Mr Smith walks in and sits down
Schipke: Good afternoon, Mr Smith.
Smith: Hey Tom. So, any progress on the advice for my 100 000?
Schipke: Yes. As a matter of fact, I've outlined all your investments and what I think you should do with them
Smith: Well let's hear it!
Schipke: ok. Firstly, I think you should split your money into four different industries. Diversification is very important when investing your money. If you don't diversify, something could happen like the industry you're invested in goes broke, and you'll be in trouble. For example, if you've invested in an oil company and the oil runs out. Alternatively, one industry might boom, and you could miss out, when you really want a piece of it, for example if an oil company suddenly finds a new stock of oil. So I wouldn't recommend investing all your money into one company, no matter how well they seem to be going.
I've also decided that you'd do well to stay clear of banking your money, because I believe you can make much more money at a reasonable safety level with these shares. The only reason to put your money into a fixed term account would be to make sure you're getting a safe investment, as the bank guarantees a certain percentage on top of your investment. But I can almost guarantee more than 5% profit per annum with all these investments, as I'll explain in a minute.
Smith: Ok, sounds sensible...
Schipke: Good? Ok. So to cut straight to the chase, I think you should invest about $25 000 into the Commonwealth bank shares.
Smith: Commonwealth? Ok, why would they be a good investment?
Well as you probably know due to the media coverage of late, they're doing very well. And unlike...