do that though - too lazy. I just park it and focus on making more money with my investment and trading capital - i prefer to leave my buffer and 'set aside for costs' money in a no-brainer. Why? Because I reckon the effect it would have on my net/gross wealth in 10, 20, 40 years is going to be negligible.

Make sense?

T.

Hi all,

bit chilly down south today i believe.

PITT ST, what was the go with your $32K now the 3 months are up.

I think BHP was $17.01 when you asked the question. Now up more than 20%!

I wish I had taken my own advice....

Bummer about BHP (I didn't buy the shares either).

The money is currently tied up in a 2 bedroom free-standing townhouse in a good part of Invercargill.

The plan is to reno and either sell or LOC.

Unfortunately, unforeseen circumstances have led to a delay in the start of the reno, though there is a flicker of light in the tunnel.

Best regards

Mark

So Ray if we play this game again, where's best to inject a new $32k for 3 months?

OK,

I will play your game....

next 2 weeks, if and when ASX to falls to $20.00 , buy 3000 @ $20.00 geared 50%.

Bring to the boil while stirring, simmer for 3 months.

Presto!

BHP was 17 bucks? seems like a long time ago.