12/01/15: 2015 Outlook

2 things you need to know…

The economic backdrop for the year ahead is likely to be fairly similar to what we saw in 2014; expect continued economic expansion but at a relatively modest and more uneven pace…

Globally • Growth is likely to remain around 3.5%; ranging from 1-1.5% in the Eurozone and Japan, 3.5% in the US and 7% in China. • Inflationary pressure is likely to remain fairly low and the overall monetary backdrop, despite a probable tightening by the US in the middle of the year, will remain fairly easy. We will likely see further easing in Europe, Japan and China.

For Australia • We should see growth move up to around 3% • Inflation is likely to remain benign • The Reserve Bank of Australia is projected to cut the cash rate to 2.25% early in the year with a 50% chance of another cut in the June quarter.

Rebalancing the economy As Australia transitions back to a more balanced economy, investors should try to avoid getting too gloomy. Yes, the mining sector is slowing down, but low interest rates and a falling Australian dollar is providing a great boost for non-mining parts of the Australian economy. For instance, we’re seeing a return to life for retail-related areas of the economy. Housing and construction has picked up, construction activity related to infrastructure continues, and the tourism, manufacturing and higher education sectors are showing signs of improvement.

Unemployment will eventually fall While economic growth is still not strong enough to lead to a fall in unemployment, we expect that the job market in 2015/16 will start to pick up as the stimulus to the economy from lower interest rates and the falling Australian dollar starts to feed through.

What does this mean for investors? It should mean another year of reasonable returns for diversified investors. But there are two key things that investors need to be mindful of: 1 What we saw in 2013 and in 2012 (returns of around 20%) out of shares is not sustainable over the long- term. Expect something more like 8-10%; 2 Every year experiences a lot of ‘noise’ and 2015 will be no different. This can be negative in terms of distracting you from your key investment strategy. Try and turn down the volume on the financial news and focus on maintaining a long-term investment strategy. (Dr Shane Oliver, AMP Capital)

Rick Maggi Westmount Financial

8/12/14: Lessons from 2014

Plus 3 themes to watch going forward…

This edition of AMP's Market Watch is a quick, simple read, but I think the most important reminder relates 'market seasonality' and the usual 'Santa Claus' share market rally phenomenon. Read Market Watch here

Rick Maggi Westmount Financial

02/12/14: Interest rates remain on hold

Where to from here?

The Reserve Bank of Australia has announced the outcome of its monthly board meeting, deciding to leave the official cash rate on hold at 2.5 per cent.

NAB chief economist Alan Oster said he expected no change in the cash rate until the end of 2015.

"The RBA still believes that a period of stability in interest rates is the most prudent policy for the time being," Mr Oster said.

"While there are tentative signs of an improvement in household spending, they do not yet signal a sustained change in household and business conditions," he added. In the absence of any "major surprises", the cash rate is unlikely to rise until late 2015, Mr Oster said.

Westpac chief economist Bill Evans noted that the November monetary policy meeting minutes were "slightly more dovish" than October's. "The growth outlook is a little less optimistic while there appears to be less hysteria around the potential risks associated with the housing market," Mr Evans said. "Indeed there is no implication of a substantial intervention by the authorities. The RBA is clearly in an ongoing ‘wait and see’ mode," he said.

It is also worth noting that in other quarters further interest rate cuts are being predicted for 2015. Deutsche Bank today went on the record predicting two 25 basis points cuts mid and later next year.

Our view at Westmount is that talk of interest rate cuts is premature at this point. Unless the Australian economy significantly deteriorates further, we expect the RBA to simply maintain current rates a little longer than previously expected. Of course, if rate cuts do occur, this would probably be a positive for shares and property, so it is critical to keep your portfolio diversified and flexible at all times.

Watch a full interest rate report from Macquarie here.

Rick Maggi Westmount Financial

01/12/14: China cuts interest rates

…and why it matters

The recent decision by the People's Bank of China to cut rates is a positive for commodities and Australian shares. Read more here

Rick Maggi Westmount Financial

30/10/14: Punchbowl removed: The end of 'Quantitative Easing'

End of an era… After a year long phasing down period, last night the US Federal Reserve finally ended its quantitative easing (QE) program, introduced at the height of the Global Financial Crisis back in 2008.

Since the worst days of the GFC, unemployment has fallen, consumers are spending again, businesses are investing and banks are lending. So after all is said and done, QE seems to have actually worked - the US economy is now well and truly into expansion mode and looking a lot stronger than Europe and Japan that have taken longer to adopt QE.

It would be fair to say that, while the US economy isn't exactly booming, the Fed Reserve's decision to take the economy off life-support was, at least for now, an important sign that the US may now be able to finally stand on its own two feet.

While the punch-bowl may have been removed from the table, the music continues to play. Consistent with the Fed Reserve's softly, softly approach, they've also indicated that interest rates won't be going up in a hurry, even as the US economy continues to recover - an encouraging signal to the US (and the rest of the world) that concrete evidence of a sustainable recovery will be needed before interest rates are finally raised in earnest.

The ending of US QE is also a positive for Australia and removes a source of upwards pressure on the Australian dollar (great for exporters).

Rick Maggi Westmount I Financial Solutions

27/10/14: Deeming Deadline: 1 January 201

Time for action!

Has your financial advisor contacted you about the account based pension (ABP) deeming rule changes effective 1 January 2015?

Don’t miss out If you haven’t, it’s time to act now. If you wish to recommence your ABP before the changes take effect, we recommend you finalise all paperwork by 1 December 2014 to ensure you retain your current income test treatment or you may risk losing it.

Recap of deeming changes On 1 January 2015, ABPs will be added to the definition of financial assets in social security legislation, which means all new ABPs will be subject to deeming rules for both Centrelink and Department of Veteran Affairs income test purposes. Under the new deeming provisions, all financial investments are assumed to earn a certain rate of income, regardless of the income generated.

Grandfathering provisions will be available ABPs commenced prior to 1 January 2015 will retain their current income test treatment where: · The person was receiving an income support payment immediately prior to 1 January 2015 and, from that day, they have continuously received an income support payment. · An ABP automatically reverts to a reversionary beneficiary on the death of the original owner, provided that at the time of the reversion, the reversionary beneficiary is receiving an eligible income support payment.

If you have any questions or if you need help on this extremely important development contact Westmount on 9382 8885.

Rick Maggi Westmount I Financial Solutions

19/10/14: Comment: FOFA amendments disallowed

Should you care?

Back in July, the government negotiated a deal with Clive Palmer to save the 'FOFA' (Future of Financial Advice) amendments. However this morning two cross benchers (Senators Lambie and Muir) did an about-face and joined Labor senators opposing the government's FOFA agenda. We can only assume that we will now see the return of FOFA (the'full-strength' version) unless a compromise can be found.

Considering Senator Lambie's recent clashes with PUP leader Clive Palmer, this seems more like a personal grudge, along with a good helping of political naivety. But for better or worse, that's the system we now have.

So exactly what does this mean for you, as a client of a financial adviser? Hysteria and vested interests aside, probably very little.

If you already have a good relationship with a non-aligned financial adviser who provides an efficient and meaningful service to you at a fair price, you won't notice much (or any) change to the way he or she interacts with you.

Let's not forget that FOFA (Labor's full strength version) was introduced almost 18 months ago which, among other things, effectively banned investment commissions and ramped-up disclosure requirements, creating a more transparent, trusting environment for investors, retirees and professional financial advisors alike. And contrary to media reports, this law was welcomed by virtually all concerned, including financial advisors, and continues to this day.

The FOFA amendments or FOFA 'lite' (introduced by the Liberals) sought to reduce some of the new law's excessive 'red-tape' without jeopardising the lion's share of consumer protections. Personally, I thought a regulatory adjustment made some sense, but that's history now.

I've spent over 30 years in financial services and I believe that the vast majority of financial advisers I've known over this time are ethical, educated, well-meaning people who sincerely want the very best for their clients, and to also run profitable practices for themselves, their families, and their employees. That's just good business.

So naturally, it has been disappointing to see the reputations and motives of solid professionals being publicly denigrated during this lengthy, polarising process.

My advice is to ignore the cynics with obvious vested interests. If you're comfortable with your current financial adviser, hold on tight and follow your own instincts, chances are you're in very good hands.

Time to move forward.

Rick Maggi

04/09/14: Profits and the Australian economy

Not bad!

The property reporting season that just finished was reasonably good with profit growth expectations affirmed. Read more here

Rick Maggi Westmount I Financial Solutions

04/09/14: How long can interest rates remain on hold?

…perhaps a little longer

An interesting read for a recurring theme out there. Read more here.

Rick Maggi Westmount I Financial Solutions

11/06/14: Europe getting its act together

…and what it means for investors

Dr Shane Oliver takes a close look at the European landscape. Very encouraging. Enjoy! Rick Maggi. Westmount. Financial Solutions.

Read more here

06/06/14: The structural challenges facing Australia...

…and what it means for investors.

A sobering, but balanced commentary from AMP Capital's Dr Shane Oliver. Worth a read in this blurry, politics laden post-budget environment. Enjoy!  Rick Maggi, Westmount. Financial Solutions.

Read here

17/04/14: Are shares headed for a crash this year?

…not likely

After a strong period of growth its natural to wonder whether the share market is headed for a crash at some point in the near future. This article examines the potential going forward. Read more here If you have any questions about the structure of your own superannuation or investment portfolio, please don't hesitate to call us.  Rick Maggi, Westmount. Financial Solutions.

03/04/14: Are we in a property bubble?

A commentary from Dr Shane Oliver...

As the China driven mining boom fades, the Australian housing recovery couldn't come at a better time. But with interest rates poised go up over the next six-twelve months, what does this mean for property investors and borrowers? Read more here  (Rick Maggi, Westmount. Financial Solutions.)

02/04/14: Connecting the dots

'Outside the Flags' with Jim Parker

Human beings love stories. But this innate tendency can lead us to imagine connections between events where none really exist. For financial journalists, this is a virtual job requirement. For investors, it can be a disaster. Read on here   (Rick Maggi, Westmount. Financial Solutions.)

15/03/14: Why asset allocation is so important

…making a comeback

If we've learned anything since the GFC, it's that a well diversified portfolio of assets, including local and overseas shares, property, cash, bonds etc., is the smartest (and easiest) way to preserve and grow your capital, whether you are retired or accumulating assets. Even as the global economy recovers, thanks to the pain experienced by most of us during the GFC, its unlikely that a new found respect for asset allocation will fade anytime soon.

In this article, Dr Shane Oliver explains what asset allocation is, why it's important to you and how to manage the economic cycles. It should be liberating to know that about 90% of the gains (or losses) investors experience in a lifetime have to do with the amount of exposure they have to various sectors like shares, property, cash etc., and much less to do with micro-decisions such as stock selection or the specific managed fund they purchase.

In other words, managing your portfolio of assets can be much less time consuming, less stressful and less expensive, if structured and maintained properly, regardless of your personal objectives and style. (Rick Maggi, Westmount. Financial Solutions)

Read here

07/03/14: Australia: Looking beyond the gloom

Cheer-up, it's much better than you think!

In this article, AMP's Shane Oliver focuses on the Australian economy, which has been getting some depressing press lately. Read more here  (Rick Maggi, Westmount. Financial Solutions.)

05/03/14: Ukraine: Relief rally (and then some)

A more conciliatory tone

Russian President Vladimir Putin said he saw no immediate need to invade Ukraine while leaving open the possibility of using force, as the U.S. weighed sanctions on Russia and offered aid to the Ukrainian government.

In his first public remarks since Ukraine said its Crimean peninsula was seized by Russian forces, Putin said yesterday he has a duty to defend ethnic Russians in the region and reserved the right to military action. U.S. President Barack Obama challenged Putin’s rationale for intervening, as Secretary of State John Kerry unveiled $1 billion in loan guarantees to Ukraine’s cash-strapped government during a visit to Kiev.

As a result stocks rebounded worldwide yesterday after Putin’s remarks stirred optimism that the worst crisis between Russia and the West since the end of the Cold War is cooling.  Putin said troops stationed in Crimea, where Russia keeps its Black Sea fleet, have only been securing their bases. Gunmen who’ve seized crucial infrastructure and surrounded military installations are acting independently, he said. At the time of writing, the US Dow Jones Index had rallied 227 points to 16,395 overnight while Australia's All Ordinaries Index is up 0.60% to 5,444.

And locally...

Perhaps more importantly, today, Australia's quarterly GDP surprised on the upside posting an annualised rate of 2.8% - higher than the 2.5% GDP rate economists were expecting. When coupled with the announcement today, from Chinese authorities, that their growth rate 'goal' for 2014 will remain at 7.5%, this should add more fuel to the overall optimism currently taking hold of financial markets - great news for Westmount clients. (Rick Maggi. Westmount. Financial Solutions.)

26/02/14: Warren Buffett on keeping investing simple

It doesn't need to be difficult or expensive

Warren Buffett's annual letter to shareholders is almost always a treat to read, even if you don't own any shares of Berkshire Hathaway. It's eminently readable, and he usually throws in some evergreen personal advice that anyone can use. This year is no exception, based on an exclusive excerpt just published by Forbes magazine.

In the letter, Buffett tells the story of two investments made more than two decades ago: a 400-acre farm outside Omaha and a commercial building in Manhattan. The farm is now worth more than five times what he paid. And he says the Manhattan investment produces annual income equal to more than a third of the initial investment.

His secret? He focused on the fundamentals of what the investments would produce, not on their fluctuating value. The real estate property, for instance, was adjacent to New York University, which he notes "wasn't going anywhere."

"Games are won by players who focus on the playing field -- not by those whose eyes are glued to the scoreboard," writes Buffett. "If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays."

Buffett says that for "the nonprofessional" (that's the rest of us), there's no need to be picking winners in the stock market, or hiring someone else to do it either. And you should definitely ignore people on TV who try to predict broader market conditions. A low-cost index fund, which captures a wide enough cross section of businesses, should be plenty. And he reveals that he's following his own advice in his will (emphasis added):

My money, I should add, is where my mouth is: What I advise here is essentially identical to certain instructions I've laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife's benefit. (I have to use cash for individual bequests, because all of my Berkshire Hathaway shares will be fully distributed to certain philanthropic organisations over the 10 years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard's.) I believe the trust's long-term results from this policy will be superior to those attained by most investors -- whether pension funds, institutions, or individuals.

So there it is. You don't need much more than a portfolio of well diversified index funds (like Vanguard's) along with the right exposure to various assets, which depends on your personal attitude towards risk, volatility and reward. Of course, the lesson from Buffett and others is that ordinary investing doesn't need to be complicated. In fact, if it's not simple, you're doing it wrong.

As most Westmount clients are already taking advantage of 'indexing' and have seen the results first hand, Buffett's comments should come as no surprise, but it's reassuring to know that you're in good company! Rick Maggi (Westmount. Financial Solutions.)

19/02/14: China debt worries and growth

Overdone?

Whether you have a superannuation, pension or managed fund, direct shares or property, what happens in China, the world's second largest economy, matters to your financial health. In this article AMP Capital's Dr Shane Oliver looks more closely at some of the 'noise' surrounding China these days, and whether this is something we should all be worried about. As usual, an easy to understand reader-friendly article from one of Australia's most respected Economists. Enjoy.  Read article here  Rick Maggi (Westmount. Financial Solutions.)

19/02/14: Age Pension Bonus: Last chance to register

Move quickly, deadline approaching!

If you're still working, male, and you were aged 65 or over (or 63.5 or over if you're a female) before September 2009, then you need to read this article.

If you fall into this age group and you expect to receive the Age Pension when you do finally retire, then you need to be aware that the Pension Bonus Scheme (PBS) closed to new members from 20 September 2009. Assuming you fall into this specific age group, the good news is that you can still register for the Age Pension Bonus, but you will have to hurry because applications close 28 February 2014.

Background: The PBS is a scheme to encourage older Australians to defer taking the Age Pension. The scheme pays a tax-free bonus to eligible individuals who work beyond Age Pension age, provided that they qualify for the Age Pension when they eventually retire. The maximum payment available is around $47,000 when you defer claiming the Age Pension for five years or more, and you're eligible for the full Age Pension when you do claim your entitlements. If you're eligible for a part-pension, you may be entitled to a part-Pension Bonus.

According to Centrelink, you will be eligible for the Age Pension bonus if you satisfy the following conditions:

> reached Age Pension age before 20 September 2009 (age 65 for men, 63.5 for women).

> continue to work since reaching Age Pension age.

> have not yet claimed the Age Pension.

> register before 1 March 2014.

If you have already applied for the PBS, then the scheme continues to apply for you, subject to meeting the scheme's 'work test' condition.

Note: Your eligibility for the PBS runs from the time you register, rather than the time you reached Age Pension age.

If you think that you may be entitled for the PBS, we recommend that you immediately make an appointment with Centrelink to formally determine your eligibility. Westmount clients can call our office if in doubt - we'll perform a quick calculation based on your current circumstances - beats waiting in a queue! Rick Maggi (Westmount. Financial Solutions.)