We'd all like to have the flexibility that wealth can bring.
Retiring early, travelling the world and doing as you want, whenever you want all sounds fantastic. Want to go to uni full time and not have to work? How about working at something that you absolutely love, without having to worry how much the pay is?
Well, here are six ways that you can drive your dollar further that not many people actually put into practice…
- Invest overseas – it's not difficult to setup a trading account to get access to some of the world's best stocks – outside Australia. Australian investors can also take advantage of the current exchange rate; buy US stocks now – before we see the Aussie dollar drop into the 80 cent range or even lower.
- Avoid speculative investments – particularly in your self-managed super fund. How are you going to cope, if you lose all or a big lump of your hard earned super? Stick to solid core companies like Telstra Corporation Ltd (ASX: TLS), Resmed Inc. (ASX: RMD), CSL Limited (ASX: CSL) and Woolworths Limited (ASX: WOW), and leave the speculation (if you must) in your own portfolio.
- Avoid managed funds – not just because most of them don't beat the index, but also because they will charge you a higher percentage of your portfolio, whatever their performance is. Listed investment companies (LICs) and exchange traded funds (ETFs) are better options. If you have to use a managed fund, choose one with very low fees, as well as a long, long history of beating the market.
- Take advantage of dividend reinvestment plans (DRPs), which allow investors to receive shares instead of cash dividends for no brokerage fee. In some cases, companies even offer DRP shares at a slight discount.
- Don't hold too much cash. Given the low returns available on term deposits, there is an opportunity cost of holding that cash, when a stock like Macquarie Radio Network Limited (ASX: MRN) is paying a 8.9% fully franked dividend yield.
- Don't hold too little cash. If you are fully invested, you are unable to take advantage of Mr Market's short-term mood swings. The last thing you want is being forced to sell a stock during a market crash to take advantage of another at even lower prices. The guide I use is to hold between 5% and 15% of my portfolio in cash most of the time.
