News Updates
AS IT HAPPENS
China's growth cycle is stabilising and that's good news for Australia's economy, our markets, and possibly your super fund. AMP Capital's Dr Shane Oliver weighs in on recent fears over slowing Chinese growth with a typically calm, well balanced commentary. As always, his article is easy to read and not overly technical. Enjoy! Read more here Rick Maggi (Westmount. Financial Solutions.)
The strong growth in the prices of many Australian shares over the past year is attributable, in part, to the buying of yield-hunting investors. A number of high-yielding financial stocks, for instance, are trading at or near to record highs.
Predictably, in the prevailing low-interest environment, many investors are now turning to more concentrated portfolios of high-yielding shares in an effort to maintain their investment yields and their lifestyles. But, unfortunately, this pursuit of yields comes at the cost of undertaking a higher level of risk for an investor's overall investment portfolio.
Rather than exposing portfolios to higher risk and upsetting carefully diversified portfolios in a hunt for income, investors should focus more on a portfolio's total return – that is the combination of its income and capital growth. With this approach, investors in need of more income than produced by a portfolio draw an amount taken from their portfolio's total return, taking into account cash-flow and capital appreciation.
In this way, investors can remain on track to achieving their long-time goals without upsetting their portfolio's diversification and without taking greater risks. Rick Maggi (Westmount. Financial Solutions.)
How often do you check whether your retirement savings are on track to finance your planned standard of living in retirement? Such check-ups are a crucial part of sound financial planning.
One of the most common times for a retirement-savings check-up would be when individuals enter the final decade or so before their intended retirement date.
Such a check-up may encourage you to really concentrate on maximising your super in the countdown to retirement and possibly to reconsider your target retirement date.
Ideally, of course, retirement-savings check-ups should be undertaken throughout a person's working life to see if the savings are growing adequately.
Ross Clare, research director of the Association of Superannuation Funds of Australia (ASFA), writes in the October issue of the association's magazine Superfunds that individuals and Government policymakers "perennially" ask the question whether retirement savings are on track.
In his cover story - headed Is super on track? - Clare writes that individuals are interested about whether they can afford their wanted retirement lifestyles. And policymakers want to know whether Australia's retirement savings will be adequate and whether some pressures will be taken off the age pension.
Clare notes that superannuation coverage and the amount of super savings have significantly increased since the introduction of the superannuation guarantee scheme in 21 years ago.
However, his article clearly shows that the latest super balances at the age of likely retirement are still markedly below the amount needed to finance what ASFA regards as a "comfortable" standard of living in retirement. This remains the position when the age pension is taken into account.
The latest ASFA Retirement Standard report estimates that a "comfortable" standard of living would cost a single person $41,197 a year or a couple, $56,406. (The issue of what constitutes a "comfortable" living standard is debatable.)
A table prepared by the Australian Bureau of Statistics for ASFA lists the average financial assets of employees aged 60-64 years of age in 2011-12 as: cash, $19,858; shares, $10,663; and superannuation, $183,254.
Are your retirement savings on track to meet your retirement goals?
Robin Bowerman, Vanguard Australia. Rick Maggi (Westmount. Financial Solutions.)
With US Republicans and Democrats going head to head over budget and debt negotiations, the rest of the world looks on powerless and bemused. Beyond some of the media hysteria, in this article AMP Capital's Shane Oliver provides a balanced, sober look at the debt ceiling standoff and the likely outcome. Read more here Rick Maggi (Westmount. Financial Solutions.)
Australian unlisted commercial property returns have been strong over the last three years, recovering from the GFC driven slump of 2008/09. So can these high returns be maintained or are we moving into a lower return phase? Read more here Rick Maggi (Westmount. Financial Solutions.)
In this commentary, MLCs Senior Investment Strategist, Michael Karangianis, takes a balanced look at our housing sector, contrasting the Australian landscape with experiences overseas. A good, simple read. Read commentary here Rick Maggi (Westmount. Financial Solutions.)
In this update, AMP Capital's Dr Shane Oliver takes a close look at where we are right now in the cycle, company profits and the risks and opportunities going forward. In a background of growing worry over Australia's economy, this is a timely and poignant article. Read more here Rick Maggi (Westmount. Financial Solutions.)
Ask any of your friends what they wish they had more of in life and perhaps a few might say a faster car or bigger house - but what most people are really looking for is more time.
Investing your hard earned money in a smarter, more efficient manner not only allows you to spend more time focussing on a smaller selection of investments, it also allows you to spend more time on other, more important matters beyond the process of investing, like your health, your family, your friendships or your business.
Your Financial Planner is the same. By investing your superannuation or pension fund more efficiently, they'll have more time to help you achieve your goals, improve your retirement outcome, reduce your tax, protect your estate, and just generally help to control the controllable.
At Westmount, we believe that markets work, 'asset allocation' drives performance more than anything else and costs really do matter. In other words, it is infinitely possible to construct an effective investment portfolio (superannuation or otherwise) in a way that doesn't require constant monitoring, regular tinkering and an enormous fee to pull it all together. This has some obvious benefits for clients - lower costs, less stress, simplification and, yes, more time.
So if you believe that your life is a little more complicated than it should be, particularly in the area of investing or superannuation, don't just shrug your shoulders and accept the way things are. Instead, ask yourself, what else could I be doing with my precious time? And then call us to change the script for good. Read all about 'indexing' here Rick Maggi (Westmount. Financial Solutions.)
This note looks at the deal to avert the US fiscal cliff along with its debt ceiling and broader economic outlook. Generally pretty positive for 2013 (easy reading). Enjoy! Rick Maggi. Read here
AMP Capital's Dr Shane Oliver weighs in on the recent round in emerging market currencies and assets. A cautionary article worth a read. Rick Maggi. Read more here
With the Coalition's plan to impose a 1.5% levy on the top 3200 companies in Australia to help pay for their six-month paid parental leave proposal, we've had a few questions about franking credits and how the proposal might impact investors and retirees. While the full details are yet to be announced, based on the current rumours, the actual impact on franked dividends would be fairly minimal - much ado about nothing. The following is a back to basics explanation of franking credits for the uninitiated… What are Franking Credits?
It's often hard to give up on the idea that investment should be exciting - an interesting article from Dimensional VP, Jim Parker. Rick Maggi Read more here.
Picking the market sector that will outperform and timing it to maximise returns is a difficult thing to do. Produced by Vanguard Australia, the following tables graphically illustrate the performance of different sectors (within the Australian share market) and the performance of different regions (international shares).
The take away is simple one. Building a portfolio within broadly diversified equity funds at the core can help lower risk and smooth out peaks and troughs in returns over time. Rick Maggi
In this article AMP Capital's Dr Shane Oliver takes a look at potential implications for investors as move towards and beyond the Federal Election. Interesting reading. Rick Maggi. The Federal Election
Every year Vanguard releases it's 'Vanguard Index Chart' and it's always worth a look. The chart illustrates what the value of $10,000 invested twenty years ago might be worth today had you invested in various sectors such as Australian shares, commercial property, cash etc. Along the twenty-year journey you see the impact of important events (both positive and negative) such as 9/11, US subprime and the Japanese Tsunami on markets and the value of the original investment. Vanguard also includes a second graph, called 'the power of diversification' which shows the performance of each sector in percentage terms, every year, for the last twenty years.
Seeing visual proof of market volatility (all of them), each having their day in the sun, followed by less than happy times, serves as a potent reminder of the importance of diversification and patience. We can all do with some gentle encouragement, especially during tougher, challenging times, so I like to keep this chart on my wall! Rick Maggi. View charts here
"Low returns are shaping as the new normal" That was the headline in The Australian Financial Review in early July 2012 in anticipation of another grim year on global equity markets for Australian investors. How did that forecast turn out? Rick Maggi Read more here
The last financial year saw returns of over 20% from Australian and global shares, so what's in store for 2013/14? Rick Maggi Read more here
The tax office - in its role as regulator of self-managed super - stripped 132 SMSFs in 2012-13 of their prized complying status for committing serious breaches of superannuation law. This is the toughest action that the ATO can take against a wayward SMSF. And it typically affects the savings of all the fund's members.
The market value of SMSFs declared non-complying is taxed at the top marginal rate, less any non-concessional (after-tax or undeducted) contributions. This could remove almost half a fund's assets.
And the ATO prevented 180 proposed new funds from entering the system. (As part of its compliance work, the tax office examines whether a fund has been established for "genuine" superannuation purposes. Sometimes funds are setup as means to extract savings from the super system before the members are legally entitled to the money.)
The ATO's Compliance in focus 2013-14 publication - released over the past week - reveals how the regulator will scrutinise the activities of SMSFs over the coming 12 months.
The annual compliance program can serve not only as a warning of where the tax office is looking but as a reminder of areas where your self-managed fund could possible improve.
During 2013-14, the ATO intends to particularly focus its SMSF attention on:
1) Prohibited loans. (SMSFs are prohibited from making loans to fund members and their relatives or providing other financial assistance to them.)
2) Funds with a history of non-compliance, including failure to lodge annual returns on time. The ATO is also keeping an extremely close watch on the compliance of new SMSFs.
3) Incorrect reporting of tax-exempt pension income. (The tax-exempt treatment of pension assets is a valuable tax break that some SMSFs incorrectly claim.)
4) Tax losses. (The ATO wants to ensure that funds are correctly calculating any claimed losses.)
5) Related-party transactions. (Generally, an SMSF is barred under the in-house asset rules in superannuation law from leasing or having investments with related parties involving assets that are worth more than 5 per cent of a fund's total market value. Business property is among the few exceptions to the rule.)
6) Non-arm's length transactions. (Self-managed funds are required to invest on a commercial, arm's length basis, including transactions involving related parties.)
How does your fund measure up in regard to these areas of ATO focus? Rick Maggi.
Markets have had a rocky time lately. Is this something to worry about? Rick Maggi Read here
Want to be kept informed in real-time? Tired of stale, irrelevant websites and blogs? Subscribe to our free updates here. Happy New Year! Rick Maggi & Staff.
