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Friday, 17 March 2017

Where should I put a windfall? Tell me what you think

I have an unexpected 'windfall' coming my way. I purchased $5,000 worth of bonds that were listed to last until 2074. Given the current low interest rates a lot of companies have been paying out these bonds and opening new ones with much lower interest rates. It's good business for them, but it means they're closing my investment and I'm about to have $5,000 in my pocket. I have some ideas what I want to do with it, but I'd love to hear your opinion.

Option 0: A neeeeeeeeeeeeeeeew car!

Hahaha, kidding. I had to throw this in here. There is no way the money is getting spent on anything but buying back my free time

Option 1: Put it towards the savings goal

This is the obvious option, I've got a goal to reach $20,000 in savings by the first of July (check my last update for February) but honestly that feels like cheating. The goal was to save $20,000, not to pull it out of my investments and put it into my savings account.

Option 2: Pay down some of the mortgage

This is an oldie but a goodie. Unexpected money can always be put towards mortgages, and the way mine are set up any excess payments can be withdrawn later free of charge. But it's not the best use of the money, the bonds were earning 5.05% and the mortgage is only costing me 3.99%. It'd be a net loss of 1% interest each year.

Option 3: Invest! But where?

This is where I'm headed! Invest! But where? The money is coming out of bonds with one of the Big 4 banks. Should I put it back into the same place, or somewhere different? The bank is offering reinvestment in their new bonds, but they pay about the same as my mortgage is charging.

I could drop the money into my Acorns account and dramatically decrease the percentage I'm paying in admin fees. My highest performing investment is in peer-to-peer lending (review to come!) but I have more than 20% of my non-real estate investment there already and I think that might be a bit risky, even if the 9.5%+ return is lovely.

I could also use it to balance my Vanguard portfolio, or I could dig in a bit more research and purchase some strong performing dividends shares, or another set of bonds.

If I get the time, I'd love to think about this more. But I'm also super aware of Warren Buffets advice that boils down to "If you don't know what you're doing, toss it in a low cost index fund like Vanguard and leave it there forever".

According to the stats on this blog close to 100 people drop by every day, most of you come from other personal finance blogs. I'd love to hear what you think (and verify that my stats aren't entirely robots!). The money hits my account on the 31st of March - what should I do with it?


  1. Well, I'll give you my very obvious 2 cents.. research some dividend stocks! There are some fantastic high-yielding ones out there, and your return could be much better than the 5% on bonds, or the 4% saved on the mortgage.
    Don't forget to include "franking credits" when considering shares, it ups the return quite a bit. There are shares that are similar to investing in index funds called 'listed investment companies' - maybe do a bit of research on those? might be a good balance between individual stock picking but with the diversity/hands off approach you're looking for.


  2. That could be a thing! I do like having a few small individual share trades going on in amongst all the index funds - it lets me pretend I have some control and know what I'm doing :) I'll look in to them, thanks!

  3. Hi LadyFIRE, I've just had a read through your blog after Mrs ETT mentioned it to me. Love seeing another Aussie blogging about their journey to FIRE.

    I like the psychological boost of seeing my mortgage diminish, even if it isn't always the best choice financially- so my vote is option 2 :)

    1. Thanks got dropping by! I hadn't actually heard of Mrs ETT (that's Enough Time Too..?) So I'll have a squiz at her site and yours :)

      The psychological boost of seeing my mortgage go down is wonderful, I definitely agree. I have a tendency to withdraw my overpayments and invest them, which I know is mathematically better, but it always hurts to see the owing go up

  4. Personally I'd probably pay off my mortgage. I hate debt and getting rid of my mortgage was the best thing that I ever did. Losing a point for me wouldn't keep me up at night but I can definitely understand the dilemma.

    1. Hi MSM! Thanks for commenting.

      I would love to not have a mortgage, but I always get drawn back by the maths telling me that $1,000 invested and $1,000 mortgage is better than zero-zero. But it would be WONDERFUL to have zero debt

  5. I would second the comment from Jasmin at DDU. Listed Investment Companies are wonderful vehicles for long term investing.
    Some have been around for decades and have a great dividend history. Also gross yields are typically around 6%.
    What did you end up doing with it by the way?

    1. I ended up putting the $5k into a deposit for a new investment property. Between that, Mr. FIRE's deposit and an equity release we've got a hefty deposit. Paperwork is taking forever though.


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