Archive for the ‘Independence and Careers’ Category

Are you over 30? You need to read this…

Monday, August 21st, 2017

Superannuation is, and will continue to be, a hot topic in the financial advice industry. No matter what your age, once you begin your working life superannuation should be in the back of your mind, but MoneyTalk magazine have uncovered some confronting statistics that it’s worth thinking about if you’re around the age of 30.

If you’re 30 years old today, you have 35 years left in the workforce and need to save enough superannuation to fund you for 35 years of retirement. Now, many of you may be thinking – ‘Hold on a minute, I don’t need to save for that many years!’ well, with the ever increasing medical improvements you just might. The median age of death is increasing by 0.6 years every year, and currently sits at age 84. If this rate continues, by the time today’s 65 year old’s reach their mid 80’s, life expectancy could have been bumped up to around 94 years old!

If you’re in your 30’s or 40’s today, it’s not unlikely that you could need to fund your retirement until the age of 100 – an intimidating prospect for many. If you’re going to live to 100, and only work until you’re 65 it is estimated that you’ll need a nest egg of $3,000,000 – but how are you going to achieve this?

1. Review your superannuation fund now

When reviewing your superannuation fund, take a detailed look at the investment returns and any fees to be paid. Take special notice of tax being deducted from your account before payment needs to be made, this can equate to thousands of dollars’ worth of lost investment returns over the years.

2. Consider making extra contributions

The younger you start contributing extra funds to your superannuation account, the better off you will be. However, there are strict limitations of how much money you can contribute to your fund, and in what capacity you can contribute- familiarise yourself with these rules so as to avoid any mistakes.

3. Build up non-superannuation investments

Think about bettering your financial situation as a whole, rather than focusing solely on your superannuation. Think of how best to build your investments outside of your superannuation, with a view to eventually transferring them into your super in the most tax efficient way. You Financial Adviser can help you to plan this out.

4. Consider gearing

Borrowing to invest money is not suitable for everyone, be sure to speak to you Financial Adviser if you are considering this as an option to boost your superannuation. If done correctly, gearing can be used both inside and outside superannuation.

No matter what your current age, you must consider and plan for your financial future – invest your time as well as your money into superannuation planning.

Source: Money Matters Magazine, December 2016.

An article by Infocus Securities

Economic Update August 2017

Monday, August 21st, 2017

Within this month’s update, we share with you a snapshot of economic occurrences both nationally and from around the globe.

Economic growth improves in key countries
– China economy shows strong signs of strengthening
– Australian employment data continues strength
– Rates on hold in Australia and the United States (US)

We hope you find this month’s Economic Update as informative as always. If you have any feedback or would like to discuss any aspect of this report, please contact Michael Berinson or his office.

There were some notable economic growth numbers released in July. After a few years of declining (but still stellar) growth numbers in China, the latest statistic was back up to 6.9%. The new China leadership team is about to be ushered in and the Chinese know how to throw a party. On top of that, the China Purchasing Managers Index (PMI) came in at 51.4 for manufacturing and 54.5 for services – both in the sweet spot. Throw in 11.0% for Retail Sales and 7.6% for Industrial Output and you have what Keating might call, ‘a beautiful set of numbers’.

Turning to the US, the anaemic growth in Q1 was overshadowed by the June quarter coming in at 2.6%. True it’s not the 3% that the Fed is aiming for or the 4% that Trump was dreaming of. But 2.6% is really solid. Unemployment is low at 4.4% and 222,000 jobs were created in June when only 180,000 new jobs were expected. It is true that wage growth was low at just 0.2% but you can’t have everything all at once can you?

Even Australia was looking good. We had some very nice jobs and unemployment data – against the trend of 2016. For whatever reason, the labour force data are looking better. But the RBA chimed in at the start of July saying that 3.5% is our ‘neutral’ interest rate. That is, rates should be at 3.5% when things are chugging along. Since we are sitting on only 1.5%, there are a lot of hikes in the pipeline!

It was a bit silly to advertise that opinion just now and an Assistant Governor had to come out and hose things down. Retail sales did come in at a biggish 0.6% for the month. We’re not cooking on gas but at least we are cooking again.

As we go around the world the United Kingdom (UK) is starting to struggle a little with its latest growth of only 0.3% for the quarter and Brexit looming large. Prime Minister Abe in Japan has gone from rock star status to a meagre approval rating of 29.9% in a few years. The Royal Bank of Canada bumped up rates to 0.75% from 0.5%.

So the dice are still rolling. Fortunes are rising and falling but there seems to be no basket cases anymore and there is lots of good news.

We became aware of a new expression this week. It’s been out but under the radar for a few years. It’s still worth sharing. On asking why stock markets – particularly in the US – remain strong – the new catch phrase is that it is a TINA market. Not as in Turner or Arena, but it is the acronym for ‘There Is No Alternative’. Money has to be invested somewhere when cash rates are so low.

TINA puts a safety net under markets for a while but we must be vigilant for when Tina starts singing.

So where to from her? Trump is floundering but his economy is doing well. The Australian economy seems to have stabilised. To us, it looks like a smooth ride ahead – until we see otherwise.

The current US reporting season has been unusually strong meaning that increases in earnings are supporting recent stock price strength. Can it go on? In a word, yes!

The big Tech Companies are having mixed results but they are looking strong. We should never be complacent but the second half of 2017 doesn’t look too bad at all. Perhaps we all deserve a break after the trials and tribulations of 2008 – 2015.

Asset Classes

Australian Equities

The ASX 200 was flat for the month of July. The Materials sector was the strongest on the back of some very strong commodity price movements. Healthcare took a beating at 7.5% with Utilities ( 5.3%), Telcos ( 4.3%) and Industrials ( 3.2%) not far behind. Financials (+1.2%) put in a creditable performance. A big sector rotation just took place.

Our August reporting season is just getting underway. As always, the companies’ outlook statements will be crucial for the future of our market. We have found some recent softening in broker forecasts of company earnings and dividends. At least that downgrade has resulted in our forecasts for capital gains to be only a tad under the long-run average.

Foreign Equities

The S&P 500 fared a bit better than us in July posting a solid +1.9% capital gain. The London FTSE also did well at +0.8%. Emerging Markets were particularly strong at +4.1% on the rising tide of commodity prices.

Our expectations for Wall Street are for a good finish for the year despite the strong first seven months of +10.3%.

Bonds and Interest Rates

With the “Fed” (US Federal Reserve) on hold again in July, the next chance for a hike is at the September meeting. But most forecasters are not expecting another hike this year. The odds of a rate hike by December are priced in at a little under 50%.

The Fed is widely expected to start its balance sheet repair in September. This amounts to gradually lowering the $4.5 trillion bond debt down to $2.5 trillion over a number of years. Since this policy will gradually raise long rates on its own, there is no reason for the Fed to also raise the underlying Federal Funds rate at the short end.

The RBA kept rates on hold again in July and August. The majority of pundits are expecting the next move to be up but not until at least the middle of 2018 – and possibly 2019.

Our view of needing a cut at home is on the back burner for the moment. We need a little more data to change our call. It all depends upon the next GDP growth number to be posted on September 6.

Other Assets

Commodity prices were on a flier in July. Iron ore was up +15.2%, Brent Oil up +9.8% and Copper up +6.2%. Our dollar was up +3.8% against the greenback.

The volatility index called the VIX was down 3.7% in July. This fear index is around all-time lows.

Since we are a commodity producing and exporting country, the restoration of solid commodity prices bodes well for our total exports and GDP growth.

However, not everyone wins from this sectoral rotation. Healthcare and a number of Industrials names are finding stronger headwinds after a good first half to 2017.

For example, our Healthcare sector is up +13.0% for the year-to-date including the poor 7.5% for July.

Regional Analysis

Australia

Our headline CPI inflation came in at only +0.2% for the quarter or +1.9% for the year. Since the RBA’s target range is 2% to 3%, this read gives the RBA no motive to raise rates anytime soon.

With total employment up around 170,000 in the first half of 2017 – with nearly all of them full-time jobs – we are back on track. During that period, the unemployment rate has been stuck at around 5.6% and wage growth is non-existent.

Europe

The focus in Europe is on what the implications of Brexit are for employment and trade. It will be nearly two years before we find out the full story so we cannot expect much good news from that region in the medium term.

However, the underlying economies are so much stronger than in recent times. We don’t have to waste much energy worrying about Greece and the other ‘PIGS’ countries anymore. Can you remember what PIGS stands for? Those days are gone!

China

The China data have been on a roll for quite a while. Without taking sides, it is hard to conclude after recent data that China is not undoubtedly doing well at the moment. Yes, there are political problems with the US and who would want North Korea as a neighbour – let alone an ally.

But what seems to be forming is a view that China has regained its role as a lead player in the world – as solid and dependable – at least in an economic sense.

US

Trump is hiring and firing quicker than he did on “The Apprentice” – but the West Wing is for real.

The US is facing a number of problems in a month or so but these ‘episodes’ on TV have not stopped US jobs and growth.

We don’t think anyone can reliably predict how this scenario will play out but, as annoying as the tweets and press releases are, the economy is marching on!

Rest of the World

With sanctions on Russia being on the front burner, and the woes of the Venezuelan leadership also up there on many news wires, some instability in oil pricing is likely. Both countries are big exporters.

Article prepared by Infocus Securities

Relationship Capital: An Advice Practice’s Most Valuable Balance Sheet Asset

Monday, August 21st, 2017

An article from Riskinfo E Magazine that highlights the most valuable asset for any business that is often overlooked when looking at the Value of the business, but in reality is the platform on which any good business should be built. It’s about Trust, integrity, and relationships – something we at Active Wealth Managers firmly believe in and practice.

When we think of business capital, it is done in financial terms, for without this asset it is impossible for an advice focussed enterprise to operate or grow.

Mentor Education argues that ‘relationship capital’ is equally vital. In fact, it is the foundation for developing new markets (and clients) – and a quick glance at the financial statements will reveal how much of this asset a business has.

Business isn’t a spectator sport, and how well you develop and nurture relationship capital will define and play a major role in its financial success…or failure.

Building relationship capital

Developing strong relationship capital is a business strategy that’s often overlooked and even approached in a superficial or tokenistic manner.

It’s the relationship capital of your people that combine to become the reputational capital of your business.

But the effort put into building good relationship capital is one of the most cost- effective strategies with potential to deliver extraordinary outcomes.

It takes thought, practice, and the right attitude to get it right with the key focus being trust, sincerity, honesty, integrity and dependability – that when combined create the business culture, and in turn the reputation capital.

The practice principal and key personnel of an advice business build culture over time, as a result of their daily activities and interactions. It’s the relationship capital of your people that combine to become the reputational capital of your business.

When people think of ‘networking’, they often do so through a very narrow prism of networking events, adding contacts to a database, having meetings, etc.

In order to build relationship and reputational capital, a broader view is required.

With every P2P interaction – client, employee, the local café cashier – you’re engaging with people in your network, and the manner in which you speak and engage with each and every one is either contributing to or deducting from, your relationship capital.

Therefore, choose words, topics, and your thoughts carefully.

How many interactions have we all experienced with people that were lazy, argumentative or patronising in the way they sought or articulated information?  Those people are undermining their personal and commercial capital, one careless and thoughtless interaction at a time.

We are all brokers of information, and the quality of the information is determined by us, and how well we deliver it.

Networking and engaging with other people is something that deserves more thought and preparation than many people give it. To be successful and effective it must be strategic and tactical in its application and purpose.

If you’re going to put time into networking, you must also put in the effort required to maximise the opportunities and outcomes.

Time isn’t money – relationships are money

Reflect on those significant client win successes: was it related to the number of hours worked each week on the proposal, or was it the rapport and depth of relationship and trust developed with the client?Developing relationships demands a significant time investment, but it’s the quality of the relationships – and the amount of relationship capital developed – that you’ll be able to take to the bank!

The extent to which positive, trusting and solid relationships are built will ultimately be reflected in the balance sheet.

Remember, people can open doors for you, but you must walk through them to find the opportunity. No matter how many networking events you attend, only you can build relationships with the people you meet.

It’s important to understand the opportunity cost to you of not networking well

The cost of not getting it right

Some might say that it’s difficult to measure the success of networking and building relationship capital. I would argue that measuring your success in these areas is as easy as looking at the financial statements of your advice practice.

It takes time to develop good relationship capital, but it’s important to understand the opportunity cost to you of not networking well and failing to develop that capital.

Relationship capital grows into reputation capital for your advice business over time. If you view this type of capital as an asset, you’ll see the sense in growing and protecting it. And as it starts to increase, you’ll see a corresponding increase in opportunities, and in your financial statements.

If you’re a reluctant networker, let me leave you with these two quotes:

“Life isn’t about finding yourself. Life is about creating yourself.” (George Bernard Shaw)

“Death is not the greatest loss in life. The greatest loss is what dies inside us while we live.” (Norman Cousins)

 

Article from Riskinfo E Magazine

Issued by Mentor Education RTO 21683: www.mentor.edu.au

Protecting the life (and people) you love

Monday, March 13th, 2017

With more Australians having children later in life, starting a second family and carrying significant levels of debt well into their 50s and 60s, life insurance has never been more important.

Life is full of unexpected twists and turns and you never quite know what is around the corner. Protecting your family against the loss of all the things you have worked hard for over the years is the cornerstone of a sensible strategy to defend your wealth and current lifestyle.

Although most people know this, being ‘underinsured’ – or holding insufficient life-related insurance cover – remains common across all age groups in Australia.

The underinsurance problem

Australians are famous for their laidback attitude and, unfortunately, that attitude often extends to taking out life insurance protection for their families. While research shows more than three-quarters of us understand the need for life related insurance, rating it as important or very important, only 52 per cent of those surveyed said they actually held some form of life insurance.i

Consulting firm Rice Warner has calculated that Australians should hold a total of $4,581 billion in life insurance to be considered adequately protected, but the actual figure held is only $1,811 billion.ii

Although the typical middle-income Australian family with two children needs an estimated $680,000 in life insurance cover to be considered adequately protected, Rice Warner found that the median level of life insurance held by these families is only $258,000.

Paying your bills and protecting your dreams

Without adequate life insurance protection, the financial burden arising from a serious illness, accident or death can cause severe financial hardship.

Such an event is not uncommon, with the Lifewise/NATSEM Underinsurance Report noting 18 families in Australia lose a working parent every day of the week. One in five families is affected by the death of a parent, a serious accident or an illness that renders a parent unable to work.iii

Increases in the number of second and blended families and ageing parents also mean many breadwinners now have more people than ever relying on them financially.

Life insurance protection is also essential for singles, as they often have fewer resources to fall back on to pay their debts and ongoing commitments such as rent and mortgage repayments if they become seriously ill or disabled.

Guarding your wealth

When it comes to developing a comprehensive strategy to protect your financial position, life insurance is a key component as it creates a safety net to protect your current lifestyle and the wealth you have accumulated.

Without adequate insurance protection, many families find themselves facing real financial hardship if the main or secondary income-earner, or the primary carer of the children, becomes sick or dies.

It’s important to look at your options in terms of life-related insurance as part of your financial goal setting. These products provide a highly effective way of protecting assets such as the family home, covering commitments such as credit card debts, paying large medical bills and avoiding being forced to sell off investments assets cheaply.

Life insurance benefits can be used in different ways depending on your personal circumstances and health, with the lump sum payment they provide easing the financial burden during what can be a very difficult time.

A tailored approach

For a complete wealth protection strategy, death cover is usually combined with other life-related insurance products such as critical illness and total and permanent disability (TPD) protection.

  • Life insurance pays a lump sum on your death or diagnosis of a terminal illness, 
  • Critical illness (or trauma) cover pays an agreed amount if you are diagnosed with a specified critical illness, such as cancer or heart disease,
  • TPD insurance provides you with a tax-free lump sum if you are permanently unable to work due to accident or illness.
    These life-related insurances are designed to provide protection against the most common adverse life events and provide you with peace of mind so that if the unexpected happens, you and your loved ones have some protection.

If you would like some advice on the right mix and amount of life insurance for your family and financial circumstances, don’t hesitate to give us a call.

i www.tal.com.au/about-us/media-centre/life-insurance-lacking-in-those-with-most-to-lose

ii http://ricewarner.com/wp-content/uploads/2015/10/INFOGRAPHIC-UnderinsuranceinAus2014.jpg

iii www.lifewise.org.au/downloads/file/aboutthelifewisecampaign/2010_0203_LifewiseNATSEMSummaryA4FINAL.pdf

General Advice Warning This information is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. Michael J Berinson Pty Ltd strongly suggests that no person should act specifically on the basis of the information contained herein but should seek appropriate professional advice based upon their own personal circumstances. Although we consider the sources for this material reliable, no warranty is given and no liability is accepted for any statement or opinion or for any error or omission.

Make your super last

Friday, November 18th, 2016

3d-person-getting-it-right

Australians enjoy one of the highest life expectancies in the world, which means you can look forward to a long and healthy retirement. Here’s how to make sure your super lasts.

Did you know that Australia is now one of just four countries in the world where both men and women can expect to live into their eighties?¹ While that’s fantastic news, it also makes saving for retirement more important than ever.

Almost half of Australians over age 40 are worried about outliving their retirement savings, while many are confused about the best way to achieve the retirement lifestyle they dream of.² But by getting good advice and planning ahead now, you can take control and enjoy the peace of mind that comes from knowing your future may be secure.

Work out how much you need

The first step is to figure out how much income you want to receive each year in retirement, and how much you may need to save in order to get there.

Plan for different stages of retirement

It’s also important to think about how your spending patterns may change during your retirement, to plan ahead accordingly.

For example, in the early stages when you’re at your most active, you’re likely to need more funds for travel, sports and recreation. Then, as you enter a more relaxed phase of retirement, you’ll need to be ready for possible health issues, so you can afford the care you need as medical treatments are becoming more sophisticated and more expensive every year.

When you crunch the numbers, you may find you’re facing a super gap. An effective way to grow your super savings while potentially paying less tax may be via salary sacrifice.

You may also want to keep your options open for the later years when you may need more intensive health support, including specialised accommodation.

Also don’t forget to factor in lump sum spending on big ticket items, such as home renovations or a new car. Because, as retirements grow longer, our cars and appliances are increasingly likely to fade away before we do.

Boost your super

When you crunch the numbers, you may find you’re facing a super gap. An effective way to grow your super savings while potentially paying less tax may be via salary sacrifice.

Even a small contribution can make a big difference over time, as you earn returns on your contributions. When you invest pre-tax income through salary sacrifice, you may also benefit from the 15% concessional tax rate on super contributions, putting you even further ahead.

Currently you can contribute $30,000 a year up to the age of 50 in concessionally taxed super contributions (which include employer super guarantee contributions), or $35,000 if you’re aged 50 or over. Note – changes to super come into effect in 2017.

Finally, if there is a large sum you will like to contribute to super, you will need advice as there have been dramatic changes to how contributions are made.

Review your investment option

Our super is one of our most valuable assets, so it’s not surprising many of us seek to protect it by investing in a low risk option. But it’s also important to remember that trying too hard to avoid risk today could expose you to a greater risk — running out of money tomorrow, when your savings don’t produce the returns you need for a comfortable retirement. So it’s important to choose the right investment option for your goals and investment time-frame.

That’s where personalised advice from a professional adviser can make a difference. Your adviser can help you calculate how much super you’ll need, then find the best strategy to reach your goal. Talk to your adviser today, call our office to book a meeting.

¹Australian Bureau of Statistics, Aussie men now expected to live past 80, 2014.
² Investment Trends, Retirement Income Report, December 2013.
Article by Colonial First State

Give yourself more flexibility in the lead up to retirement

Thursday, November 10th, 2016

take-control-your-retirement

Nowadays, we’re living for years longer than ever before. 60 is no longer old age! So it makes sense that you want the flexibility to approach retirement in a way that suits you. A transition to retirement strategy enables you to access part of your super while you are still working and has a number of benefits.

Boost your super and supplement your income

There are two main benefits of a transition to retirement strategy:

Maximising your super – You can continue to work while drawing an income from an account-based pension. By doing this you can salary sacrifice as much of your pre-tax salary to super as possible while receiving an income from your pension. This allows you to increase your retirement savings without reducing your income. This can also be extremely tax-effective because pension payments are generally taxed at a lower rate than your salary.

Supplementing your income – If you want to move into part-time work before you retire but don’t want your income to drop you can use your pension to supplement your salary.

Ease yourself into retirement

You can choose different transition to retirement strategies depending on what is most important to you. If you believe you have enough retirement savings you could still benefit from a transition to retirement strategy. For example, if you wanted to renovate your home before retirement you could keep working full-time and use the extra income from your transition to retirement pension to pay for the work. That way you get your home improvements done before retirement without taking on any debt.

Are you eligible?

You can take advantage of a transition to retirement strategy if you meet the following conditions:

You are aged between 56 and 65 years of age
You are still working
You transfer some, or all, of your super account to a transition to retirement pension

Important considerations for high income earners

It you earn a high income it’s important to consider the concessional contributions cap before deciding to salary sacrifice as part of a transition to retirement strategy. If you exceed the concessional contributions cap, which is currently $35,000 for the 2015-2016 financial year, you may be taxed an extra 31.5% tax on any contributions above the cap.

Set it up right from the start

Transition to retirement strategies can provide significant tax savings and benefits, but they can be complicated. For this reason we strongly recommend that you talk to us in the lead up to retirement, so that the strategy you put in place is right for your personal situation. Come in and have a free, no obligation initial chat, and then take it from there. 

Economic Update – September 2016

Monday, September 5th, 2016

business-world-financial-data-abstract-background-15228374

 

 

 

 

 

Economic Update

By Ron Bewley*.  

Within this month’s update, we share with you a snapshot of economic occurrences both nationally and from around the globe.
With Brexit fears cast aside:

– United Kingdom (UK) confidence bounces back
– United States (US) Federal Reserve claims economy strengthening
– Japan ready to add more stimulus

We hope you find this month’s Economic Update as informative as always. If you have any feedback or would like to discuss any aspect of this report, please contact your Financial Adviser.

The Big Picture

It is just a year since some reports on the China stock market sell-off last August predicted doom and gloom. As we suggested at the time, it wasn’t a major problem because that market was, and is, in its infancy. The market stabilised, and it is now comfortably above those 2015 lows.

At the end of 2015, some nerves were rattled about the prospects of Federal Reserve rate hikes in the US. While occasional bouts of uncertainty continue to cloud market movements, the successive Fed meetings have gone reasonably smoothly.

In January 2016, the Royal Bank of Scotland told us to ‘Sell everything’ and some other big houses made similar dire predictions. Markets are comfortably up and selling wasn’t the answer.

Oil and iron ore prices dived in February 2016. Iron ore prices dipped below $40 but later climbed to $70. Oil was predicted by some to get down to $20, or even $10, when it was $26. Instead, prices have more or less doubled. Another ‘crisis’ averted!

And then there was ‘Brexit’, and the dire predictions that went with it. The ‘leave’ vote won, but consumer confidence jumped 3% in the UK in the first month following the referendum. Markets are stable and the pundits got it wrong again.

Of course, at some point, an event will come along that will have a medium-term adverse impact on our investments, but most of these stories are simply overblown in quiet news periods. At this point we feel that all of those ‘scare stories’ are fading into oblivion and there are no new major known issues brewing.

At home, our labour force data isn’t great, but the mid-year fall in full-time employment seems to have turned around. Unemployment is stable at 5.7%. Our Reserve Bank is expected to cut rates again – from 1.75% to 1.50% sometime this year – but that is more to align our rate with the rest of the world rather than a reaction to avert major issues at home.

News in August was dominated by the Olympics. Australia was disappointed but ‘Team GB’ beat all expectations. There are big lessons for economic management to be learnt from these results.

Australian Olympic success was at a low in Seoul, 1988. Government funding was pumped in with increasing success to match – until, that is, at Beijing and after.
Great Britain (GB) hit its nadir in 1996 at Atlanta, with only one gold medal being won. The national lottery was born with substantial taxes going to sports’ funding.

In both cases it took time for athletes to respond, but pumping money into a venture alone is not an investment. Just like with migrants, the expression “The first generation makes it, the second builds on it, and the third loses it” might apply to economies and sports alike. But our athletes might now be doing as well – it’s just that others are rapidly improving.

Importantly, Australia was reported to have concentrated funding on our traditional sports. GB, on the other hand, looked for opportunities in sports they had not previously been good at. GB’s plan seems to have thrown up many unexpected successes.

The reaction to the GFC was for governments to cut back on fiscal spending around the world. Now we need well-tailored programmes to start the next phases of growth. Not pink batts, but spending on considered infrastructure projects and the like could be what we need now. But with our government system living on minority leadership for too many years, it is difficult to see from where such a programme will come.

In the meantime, growth might be a little below par but good enough. A shot in the arm for infrastructure could well be the start for a return to our desired long-run growth path.

Asset Classes

Australian Equities

The ASX 200 did lose 2.3% in August, but that followed a massive +6.3% gain in July. Virtually all sectors lost ground in August but market volatility remains reasonably low.

After reporting season in August our view of the fundamentals remains strong, we expect the 2016/17 financial year to be strong. The calendar year-to-date for 2016 posted a gain of +5.6% including dividends.

The high-yield sectors of Financials, Property, Telcos and Utilities continued to seriously lag behind the other sectors in 2016 y-t-d including dividends. Indeed, capital losses in high-yield have more than wiped out dividend payouts. The total returns of the ‘other’ sectors have exceeded +14% y-t-d.

Foreign Equities

Wall Street hit some new all-time highs in August. The VIX fear index reached quite low levels suggesting markets are quite settled even if August was not a strong month for markets.

With a rate hike in the US unlikely before December, only the Presidential election seems likely to interfere with a smooth finish into the end of 2016.

Bonds and Interest Rates

The RBA kept rates on hold again in Australia. The Fed Reserve’s second-in-command caused some volatility with his comments, shortly after Chair Yellen made her views known. While Yellen saw the chance of a hike strengthening with good economic data, Fischer went further putting September back on the table. December is still our call for the first hike.

Other Assets

Oil prices have seemingly stabilised on talks between OPEC and Russia. At current prices, oil is too cheap to warrant shale oil to come back on stream in the US and too high to cause major concerns going forward.

The VIX volatility – or fear – index reached a low for 2016 during August. Our dollar did vary somewhat over the month but the change on the month was relatively small.

Regional Analysis

Australia

On the face of it our employment data grew strongly, but full-time employment fell while part-time employment did the work. The unemployment rate was steady at 5.7%.

Trend full-time employment – the official preferred method – has started to pick up – possibly because of the earlier rate cut.

China

The month started reasonably well with the Purchasing Managers Index (PMI) at 49.5 for manufacturing – which is just below the break-even 50 level. The services version of the PMI continues to be well above 50 as the domestic economy takes over from infrastructure expenditure.Mid-month retail sales and industrial production did miss forecasts by a fraction but not enough to worry markets.

U.S.A.

Janet Yellen talked up the strengthening US economy at the annual Central Bankers’ conference in Jackson Hole. There is no doubt that employment data has bounced back strongly from the earlier mini-slump. But two good numbers are not enough to eradicate all discomfort.

Europe

The Brexit vote won at the end of July. August Retail Sales surged at +1.4% against an expected +0.1%. UK confidence also surged from a three year low to 109.8 from 106.6. With Olympic success as well, it seems the UK has side-stepped the issues that some worried about earlier in the year.The Bank of England did cut its rate at the start of August and also pumped in some unexpected monetary stimulus.

Germany’s GDP came in at +0.4% for the quarter smashing expectations. There are also other pockets of mild success. Brexit will happen slowly so trade deals can be renegotiated far before trade becomes an issue.

Rest of the World

Japan can’t win a trick, as they just recorded another month of deflation. Japan is pledging to continue to stimulate the economy as required.Japan’s problem is its falling population. Many countries, such as ours, would also look a little glum if populations were not growing!

*Ron Bewley (PhD,FASSA) – Director, Woodhall Investment Research

This article is brought to you by Infocus.

Important information

This information is the opinion of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL and Australian Credit Licence No. 236523 trading as Infocus Wealth Management and may contain general advice that does not take into account the investment objectives, financial situation or needs of any person. Before making an investment decision, readers need to consider whether this information is appropriate to their circumstances.

You can afford Life Insurance

Monday, September 5th, 2016

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In a recent study found that 95% of families didn’t have adequate levels of insurance.

One in five families are likely to be impacted by the death of a parent, a serious accident or illness that renders a parent unable to work; The typical Australian family will need to cope on half or less of their income as a result of under-insurance.¹

With so many families without adequate cover, unexpected financial pressures on top of a serious heath event can put significant strain at a very difficult time.

Understanding their finances are one of the main reasons Australians fail to protect themselves and their families. How can I afford the premiums? Here’s how.

Insurance cover through super

Did you know that you can pay your insurance premiums through your super? This may assist you with paying insurance premiums when you have a low disposable income.

Other ways to pay for cover

You can make contributions to your super fund and gain tax benefits:
• If you’re eligible to salary sacrifice to super, you can have premiums paid from pre-tax dollars. And because your super fund may be able to claim a tax deduction for the premiums, you may not need to pay tax on the contributions.
• If you’re self-employed, making a personal contribution to super from after-tax income to cover premiums lets you claim a personal tax deduction.

You could also:

• take advantage of tax offsets of up to $540 by making a super contribution to your low-income spouse ² 
• make personal contributions to super, and if eligible, qualify for a Government co-contribution of up to $500³

1 Lifewise/ NATSEM underinsurance report 2010
2 Subject to eligibility
3 Eligibility for the co-contribution applies.

Source: AIA Australia Limited

Earning A High Income Won’t Automatically Make You Wealthy

Monday, September 5th, 2016

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When you earn enough money to pay for everything you need there’s no reason to save regularly, right? Wrong. There’s far more to becoming wealthy than earning a high income as suggested in the well-known proverb ‘The art is not in making money, but in keeping it’.

High income earners can make the worst savers

It’s an unfortunate fact of life nowadays that the more you earn, the more you tend to spend. Today, there is so much pressure to spend money on the latest gadgets, prestigious fashion labels and having a picture postcard home. We’re living in a spending culture where the next best thing is always just around the corner.

When you earn a higher than average income it’s easy to justify upgrading your lifestyle here and treating yourself a little bit there. After all, you’ve worked hard to earn that income and you want to get some enjoyment out of it.

And even if you don’t think of yourself as the type of person who is careless with their money, there may be other factors at work. Behavioural scientists have shown that it’s human nature to seek instant gratification. We’re much more likely to do something that makes us feel good now, like spoiling our loved ones with lavish gifts, than doing something that’s better for us in the long term, like saving some of our money.

You reap what you sow

You may be able afford a high standard of living now but could this lifestyle be maintained if you stopped working?
To get the full benefit of your income you need to cap your spending and get into the habit of putting away part of what you earn every week or month. This way your money can start working for you.

There are many benefits of having spare cash around:

You will have money set aside for any small emergencies so you don’t have to worry about how you will cope if something goes wrong

You will be able buy things with cash rather than credit cards. Many retailers offer discounts for paying with cash. And you’ll be saving money because you won’t be paying interest on credit card purchases.

Importantly you will have spare money for investing which will help you grow and protect your wealth over the long term.

The more you save, the more you will earn

Regular investing also gives you the chance to boost your savings by taking advantage of compound interest. Compounding, or earning interest on your interest can make a significant difference to the value of your savings or investments over time. The longer you save, the greater the effect of compounding.

Let’s look at a simple example that shows the power of compound interest. Say you had savings of $20,000 and each month you put away $500. In just 10 years that $20,000 would have grown to $110,074, assuming the interest rate on your bank account was 5%. Of that, $30,074 would be the compound interest that you’ve earned along the way.

Spend wisely and enjoy the benefits of saving

Starting a savings plan is one of the simplest and easiest ways to save money. Your savings are kept in a separate account to your everyday spending account, so you won’t be able to spend this money as part of your weekly expenses. It will also attract a higher rate of interest, which if left to accrue in the account, will help you get your goal of wealth creation underway.

Article prepared by Infocus Wealth Management

How to make insurance more affordable at tax time

Monday, June 27th, 2016

piggy bankDid you know you can save money by buying your insurance in super? This is because super can offer both cash-flow benefits and tax concessions.

Most super funds offer insurance that can help you, or your dependants replace your income if the unexpected was to happen. This includes Life, Total and Permanent Disability (TPD) and Income Protection insurance.

While these types of insurance can also be bought outside super, you’ll have to fund the premiums from your own cash-flow and you probably won’t get any tax breaks if you buy Life and TPD insurance.

On the other hand, when you insure inside super, the premiums are deducted from your super balance. This means you can arrange the amount of cover you need without having to pay the premiums from your cash-flow.

This may mean you’ll use up some of your super money which could help you meet your living expenses in retirement and while this could make a difference when you’re no longer working, it’s important to think of what could happen to your family’s lifestyle in the meantime if you don’t have the right level of cover.

If you or your family faced financial difficulty you could run out of savings very quickly, well before your intended retirement date. So insuring in super could be a great solution if you don’t have enough cash-flow to pay for the premiums.

Even if you think you could pay the premiums outside super, there are still cost-effective benefits of insuring inside super. This is because if you make super contributions, there are some tax concessions, regardless of whether the contributions are used to buy insurance. For example:

  • if you’re an employee and eligible to make salary sacrifice contributions, you may be able to buy insurance through a super fund with pre-tax dollars
  • if you earn less than 10% of your income from employment (eg if you’re self-employed or not employed), you can generally claim your super contributions as a tax deduction, and
  • if you earn less than $49,488 each year, of which at least 10% is from employment or a business, and you make personal after-tax super contributions, you may be eligible to receive a Government co-contribution of up to $500 in 2014/2015. That could help you cover the cost of future insurance premiums.
    To find out more about insuring inside super, please contact our office.

Source: MLC