One month to go till the election. I don't know about you, but I can't wait for it to be over.
Yesterday's interest rate cut is dominating the headlines, and rightly so. More on that a little further down, including what on earth you should be doing with your term deposits now.
But first…
In case we needed reminding, the world's billionaires have it a bit different than the rest of us.
Case in point: Jeff Bezos, the founder and CEO of global retail game-changer Amazon.com, just bought The Washington Post…
It's Washington, D.C.'s newspaper of record. But it's also an unprofitable mess, like so many other once-powerful print publications. (Just ask our friends at Fairfax Media (ASX: FXJ) about problems in the newspaper business!)
Bezos paid US $250 million, but that's spare change for Bezos. His net worth is some US $28 billion.
He'll just add the unprofitable newspaper to his already packed garage of hobbies and pet projects…
Which include multi-million dollar forays into manned space travel and a giant mechanical clock, to be built into the side of a Texas mountain, where the cuckoo will come out just once a millennium.
You could call these pet projects cuckoo, but the man's got a right to spend his cash just as he wants to. As do we!
Which brings me to yesterday's RBA interest rate cut and a gut-churning reality for Australian savers.
In a turn of events that shocked precisely no one…
The RBA cut the cash rate for the fourth time in the last 12 months. It's now at 2.5%, a 53-year low.
It's a move meant to flush your cash out of the bank and into the share market… and the shops. That leaves returns-hungry investors like you and me with two key problems.
The first problem is… I've already got a big enough TV
I sure can't say I'd want to have seen The Ashes in any greater detail than my 42" LCD TV. And I don't need another pair of jeans, much less a new car. (Wine however is a different story… a story for another day.)
Unlike Jeff Bezos, I don't quite have the spare cash to fund giant cuckoo clocks, or to buy The Ashes back.
Like you, what I'm after is seeing my hard-earned money grow, and building my long-term wealth. And right now, it's clearer than ever, that sitting in cash and term deposits isn't a viable option.
As The Australian Financial Review has reported:
"Those looking to eke out a living from their savings, deposits and the like have seen their income drop by more than 30 per cent over the past two years as the official cash rate has been slashed. Life is tougher for the nation's savers…"
You're telling me! An over 30% drop is no joke. We've all felt it.
The second problem follows right on the heels of the first…
It's this: The share market, as measured by S&P/ASX 200 index, is looking a little on the pricey side. To echo eminent fund analyst Chris Prunty, the last thing I'd go and do right now is buy the index.
We've all felt the rising tide of the bull market – even as the economy has slowed a bit – and plenty of us will have a healthy fear of reversion to the mean.
In other words, I wouldn't expect the index to keep climbing by 20%-plus every 12 months. The likelihood is, the index's returns over the next 12 months will be much lower…
So where does that leave us? Fully franked dividends, of course…
Precisely where we always were! Looking out for the most promising individual companies and shares. Seeking out solid, fully franked dividends.
Welcome to the new world, friends – same as the old world. The stock picker's job is never done. Neither is the individual investor's job ever done.
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Motley Fool Share Advisor Investment Analyst Scott Phillips on ABC's The Business, talking stocks with Ticky Fullerton.
As our Motley Fool Share Advisor investment guru Scott Phillips said yesterday, you're the best person to manage your money. The time to get started – or simply to recommit – is now.
So how will you handle the over 30% drop in income on your savings?
We'd humbly suggest you invest in the very best ASX shares.
For the growing SMSF Army…
For many Mum and Dad investors, including the growing SMSF army, that involves turning to the big four banks — ANZ (ASX: ANZ), Commonwealth Bank (ASX: CBA), NAB (ASX: NAB) and Westpac(ASX: WBC).
As you'll see in the disclosure section below, my family has a holding in three out of the four big banks.
But, in proportion to my family's total portfolio, the total bank holdings are relatively modest.
On the one hand you can call it diversification. But on the other you can call it risk mitigation.
At a time when house prices are already riding high, unemployment is rising and the economic growth rate is falling, I don't want to be over-exposed to the highly leveraged, highly valued Australian banking sector.
The Australian Financial Review says "good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit." Get "3 Stocks for the Great Dividend Boom" in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!
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Of the companies mentioned above, Bruce Jackson has an interest in ANZ, Commonwealth Bank, and Westpac.
