Author Archive

Super vs Property – What works for retirement income?

Posted by Greg Provians

There is no debate that Australians love investing in property. The value of Australian residential real estate at the end of August 2024 was an estimated $10.95 trillion.i

Some love it so much that they believe property is a better option for providing a retirement income. They see a bricks and mortar investment as a more tangible and solid approach than say, superannuation, preferring to take their super as a lump sum on retirement to buy property. They may also choose to invest a windfall, such as an inheritance, or the proceeds from downsizing the family home, in property instead of their super.  

So, given that a retired couple above age 65 needs an estimated yearly income $73,337 to lead a comfortable lifestyle, could a property investment do the job?ii

While it’s true that a sizeable property portfolio could deliver rental income to equal a super pension, it might mean missing out on some useful benefits.

After all, super is a retirement savings structure with significant tax advantages. It also has the flexibility to provide investments in a range of different asset classes, including property.

Meanwhile, super fund performance has, generally speaking, outstripped house price movements over the past decade. Super funds (invested in an all-growth category) returned an annual average of 9.1 per cent during that time while average house prices in Australian capital cities grew 6.5 per cent per year over the same period.iii, iv

The performance of superannuation and property

Superannuation: Diversified Fund Performance

Fund categoryGrowth Assets (%)1 Yr (%)3 Yrs (% pa)5 Yrs (% pa)10 Yrs (% pa)
All Growth96 – 10012.76.18.39.1
High Growth81 – 9510.85.77.78.4
Growth61 – 809.4.96.37.2
Balanced41 – 607.43.94.85.8
Conservative21 – 405.52.63.34.3

Note: Results to 30 June 2024. Performance is shown net of investment fees and tax. It is before administration fees and adviser commissions.

Source: Chant West

Property: Capital city average prices

Source: SQM Research

Not that past performance can give you any guarantees about what will happen in the future. Indeed, the average numbers smooth out the years of high returns and the years of negative returns. More important considerations in making an informed decision are your financial goals, your investment timeframe and how much risk you’re comfortable with.

Liquidity

One of the most significant differences between super and property investments is liquidity, or how quickly you can convert your investment to cash.

With super, assuming you’re eligible, funds can be accessed relatively easily and quickly. On the other hand, if your wealth is tied up in property it may take some time to sell or it may sell at a lower price.

Nonetheless, market cycles affect both property and super investments. They can be affected by volatile conditions and deliver negative returns just at the time you need access to a lump sum.

Long-term investing

Superannuation is designed for long-term growth, often spanning decades as you accumulate wealth over your working life. The magic of compounding interest can lead to substantial growth over time, depending on your investment options and the state of the market.

Property investments, on the other hand, can be invested for short, medium, and long-term growth depending on the suburb, the street, and the type of house you invest in. Of course, there are additional costs in buying a property (such as stamp duty) plus costs in selling (including capital gains tax). If there’s a mortgage over the property, you’ll need to factor in the additional costs of repayments and interest (bearing in mind that interest on investment properties is tax deductible).

Risk appetite

Investors’ attitudes towards risk also play a role in choosing between super and property.

Superannuation funds can be diversified across various asset classes, which helps to reduce risk. But property investments expose investors to a single market meaning that while there might be a big benefit from an upswing, any downturn may be a blow to a portfolio.

Making an informed choice

Ultimately, any decision between superannuation and property should align with individual financial goals, risk tolerance, and investment strategies. And, of course, it doesn’t need to be one or the other – many choose to rely on their super while also holding investment property so it’s best to understand how super and property can complement each other in a well-rounded retirement plan.

We’d be happy to help you analyse your retirement income strategy to develop a plan that works for you.

Monthly Housing Chart Pack – September 2024 | CoreLogic Australia

ii ASFA Retirement Standard – June quarter 2024 | The Association of Superannuation Funds of Australia Limited (ASFA)

iii Super funds deliver strong result in FY24 | Chant West

iv SQM Research Weekly Asking Property Prices , 1 October 2024 | SQM Research

RBA Update – Interest Rates are on Hold

Posted by Greg Provians

At its latest meeting, the Reserve Bank Board announced it was leaving the cash rate at 4.35 per cent.

Please click here to view the Statement by Michele Bullock, Governor: Monetary Policy Decision.

With the official rate on hold, we’re watching closely what the banks do with their rates, as some of Australia’s biggest lenders may make changes to their rates.

You will be notified directly by your bank if and when they change their interest rate.

Please get in touch if you would like to discuss recent rate movements or if you would like to review your finance options.

October 2024

Posted by Greg Provians

It’s October and, as Spring delivers a bracing mix of weather events from rain and wind to snow and hail in some parts, we’re looking forward to the longer, warmer days ahead.

Interest rate speculation is rife after the Reserve Bank of Australia (RBA) kept rates on hold at 4.35% last month. Economists are now predicting it may be several months before rates fall. It’s a different story in the United States where the Federal Reserve slashed interest rates by half a percentage point in September and forecast two more cuts before the end of the year.

Australia’s inflation rate fell to 2.7% in August, down from 3.5% the previous month in the lowest reading in three years. Falling petrol prices and energy bill relief helped drive the slowdown. The jobless rate remained steady in August at 4.2% with the number of unemployed people falling by 10,500 in seasonally adjusted terms. Spending may be down but our net worth rose for the seventh consecutive quarter. Total household wealth was 9.3% higher than a year ago, largely thanks to rising house and land values. Consumer confidence is also positive with an increase in the ANZ-Roy Morgan index on last year’s figures.

The S&P/ASX 200 index hit an all-time high near the end of the month at 8862 points and a low of 7687 a few weeks earlier. It closed the month at a respectable 8266, up 2.2% for the month and 7.89% for the year. China’s plan to stimulate its economy has led to stronger commodity prices with mining and energy stocks the main beneficiaries.


Market movements and review video – October 2024

Stay up to date with what’s happened in the Australian economy and markets over the past month.

Interest rate speculation is rife after the Reserve Bank of Australia (RBA) kept rates on hold at 4.35% last month.

RBA Governor Michelle Bullock believes it may be “some time” before inflation is “sustainably in the target range”, with concerns about inflation, excess demand, low productivity, and a still tight labour market.

The S&P/ASX 200 reached a new record high, up 2.2% for the month and 7.89% for the year, reflecting global optimism on the macro-economic front.

Click the video below to view our update.

Please get in touch if you’d like assistance with your personal financial situation.


Investing cycles – Lessons from the Magnificent 7

When it comes to investing in shares, it’s often said that time is your friend.

The data shows that investing small amounts consistently over time and riding out the ups and downs of the market by holding onto your investments for the long term, can produce a healthy return.

Over the past two decades, the top 500 US companies averaged a 10 per cent annual return and Australia’s S&P ASX All Ordinaries Index recorded an average annual return of 9.2 per cent.i

Those returns have been delivered despite some catastrophic events that sent the markets plummeting including the dot-com bubble crash, the Global Financial Crisis, and the effects of Covid-19.

It takes grit to hold on as the markets plummet, but the best way might be to avoid the hype and tune out the ‘noise’. It can be a trap checking prices every day and week, causing heightened stress and anxiety about your portfolio, a recent example being the mid-2024 Microsoft outage which impacted briefly investor confidence. We can help you maintain a longer-term view, so it you have any concerns give us a call.

The cycle of endless phases of good and bad times are a constant for markets. Most cycles follow a pattern of early upswing, after the market has bottomed out followed by the bull market, when investor confidence is strong and prices are rising faster than average. Then the market hits its peak as prices level out before negative investor sentiment drives a bear market. Finally, the bottom of the cycle is reached as prices are at their lowest.

There are also certain seasonal market cycles that may be helpful in buying and selling decisions. Note, though, that there are always exceptions.

In Australia, April, July, and December have tended to be the strongest months on the All Ordinaries Index. But these patterns have weakened a little over time, with lower average gains in April, July, and December more recently. Performance is usually the lowest in June.ii

November and April have been the strongest months for US shares for the past 30 years, with average monthly gains of 1.9 per cent and 1.6 per cent respectively.

The Magnificent Seven

The performance of Nvidia and the Magnificent 7 is a real-time lesson in market dynamics and cycles.

Despite the rise and rise of seven US technology stocks in the past 18 months – known as The Magnificent 7 – their price pattern has, more or less, followed these seasonal cycles.

The seven stocks – Nvidia, Alphabet, Microsoft, Apple, Meta, Amazon, and Tesla – returned more than 106 per cent in 2023 alone.iii

In the first half of 2024, their prices rose around 33 per cent on the US S&P 500 index while the rest of the index increased by only 5 per cent.

But another story has been emerging in recent months. The Magnificent 7 has now become the Magnificent 3, thanks to intense excitement around artificial intelligence (AI).

Nvidia, Alphabet and Microsoft leapt into the lead on the index, doubling the performance of the other four.iv

Nvidia has been the market darling, with its price almost tripling in 12 months. But prices have been volatile at times. A correction in June knocked the company from the biggest in the world, a title it held briefly before the plunge, to number three after Microsoft and Apple.

Some describe the activity as a bubble that is due to burst. Others say the Magnificent 7 stocks are undervalued and have further to go.

Either way, be wary about getting caught up in the hype that surrounds rapidly rising prices.

Keeping a cool head and taking the time to understand what you are investing in, and the potential risks will help you stay focussed on your long-term investing goals.

Get in touch if you’d like to discuss your investment portfolio and to review in the context of your long-term investment goals.

2023 Vanguard Index Chart: The real value of time – Vanguard
ii 
The ’best’ and the ‘worst’ months for shares – asx.com.au
iii 
The magnificent 7: A cautionary investment tale – Vanguard
iv 
The Kohler Report – ABC News


Estate planning gives you a final say

Planning for what happens when you pass away or become incapacitated is an important way of protecting those you care about, saving them from dealing with a financial and administrative mess when they’re grieving.

Your Will gives you a say in how you want your possessions and investments to be distributed. Importantly, you should also establish enduring powers of attorney and guardianship as well as a medical treatment decision maker and/or advance care directive in case you are unable to handle your own affairs towards the end of your life.

At the heart of your estate planning is a valid and up-to-date Will that has been signed by two witnesses. Just one witness may mean your Will is invalid.

You must nominate an executor who carries out your wishes. This can be a family member, a friend, a solicitor or the state trustee or guardian.

Keep in mind that an executor’s role can be a laborious one particularly if the Will is contested, so that might affect who you choose.

Around 50 per cent of Wills are now contested in Australia and some three-quarters of contested Wills result in a settlement.i

The role of the executor also includes locating the Will, organising the funeral, providing death notifications to relevant parties and applying for probate.

Intestate issues

Writing a Will can be a difficult task for many. It is estimated that around 60 per cent of Australians do not have a valid Will.ii

While that’s understandable – it’s very easy to put off thinking about your own demise, and some don’t believe they have enough assets to warrant writing a Will – not having one can be very problematic.

If you don’t have a valid Will, then you are deemed to have died intestate, and the proceeds of your life will be distributed according to a statutory order which varies slightly between states.

The standard distribution format for the proceeds of an estate is firstly to the surviving spouse. If, however, you have children from an earlier marriage, then the proceeds may be split with the children.

Is probate necessary?

Assuming there is a valid Will in place, then in certain circumstances probate needs to be granted by the Supreme Court. Probate rules differ from state to state although, generally, if there are assets solely in the name of the deceased that amount to more than $50,000, then probate is often necessary.

Probate is a court order that confirms the Will is valid and that the executors mentioned in the Will have the right to administer the estate.

When it comes to the family home, if it’s owned as ‘joint tenants’ between spouses then on death your share automatically transfers to your surviving spouse. It does not form part of the estate.

However, if the house is only in your name or owned as ‘tenants in common’, then probate may need to be granted. This is a process which generally takes about four weeks.

Unless you have specific reasons for choosing tenants in common for ownership, it may be worth investigating a switch to joint tenants to avoid any issues with probate.

Having a probate is favourable if there is a refund on an accommodation bond from an aged care facility.

Rights of beneficiaries

Bear in mind that beneficiaries of Wills have certain rights. These include the right to be informed of the Will when they are a beneficiary. They can also expect to hear about any potential delays.

You are also entitled to contest or challenge the Will and to know if other parties have contested the Will.

If you want to have a final say in how your estate is dealt with, then give us a call. 

Success rate of contesting a will | Will & Estate Lawyers

ii If you don’t, who will? 12 million Australians have no estate plans | Finder


Investing mistakes to avoid

Investing successfully and improving your investment portfolio can be as much about minimising mistakes as trying to pick the ‘next big thing’. It’s all about taking a calm and considered approach and not blindly following trends or hot tips.

Let’s delve into some of the most prevalent investment mistakes and look at the principles that underpin a robust and successful portfolio.

Chasing hot and trending shares

Every so often there are industries or shares that are all over the media and you may begin to worry that you are missing out on something. Jumping on every trend is like trying to catch a wave; you might ride it for a bit, but you’re bound to wipe out sooner or later. That’s because the hot tips and ‘buy now’ rumours often don’t pass the fundamentals of investing test.

The key is to keep a cool head and remember that the real winners are often the ones playing the long game.

Not knowing your ‘why’

What would you like your investment portfolio to achieve? Understanding your motivations and goals will help you to choose investments that work best for you.

If you want to build wealth for a comfortable retirement, say 20 to 30 years down the track, you can afford to invest in riskier investments to play the long-term game. If you have already retired and plan to rely on income from your portfolio, then your focus will be on investments that provide consistent dividends and less on capital growth.

Timing the market

Timing the market involves buying and selling shares based on expected price movements but at best, you can only ever make an educated guess and then get lucky. At worst, you will fail.

As the world-renowned investor Peter Lynch wrote in his book Learn to Earn: “Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves”.i

Putting all the eggs in one basket

This is one of the classic concepts of investing but it’s worth repeating because, unless you are regularly reviewing your portfolio, you may be breaking the rule.

Diversifying your portfolio allows you to spread the risk when one particular share or market is performing badly.

Diversification can include different countries (such as adding international shares to your portfolio), other financial instruments (bonds, currency, real estate investment trusts, exchange traded funds), and industry sectors (ensuring a spread across various sectors such as healthcare, retail, energy, information technology).

Avoiding asset allocation

While diversification is key, how do you achieve it? The answer is by setting an asset allocation plan in place and reviewing it regularly.

How much exposure do you want to diversify into defensive and growth assets? Within them, how much should be invested in the underlying asset classes such as domestic shares, international shares, property, cash, fixed interest and alternatives.

Making emotional investment decisions

The financial markets are volatile and that often leads investors to make decisions that in hindsight seem irrational. During the COVID-19 pandemic, on 23 March 2020 the ASX 200 was 35 per cent below its 20 February 2020 peak.ii By May 2021, the ASX 200 crossed the 20 February 2020 peak. Many investors may have made an emotional decision to sell out during the falling market in March 2020 but then would have missed the some of the uplift in the following months in.

Seeking out quality and trustworthy financial advice can help to minimise investment mistakes. Give us a call if you would like to discuss options for growing your portfolio.

i From the Archives: Fear of Crashing, Peter Lynch – From the Archives: Fear of Crashing – Worth
ii Australian Securities Markets through the COVID-19 Pandemic – 
Australian Securities Markets through the COVID-19 Pandemic | Bulletin – March 2022 | RBA


Strategies for long-term investing

Given the inherent volatility of security prices in capital markets, it is useful to remind ourselves of strategies that investors can utilise to meet their investment goals.

This is important when constructing and positioning a diversified portfolio of assets, a challenge that most financial advisers face daily. Reminding ourselves of the fundamentals of portfolio construction can help investors position portfolios appropriately in times of crisis and volatility.

Exploit a long-run time horizon

Investors with a long horizon do not need short-term liquidity, giving them an edge during market sell-offs. As markets fall, long-run investors have often generated excellent returns by buying quality distressed assets across major asset classes.

Additionally, if the market rewards illiquid assets with a higher risk premium, it makes sense that investors over-allocate to such assets, as it is unlikely that they will need to sell during bouts of market volatility. Pockets of traditional asset classes like corporate bonds, small-cap equity, and emerging market equity offer the opportunity for long-run investors to generate superior returns over time.

Whilst many would like to describe themselves as long-term investors, this time horizon can shorten very quickly. During financial and economic turmoil, both institutional and individual investment horizons tend to shorten due to immediate cash flow needs or because of psychological factors. The last thing that any investor wants to do is sell an asset into a volatile and illiquid market, where bid–offer spreads can widen materially, and asset prices can fall well below fair value.

The free lunch

Diversification is the rare free lunch available for all investors: it can reduce portfolio volatility without reducing its return. A key challenge to achieving diversification is reducing the dominance of equity risk in a balanced portfolio. Even if diversification tends to fail in crises (as correlations spike across asset classes), it can still be useful in the long run. This matters more for long-run investors who face less liquidation pressure during market drawdowns.

Most portfolios have positive exposures to the equity market and to economic growth. This directional risk is difficult to diversify away, making those assets with a negative correlation to equities a valuable addition. Despite yields being at all-time lows, cash and high-quality government bonds and gold can play an important role to play in most portfolios.

Diversification, of course, has limitations, one of which is the tendency for correlations to approach one during crises. Many good fund managers distinguish themselves by managing downside risk instead of just relying on diversification. A strong risk management framework and avoidance of large drawdowns is key in generating good long-run compounded returns.

Risk-free is return-free

Developed market central banks have taken the actions that they have with a defined monetary policy transmission mechanism in mind. One of the channels of monetary policy is the asset prices and wealth channel, with lower interest rates and quantitative easing expected to spur demand for higher risk assets. Risk-free assets like cash and government bonds no longer generate a positive inflation-adjusted yield and are return-free. Long-run investors can position for ‘the portfolio rebalancing effect’ that is likely to dominate investment flows in the next decade.

Expected portfolio returns can be improved by increasing the weight of the most volatile asset class. The classic approach is to raise the weight of ‘high-risk, high-return’ equities and reduce the weight of ‘low-risk, low-return’ assets such as cash and government bonds. Taking more risk in this way, and getting rewarded for it, is an easy way to boost long-run returns for investors.

Minimising costs can come at a cost

Passive investing minimises trading costs. However, some costs are worth paying. For example, buying an equity index fund costs more than investing in a bank deposit, but the equity risk premium should make the cost worthwhile in the long run. In general, investors should allocate more to active products the less they believe in market efficiency. Minimising costs is not always smart; being cost-effective and avoiding wasteful expense is.

The importance of being selective

Market outperformance – through the compounding of returns – can help investors increase their ability to achieve their financial goals. Excess returns can be an important driver of wealth creation, and actively managed funds offer the opportunity to outperform the market. Even seemingly small amounts of excess return can lead to significantly better outcomes.

Over the intermediate term, asset performance is often driven largely by cyclical factors tied to the state of the economy, such as corporate earnings, interest rates, and inflation. The business cycle, which encompasses the cyclical fluctuations in an economy over many months or a few years, can, therefore, be a critical determinant of market returns.

As volatility is ever-present in capital markets, protection in the form of safe-haven assets and portfolio diversification will be increasingly important for investors. However, investors must now acknowledge that returns from defensive assets will likely be far less than historic averages. Due to central bank action, riskier asset classes like equities appear likely to attract increasing inflows over the coming decade. The traditional methods of portfolio construction – a long-run horizon, diversification, cost-control, and active investing – remain the best approach to generating sustainable long-run returns.

To find out more about diversifying your investments, please call us today.

Source:
Reproduced with permission of Fidelity Australia. This article was originally published at https://www.fidelity.com.au/insights/investment-articles/strategies-for-long-term-investing/

This document has been prepared without taking into account your objectives, financial situation or needs. You should consider these matters before acting on the information. You should also consider the relevant Product Disclosure Statements (“PDS”) for any Fidelity Australia product mentioned in this document before making any decision about whether to acquire the product. The PDS can be obtained by contacting Fidelity Australia on 1800 119 270 or by downloading it from our website at www.fidelity.com.au. This document may include general commentary on market activity, sector trends or other broad-based economic or political conditions that should not be taken as investment advice. Information stated herein about specific securities is subject to change. Any reference to specific securities should not be taken as a recommendation to buy, sell or hold these securities. While the information contained in this document has been prepared with reasonable care, no responsibility or liability is accepted for any errors or omissions or misstatements however caused. This document is intended as general information only. The document may not be reproduced or transmitted without prior written permission of Fidelity Australia. The issuer of Fidelity Australia’s managed investment schemes is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009. Reference to ($) are in Australian dollars unless stated otherwise.
© 2022. FIL Responsible Entity (Australia) Limited.

Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.


Buying shares for kids: a gift that keeps on giving

Many parents and grandparents worry about how to help the children in their lives achieve financial independence. But the value of long-term investment can seem like a dry and complicated idea for kids to get their heads around.

In fact, many young people would like to know more about money, according to a Young People and Money survey by the Australian Securities and Investments Commission MoneySmart website. The survey found more than half of the 15-21-year-olds surveyed were interested in learning how to invest, different types of investments and possible risks and returns. What’s more, almost all those young people with at least one investment were interested enough to regularly check performance.

One way to introduce investment to children may be to begin a share portfolio on their behalf. The child can follow the progress of the companies they are investing in, understand how the market can fluctuate over the short- and long-term, as well as learn to deal with some of the paperwork required, such as filing tax returns.

How to begin

Setting up a share portfolio doesn’t need to be onerous. It’s possible to start with a minimum investment of around $500, using one of the online share trading platforms. Then you could consider topping it up every year or so with a further investment.

Deciding on which shares to buy comes down to the amount you have available to invest and perhaps your child’s interests.

If the initial investment is relatively small, an exchange traded fund (ETF) may be a useful way of accessing the hundreds of companies, bonds, commodity or theme the fund invests in, providing a more diversified portfolio.

ETFs are available in Australian and international shares; different sectors of the share market, such as mining; precious metals and commodities, such as gold; foreign and crypto currencies; and fixed interest investments, such as bonds. You can also invest in themes such as sustainability or market sectors such as video games that may appeal to young people.

Alternatively, buying shares in one company that your child strongly identifies with – like a popular pizza delivery firm, a surf brand or a toy manufacturer – may help keep them interested and excited about market movements.

Should you buy in your name or theirs

Since children cannot own shares in their own right, you may consider buying in your name with a plan to transfer the portfolio to the child when they turn 18. But be aware that you will pay capital gains tax (CGT) on any profits made and the investments will be assessable in your annual income tax return.

On the other hand, you could buy the shares in trust for the child. While you are considered the legal owner the child is the beneficial owner. That way, when the child turns 18, you can transfer the shares to their name without paying CGT. Your online trading platform will have easy steps to follow to set up an account in trust for a minor.

There is also some annual tax paperwork to consider.

You can apply for a tax file number (TFN) for the child and quote that when buying the shares. If you don’t quote a TFN, pay as you go tax will be withheld at 47 per cent from the unfranked amount of the dividend income. Be aware that if the shares earn more than $416 in a year, you will need to lodge a tax return for the child.

Taking it slowly

If you are not quite ready to invest cash but are keen to help your children to understand share investment, you could consider playing it safe by playing a sharemarket game, run by the ASX.

Participants invest $50,000 in virtual cash in the S&P/ASX200, a range of ETFs and a selection of companies. You can take part as an individual or a group and there is a chance to win prizes.

Another option, for children able to work independently, is the federal government money managed website. This is pitched at teens and provides a thorough grounding in savings and investment principles.

Call us if you would like to discuss how best to establish a share portfolio for your child, grandchild or a special young person in your life.


Options and costs of government-funded aged care

If you need help in your home, or can no longer live independently, the Australian Government provides a range of aged care services.

These services are subsidised, but you need to contribute to the cost if you can afford to.

Where to start

The first thing to do is think about what you need. You might want to stay in your own home, but need some help with domestic chores. Or you might be ready to start looking at options for longer-term residential care.

Talk to your family or friends about what you want. This will help you get the right care when the time comes.

Once you have an idea of your needs, contact My Aged Care. They will:

It’s important to plan ahead, as this process can take time. There are waiting lists for some services.

To discuss your options, speak to us or speak to an Aged Care Specialist Officer (ACSO) at a Services Australia service centre. 

Care and help at home

To help you stay in your own home for as long as possible, the government provides subsidised home care. This is to help with everyday tasks like shopping, cooking and transport, as well as with personal and nursing care.

There are two types of home care:

What you pay

If you can afford to do so, you may have to pay:

If you can’t afford to pay, you may be able to get financial hardship assistance.

Check My Aged Care’s fee estimator to see how much you might have to pay for home care

Residential aged care

If you can no longer live at home, you may choose to move to an aged care home (sometimes called a nursing home or residential aged care facility). Care is available 24 hours a day. This can be a short-term stay or a permanent move.

What you pay

If you can afford to do so, you may have to pay:

The accommodation payment is the biggest cost. You can pay this as a:

If you can’t afford to pay, you may be able to get financial hardship assistance.

Check My Aged Care’s fee estimator to see what accommodation payment you might have to pay.

Selling or keeping your family home

You may be thinking of selling the family home to pay the bond (RAD). Or maybe you’re wondering whether it’s better to rent it out to help pay the daily amount (DAP)?

You have 28 days after you go into aged care to decide how to pay for your accommodation. You must pay the DAP until the RAD is paid:

You may need professional financial advice to work out whether selling or renting your home is the best option, so call us today and we can discuss this option with you.

Either way, be aware that what you choose to do with the family home may affect the Age Pension assets test.

If you sell the home, its value will count towards the Age Pension assets test.

If you rent out the home, its value may count towards the Age Pension assets test, depending on when you moved into aged care.

If you keep the home without renting it out, it is exempt from the Age Pension assets test for two years from the date that you moved into aged care. (This may vary if you are, or were, a couple when you moved into aged care.)

Speak to a Services Australia Financial Information Service (FIS) officer for more information.

Short-term help

Short-term help is available, either in your own home or in an aged care home. There are different types of care:

Private retirement accommodation

As well as government subsidised aged care homes, there are many private retirement accommodation options. For this kind of accommodation, you pay the full amount yourself.

The Australian Competition and Consumer Commission has information about types and costs of retirement homes but please reach out if you need further assistance in this area.

Source:
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/living-in-retirement/aged-care
Important note: This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.  Past performance is not a reliable guide to future returns.
Important
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Estate Planning gives you final say

Posted by Greg Provians

Planning for what happens when you pass away or become incapacitated is an important way of protecting those you care about, saving them from dealing with a financial and administrative mess when they’re grieving.

Your Will gives you a say in how you want your possessions and investments to be distributed. But, importantly, it should also include enduring powers of attorney and guardianship as well as an advance healthcare directive in case you are unable to handle your own affairs towards the end of your life.

At the heart of your estate planning is a valid and up-to-date Will that has been signed by two witnesses. Just one witness may mean your Will is invalid.

You must nominate an executor who carries out your wishes. This can be a family member, a friend, a solicitor or the state trustee or guardian.

Keep in mind that an executor’s role can be a laborious one particularly if the Will is contested, so that might affect who you choose.

Around 50 per cent of Wills are now contested in Australia and some three-quarters of contested Wills result in a settlement.i

The role of the executor also includes locating the Will, organising the funeral, providing death notifications to relevant parties and applying for probate.

Intestate issues

Writing a Will can be a difficult task for many. It is estimated that around 60 per cent of Australians do not have a valid Will.ii

While that’s understandable – it’s very easy to put off thinking about your own demise, and some don’t believe they have enough assets to warrant writing a Will – not having one can very problematic.

If you don’t have a valid Will, then you are deemed to have died intestate, and the proceeds of your life will be distributed according to a statutory order which varies slightly between states.

The standard distribution format for the proceeds of an estate is firstly to the surviving spouse. If, however, you have children from an earlier marriage, then the proceeds may be split with the children.

Is probate necessary?

Assuming there is a valid Will in place, then in certain circumstances probate needs to be granted by the Supreme Court. Probate rules differ from state to state although, generally, if there are assets solely in the name of the deceased that amount to more than $50,000, then probate is often necessary.

Probate is a court order that confirms the Will is valid and that the executors mentioned in the Will have the right to administer the estate.

When it comes to the family home, if it’s owned as ‘joint tenants’ between spouses then on death your share automatically transfers to your surviving spouse. It does not form part of the estate.

However, if the house is only in your name or owned as ‘tenants in common’, then probate will probably need to be granted. This is a process which generally takes about four weeks.

Unless you have specific reasons for choosing tenants in common for ownership, it may be worth investigating a switch to joint tenants to avoid any issues with probate.

You will also definitely need probate if there is a refund on an accommodation bond from an aged care facility.

Super considerations

Another important consideration when dealing with your affairs is what will happen to your superannuation.

It is wise to complete a ‘binding death benefit nomination’ with your super fund to ensure the proceeds of your account, including any life insurance, are distributed to the beneficiaries you choose.  You can nominate one or more dependants to receive your super funds or you could choose to pay the funds to your legal representative to be distributed according to your Will.

If a death benefit is paid to a dependant, it can be paid as either a lump sum or income stream. But if it’s paid to someone who is not a dependant, it must be paid as a lump sum.

If your spouse has predeceased you and you have adult children, they will pay up to 32 per cent on the taxable component of your super death benefit unless a ‘testamentary trust’ is established by the will, naming them as beneficiaries.

A testamentary trust is established by a Will and only begins after the person’s death. It’s a way of protecting investments, cash and other valuable assets for beneficiaries.

Rights of beneficiaries

Bear in mind that beneficiaries of Wills have certain rights. These include the right to be informed of the Will when they are a beneficiary. They can also expect to hear about any potential delays.

You are also entitled to contest or challenge the Will and to know if other parties have contested the Will.

If you want to have a final say in how your estate is dealt with, then give us a call.

Unexpected outcomes

David died in his early 60s. He left his estate to his wife Sally in accordance with his Will.

It seemed sensible at the time. But after a few years, Sally remarried. Unfortunately, the marriage did not last. When Sally died some 20 years later, her estate did not just go to her and David’s children but ended up being shared with her estranged second husband.

A testamentary trust, stipulating that the beneficiaries of both David’s and Sally’s estates were to be only blood relatives, may have solved this issue.

Success rate of contesting a will | Will & Estate Lawyers

ii If you don’t, who will? 12 million Australians have no estate plans | Finder

September 2024

Posted by Greg Provians

Welcome to spring, a season that might be motivational for personal, business and financial renewal. We hope you enjoy the sunshine and warmer weather.

Global stock markets – including the ASX – largely stabilised by the end of August after a turbulent month.

It was a rocky start when markets everywhere fell after news of high unemployment figures in the US and an interest rate move by Japan’s central bank. Despite the dramas, the S&P/ASX 200 closed 1.28% higher for the month marking a gain of just over 10% for the 12 months to date.

A slight drop in inflation figures – down to 3.5% in July from 3.8% the previous month – had investors checking the Reserve Bank’s reaction but most economists agree there’s no chance of an interest rate cut this year. The RBA’s not forecasting inflation to get to its preferred levels until late 2026 or early 2027.

While the cost of living has dropped ever so slightly (and partly due to $300 federal government rebates on electricity bills), wages have risen. The Australian Bureau of Statistics reports that wages rose by 4.1% in the year to June. It means that wages are now keeping up with the cost of living.

The good news from the markets and inflation data contributed to a small upswing in consumer confidence although there’s still much ground to recover after the losses caused by Covid-19.


Market movements and review video – September 2024

Stay up to date with what’s happened in Australian markets over the past month.

Global stock markets – including the ASX – largely stabilised by the end of August after a turbulent month.

It was a rocky start when markets everywhere fell after news of high unemployment figures in the US and an interest rate move by Japan’s central bank.

Click the video below to view our update.

Please get in touch if you’d like assistance with your personal financial situation.


Holidaying off the tourist trail

When we dream of an overseas holiday, our minds often drift to iconic landmarks, bustling cities, and well-trodden tourist paths. While these destinations have their allure, travel to popular destinations is booming and comes with challenges so there are advantages to venturing off the beaten track and seeking out the hidden gems.

Travel is booming – and creating some headaches

It’s no secret that we Aussies love to travel outside our own country. Last year nearly 10 million of us headed overseas, marking a 12 per cent increase from the previous year, and this year is shaping up to continue the trend.i And it’s not just us enjoying getting out there and travelling the world, global figures anticipate international travel will soon exceed pre-pandemic levels and surpass 2 billion for the second time ever.ii

That adds up to a lot of people out there travelling and some popular destinations are showing the strain with skyrocketing prices, excessive queues, damage at historical sites and environmental impacts all being felt.

Tensions are high in some areas with tourists in Barcelona, Spain recently doused in water by frustrated locals and authorities in the historic city centre of Florence banning new short-term holiday rentals to try to relieve some of the pressure of over-tourism. 

Taking the road less travelled can help areas suffering from over-tourism and support those communities who would welcome more visitors.

Supporting communities that need it

Tourism plays a significant role in the economic growth of many communities around the world and there are many places that would really benefit from the tourist dollar. The money you spend as you travel can contribute meaningfully to local economies and help support small businesses, artisans, and entrepreneurs, ensuring that future generations can continue to enjoy unique destinations.

But there are plenty of less altruistic reasons to seek out the hidden gems when you travel though.

Authentic Encounters

One of the lovely aspects of traveling to less touristy places is the opportunity to immerse yourself in local cultures. Away from tourist hotspots, communities maintain their unique traditions, cuisines, and ways of life. Imagine strolling through a market where locals gather to sell fresh produce, handicrafts, and homemade delicacies, or stumbling upon a hidden café where the owner shares stories of their town’s history. These encounters create lasting memories and offer a genuine glimpse into the daily lives of people from different corners of the world.

Unspoiled natural beauty

Nature enthusiasts will find bliss in exploring destinations that are off the typical tourist radar. Picture deserted beaches with powdery sand and crystal-clear waters, hiking trails winding through lush forests, or breathtaking untouched landscapes. Whether you’re seeking solitude in nature or hoping to capture stunning photographs without a sea of selfie sticks in the background, less touristy places often boast natural beauty that remains unspoiled and awe-inspiring.

Affordable adventures

Traveling to less touristy places can also be kinder to your wallet. Accommodation, dining, and activities in popular tourist hubs tend to come with inflated price tags due to high demand. In contrast, destinations that are yet to be discovered by the masses often offer more affordable options. You might find charming family-run guesthouses, budget-friendly eateries serving local dishes, and reasonably priced excursions that allow you to stretch your travel budget further.

Destination dupes

Doing a little homework can point you in the direction of alternatives to popular destinations.

For example, instead of Venice – which is literally sinking under the weight of tourism -consider visiting the town of Trieste, an old port town by the Adriatic Sea. If you are after stunning beaches and clear aqua water, Palawan in the Philippines is a good alternative for the Maldives. Or for an alternative to over touristed St Tropez in France, Turkey’s Bodrum coast offers comparable glamour and affordable luxury. Doing a little research can uncover similar destinations that offer the experience you are seeking, with all the benefits and none of the problems of the overhyped placed.

While the allure of ticking off the list of famous places is understandable, exploring less touristy places offers a wealth of unique experiences to the visitor, and benefits the local communities. So, the next time you plan an overseas holiday, think outside the square of the obvious destinations, and discover the hidden gems.

CATO reveals new trends with Australia’s 10m international travellers – Travel Weekly

ii 2024 international travel boom predicted – VanillaPlus


How do retirement income options compare?

Retirement is filled with opportunities and choices. There’s the time to travel more, work on long-delayed personal projects or volunteer your help to worthwhile causes.

You also have a host of choices to make when it comes to funding your new life away from paid work. Here are four different options to consider.i

Account-Based Pension

An account-based pension (ABP) using your superannuation is one of the most common retirement income options. The amount you receive depends on the balance of your account and the drawdown rate you choose, subject to the minimum pension requirements set by the government.

Some considerations:

Transition to Retirement

A transition to retirement (TTR) strategy allows access to some of your superannuation while still working, if you have reached age 60 (based on current rules).ii

Some considerations:

Annuities

An annuity is a financial product that provides a guaranteed income for a specified period or for the rest of your life. There are various types of annuities, including fixed, variable, and indexed annuities. You can purchase annuities or lifetime income streams using your superannuation.

Some considerations:

Innovative Retirement Income Stream

An Innovative Retirement Income Stream (IRIS) is provided by a newer range of products. These were introduced after changes to regulations designed to deliver more certainty to retirement income by paying a pension for life without running out of funds.

Some considerations:

Next steps

How do these different options suit your personal needs and how would they affect your retirement income? Consulting with a financial advisor can help you navigate these choices and tailor a plan that best suits your needs. Speak to us, so we can help you structure a plan to fund the retirement lifestyle you’ve worked so hard for.

Planning to retire | Australian Taxation Office (ato.gov.au)

ii Transition to retirement | Australian Taxation Office (ato.gov.au)


Insuring against loss of income

Protecting income from unexpected illness and injury is particularly important to anyone with a mortgage to service, small business owners and self-employed people with no sick leave available.

With income protection insurance, you can be paid some 70 per cent of your income for a specified period to help when you cannot work.i

The most common claims are for illnesses such as cancer, heart attack, anxiety and depression.ii Payments generally last from two to five years although you can take a policy up to a certain age, such as 65, and the amount is generally based on 70 per cent of your income in the 12 months prior to the injury or illness.iii

For some, income protection insurance may be part and parcel of your superannuation although more commonly this is limited to life insurance, and total and permanent disability cover. But, if you do have income protection insurance in your super, check the extent of the automatic cover as it can be modest.

Alternatively, you could take out a policy outside super where you will enjoy tax deductibility on the premiums. Income protection insurance is the only insurance that is tax deductible. Other life insurance products outside super such as trauma insurance are not tax deductible.iv

Work out a budget

There are many considerations when looking at income protection insurance and the best place to start is to work out your budget, thinking about how much would you need to maintain your family’s lifestyle if you are unable to work. Then you are able to decide on the appropriate level of income protection insurance as well as other factors that affect premiums such as how quickly you might need the payments to start and how long these payments will last.

Many people think income protection insurance is expensive, but you can fine tune policies to suit your budget by changing the percentage payment amount, the length of time for which you would receive the payment and how soon you start getting a payment once you cannot work. Reducing these parameters can reduce your premiums.

Check the policy details

It is important to be mindful of a number of factors that might affect the success of any claim you might make. So, make sure you read the product disclosure statement.

Every insurer has a different definition as to what will trigger a payment, so you need to understand the difference between “own occupation” and “any occupation” for cover. For example, if you are a surgeon and lose capacity in one of your hands, you will receive a payout from your insurer if you have specified “own” occupation because you can no longer work as a surgeon. But if you opt for “any” occupation, then the insurer could argue that you could still work as a doctor just not as a surgeon and the claim may not be paid.

It is also wise to understand that if your policy does not seek your medical history, it is likely there could be limitations to what illnesses are covered.

Another consideration is whether you have stepped or level premiums. Stepped premiums start low and usually increase as you age. Level premiums begin at a higher rate but typically don’t increase until you reach 65. In the long run, level may work out cheaper for some.v You must work at least 20 hours a week to take out income protection insurance and you can usually only buy a policy up to the age of 60. Also, if you receive a payout, you need to declare that income on your tax return.

If you want to check that you have sufficient cover to protect you and your family should you lose your income, then give us a call to discuss.

Income protection insurance | Moneysmart ( moneysmart.gov.au)

ii The Most Common TPD Claims in Australia with Examples | Aussie Injury Lawyers

iii Income protection insurance | Moneysmart ( moneysmart.gov.au)

iv ATO Community – Stand alone Trauma Insurance and income tax | Australian Tax Office ( community.ato.gov.au)

Income protection insurance | Moneysmart ( moneysmart.gov.au)

Spring 2024

Posted by Greg Provians

Welcome to Spring, a season that might be motivational for personal, business and financial renewal. We hope you enjoy the sunshine and warmer weather.

Global stock markets – including the ASX – largely stabilised by the end of August after a turbulent month.

It was a rocky start when markets everywhere fell after news of high unemployment figures in the US and an interest rate move by Japan’s central bank. Despite the dramas, the S&P/ASX 200 closed 1.28% higher for the month marking a gain of just over 10% for the 12 months to date.

A slight drop in inflation figures – down to 3.5% in July from 3.8% the previous month – had investors checking the Reserve Bank’s reaction but most economists agree there’s no chance of an interest rate cut this year. The RBA’s not forecasting inflation to get to its preferred levels until late 2026 or early 2027.

While the cost of living has dropped ever so slightly (and partly due to $300 federal government rebates on electricity bills), wages have risen. The Australian Bureau of Statistics reports that wages rose by 4.1% in the year to June. It means that wages are now keeping up with the cost of living.

The good news from the markets and inflation data contributed to a small upswing in consumer confidence although there’s still much ground to recover after the losses caused by Covid-19.


How do retirement income options compare?

Retirement is filled with opportunities and choices. There’s the time to travel more, work on long-delayed personal projects or volunteer your help to worthwhile causes.

You also have a host of choices to make when it comes to funding your new life away from paid work. Here are four different options to consider.i

Account-Based Pension

An account-based pension (ABP) using your superannuation is one of the most common retirement income options. The amount you receive depends on the balance of your account and the drawdown rate you choose, subject to the minimum pension requirements set by the government.

Some considerations:

Transition to Retirement

A transition to retirement (TTR) strategy allows access to some of your superannuation while still working, if you have reached age 60 (based on current rules).ii

Some considerations:

Annuities

An annuity is a financial product that provides a guaranteed income for a specified period or for the rest of your life. There are various types of annuities, including fixed, variable, and indexed annuities. You can purchase annuities or lifetime income streams using your superannuation.

Some considerations:

Innovative Retirement Income Stream

An Innovative Retirement Income Stream (IRIS) is provided by a newer range of products. These were introduced after changes to regulations designed to deliver more certainty to retirement income by paying a pension for life without running out of funds.

Some considerations:

Next steps

How do these different options suit your personal needs and how would they affect your retirement income? Consulting with a financial advisor can help you navigate these choices and tailor a plan that best suits your needs. Speak to us, so we can help you structure a plan to fund the retirement lifestyle you’ve worked so hard for.

Planning to retire | Australian Taxation Office (ato.gov.au)

ii Transition to retirement | Australian Taxation Office (ato.gov.au)


Insuring against loss of income

Protecting income from unexpected illness and injury is particularly important to anyone with a mortgage to service, small business owners and self-employed people with no sick leave available.

With income protection insurance, you can be paid some 70 per cent of your income for a specified period to help when you cannot work.i

The most common claims are for illnesses such as cancer, heart attack, anxiety and depression.ii Payments generally last from two to five years although you can take a policy up to a certain age, such as 65, and the amount is generally based on 70 per cent of your income in the 12 months prior to the injury or illness.iii

For some, income protection insurance may be part and parcel of your superannuation although more commonly this is limited to life insurance, and total and permanent disability cover. But, if you do have income protection insurance in your super, check the extent of the automatic cover as it can be modest.

Alternatively, you could take out a policy outside super where you will enjoy tax deductibility on the premiums. Income protection insurance is the only insurance that is tax deductible. Other life insurance products outside super such as trauma insurance are not tax deductible.iv

Work out a budget

There are many considerations when looking at income protection insurance and the best place to start is to work out your budget, thinking about how much would you need to maintain your family’s lifestyle if you are unable to work. Then you are able to decide on the appropriate level of income protection insurance as well as other factors that affect premiums such as how quickly you might need the payments to start and how long these payments will last.

Many people think income protection insurance is expensive, but you can fine tune policies to suit your budget by changing the percentage payment amount, the length of time for which you would receive the payment and how soon you start getting a payment once you cannot work. Reducing these parameters can reduce your premiums.

Check the policy details

It is important to be mindful of a number of factors that might affect the success of any claim you might make. So, make sure you read the product disclosure statement.

Every insurer has a different definition as to what will trigger a payment, so you need to understand the difference between “own occupation” and “any occupation” for cover. For example, if you are a surgeon and lose capacity in one of your hands, you will receive a payout from your insurer if you have specified “own” occupation because you can no longer work as a surgeon. But if you opt for “any” occupation, then the insurer could argue that you could still work as a doctor just not as a surgeon and the claim may not be paid.

It is also wise to understand that if your policy does not seek your medical history, it is likely there could be limitations to what illnesses are covered.

Another consideration is whether you have stepped or level premiums. Stepped premiums start low and usually increase as you age. Level premiums begin at a higher rate but typically don’t increase until you reach 65. In the long run, level may work out cheaper for some.v You must work at least 20 hours a week to take out income protection insurance and you can usually only buy a policy up to the age of 60. Also, if you receive a payout, you need to declare that income on your tax return.

If you want to check that you have sufficient cover to protect you and your family should you lose your income, then give us a call to discuss.

Income protection insurance | Moneysmart ( moneysmart.gov.au)

ii The Most Common TPD Claims in Australia with Examples | Aussie Injury Lawyers

iii Income protection insurance | Moneysmart ( moneysmart.gov.au)

iv ATO Community – Stand alone Trauma Insurance and income tax | Australian Tax Office ( community.ato.gov.au)

Income protection insurance | Moneysmart ( moneysmart.gov.au)


Holidaying off the tourist trail

When we dream of an overseas holiday, our minds often drift to iconic landmarks, bustling cities, and well-trodden tourist paths. While these destinations have their allure, travel to popular destinations is booming and comes with challenges so there are advantages to venturing off the beaten track and seeking out the hidden gems.

Travel is booming – and creating some headaches

It’s no secret that we Aussies love to travel outside our own country. Last year nearly 10 million of us headed overseas, marking a 12 per cent increase from the previous year, and this year is shaping up to continue the trend.i And it’s not just us enjoying getting out there and travelling the world, global figures anticipate international travel will soon exceed pre-pandemic levels and surpass 2 billion for the second time ever.ii

That adds up to a lot of people out there travelling and some popular destinations are showing the strain with skyrocketing prices, excessive queues, damage at historical sites and environmental impacts all being felt.

Tensions are high in some areas with tourists in Barcelona, Spain recently doused in water by frustrated locals and authorities in the historic city centre of Florence banning new short-term holiday rentals to try to relieve some of the pressure of over-tourism. 

Taking the road less travelled can help areas suffering from over-tourism and support those communities who would welcome more visitors.

Supporting communities that need it

Tourism plays a significant role in the economic growth of many communities around the world and there are many places that would really benefit from the tourist dollar. The money you spend as you travel can contribute meaningfully to local economies and help support small businesses, artisans, and entrepreneurs, ensuring that future generations can continue to enjoy unique destinations.

But there are plenty of less altruistic reasons to seek out the hidden gems when you travel though.

Authentic Encounters

One of the lovely aspects of traveling to less touristy places is the opportunity to immerse yourself in local cultures. Away from tourist hotspots, communities maintain their unique traditions, cuisines, and ways of life. Imagine strolling through a market where locals gather to sell fresh produce, handicrafts, and homemade delicacies, or stumbling upon a hidden café where the owner shares stories of their town’s history. These encounters create lasting memories and offer a genuine glimpse into the daily lives of people from different corners of the world.

Unspoiled natural beauty

Nature enthusiasts will find bliss in exploring destinations that are off the typical tourist radar. Picture deserted beaches with powdery sand and crystal-clear waters, hiking trails winding through lush forests, or breathtaking untouched landscapes. Whether you’re seeking solitude in nature or hoping to capture stunning photographs without a sea of selfie sticks in the background, less touristy places often boast natural beauty that remains unspoiled and awe-inspiring.

Affordable adventures

Traveling to less touristy places can also be kinder to your wallet. Accommodation, dining, and activities in popular tourist hubs tend to come with inflated price tags due to high demand. In contrast, destinations that are yet to be discovered by the masses often offer more affordable options. You might find charming family-run guesthouses, budget-friendly eateries serving local dishes, and reasonably priced excursions that allow you to stretch your travel budget further.

Destination dupes

Doing a little homework can point you in the direction of alternatives to popular destinations.

For example, instead of Venice – which is literally sinking under the weight of tourism -consider visiting the town of Trieste, an old port town by the Adriatic Sea. If you are after stunning beaches and clear aqua water, Palawan in the Philippines is a good alternative for the Maldives. Or for an alternative to over touristed St Tropez in France, Turkey’s Bodrum coast offers comparable glamour and affordable luxury. Doing a little research can uncover similar destinations that offer the experience you are seeking, with all the benefits and none of the problems of the overhyped placed.

While the allure of ticking off the list of famous places is understandable, exploring less touristy places offers a wealth of unique experiences to the visitor, and benefits the local communities. So, the next time you plan an overseas holiday, think outside the square of the obvious destinations, and discover the hidden gems.

CATO reveals new trends with Australia’s 10m international travellers – Travel Weekly

ii 2024 international travel boom predicted – VanillaPlus

August 2024

Posted by Greg Provians

Most of us have been experiencing unexpectedly cold temperatures and high rainfall lately but the good news is that spring is on the way. As the days grow longer and warmer, there can be a sense of optimism and a feeling of renewal.

Market watchers, investors and mortgage holders, who’d been anxiously awaiting the release of the latest inflation data at the end of July, could neither jump for joy nor collapse in despair.

The best that could be said about the figures was that they were not as bad as they could have been. It remains to be seen how the Reserve Bank board will view inflation’s modest increase when it meets on August 5 and whether it decides on an interest rate rise to counter it. The Australian Bureau of Statistics says prices rose 1% in the June quarter and 3.8% annually.

Retail sales continue to splutter along with the latest data showing a 0.5% increase in sales in June thanks to the sales but over the quarter, retail sales volumes fell 0.3% for the sixth time in the past seven quarters. Meanwhile, building approvals fell 6.5% in June after a 5.7% rise the previous month.

The ASX S&P 200 index finished the month strongly with an increase of around 4%, riding out a mid-month plunge. But the currency didn’t fare quite as well, falling below US65 cents for the first time in almost three months. In the US, the S&P 500 finished the month almost where it began after a big mid-month upward spike then fall but, for the year to date, it’s recorded an increase of almost 15%.


Market movements and review video – August 2024

Stay up to date with what’s happened in markets and the Australian economy over the past month.

While the anxiously awaited release of the latest inflation data at the end of July, showed an increase, it was in line with economists’ predictions.

Given the RBA wants inflation back within a 2-3% target range by the end of 2025, there were concerns about the inflation figures and the implications for the cash rate.

The ASX finished the month strongly with an increase of around 4%, riding out a mid-month plunge and surging to a record high for the ninth time this year. Click the video below to view our update.


When passion is the purpose of investing

Investing is often considered best undertaken with a cool head and heart. But for some investors, passion is the whole purpose of the investment.

Passion investing is what it sounds like – investing in things you love, non-traditional assets that generally allow you to enjoy ownership while hopefully watching them appreciate in value at the same time.

Most traditional investments take into consideration time horizon, risk appetite and investment capital appreciation goals. For the passion investor, while financial considerations may dictate their investments to some extent, they are strongly influenced by more than market returns and want to invest – and collect – in a way that supports their interests and passions.

The growth of passion investing

We Australians certainly love collecting and, according to the eBay State of Collectibles report, we also care about the financial implications of our collections. In fact, more than one in four Aussies collect goods such as coins, toys, sneakers and art and more than 40% of those collectors could be considered passion investors as they have a financial objective in mind.

The top 10 luxury passion investments

While buying and selling on Ebay is one end of the scale, the other end of the scale is the luxury passion investments. For those who have the cash to splash, some high-end investments can prove very lucrative.

According to Knight Frank’s Luxury Investment Index, the top 10 most successful passion investments ranked in order from those recording the highest returns are art, jewellery, watches, coins, coloured diamonds, wine, furniture, luxury handbags, classic cars and rare whisky.i While major auction houses recorded record sales last year, the Luxury Investment Index recorded a marginal decline of -1%, largely due to a drop in the rare whisky index of -9%. This overall decline was on the back of an impressive 16% increase the previous year, highlighting the volatility of the index.

Art typically records the most gains as investors pay stellar prices for museum quality works of art, with several single owner collections producing totals in excess of US$2.5 billion. It’s not just art setting records though. A US$143 million Mercedes-Benz Uhlenhaut Coupé set a new record for the most expensive car ever sold, with the most expensive watch, a 1957 Patek Philippe 2499, going for almost $10 million dollars.

Exploring other passions

Of course, passion investing is more than just the above luxury goods. If you thought Lego was just a toy that possesses enduring popularity, think again – the biggest online database for collectible Lego sets is now worth $1.2bn and it is possible for investors to realise profits in the range of 150% to 250%.ii

Following in Lego’s footsteps as a popular passion investment is sneakers. More than just comfy footwear to collectors, sneaker reselling has become a $6 billion industry globally, with the most sought-after limited-edition shoes commanding six-figure prices on the resale market.iii

Things to consider

While collecting items you love may seem like an exciting way to park some extra capital, passion investing can be a risky proposition and there are a number of things to consider.

Passion investments can be extremely susceptible to fluctuations in their value and luxury niche items can be hard to sell during economic downturns.

You have to know what to look for and it can be difficult, if not impossible, to predict what will be of interest to collectors in years to come. As with more traditional investments, you usually need to hold on to passion investments for some time in order for their value to grow so they are rarely a ‘get rich quick’ scheme.

They are also called passion investments for a reason. Any investment you are strongly attached to can potentially cloud your judgment when making decisions about buying, selling, or holding onto them.

You also need to think about where and how your objects are stored so they don’t lose value and insurance is a consideration when you possess items of significant value.

If you enjoy owning things that bring you joy, by all means pursue your passions – that’s what life is all about after all. Just approach with caution when mixing passion with investing.

https://www.knightfrank.com.au/blog/2024/04/04/art-leads-knight-franks-luxury-investment-index-with-prices-rising-11-in-2023
ii 
https://www.wsj.com/video/series/in-depth-features/lego-investing-is-booming-heres-how-it-works/5F2B44FE-2789-46E2-B280-9CA089EAB458
iii 
https://www.firstonline.info/en/sneakers-da-collezione-una-folle-ossessione-chi-ci-guadagna/

Going for Gold

Gold fever is in the air and it’s not just the prospect of medals at the upcoming Paris Olympics.

Gold prices have been climbing strongly in 2024 as investors, jittery about the effects of wars in the Middle East and Ukraine, buy up the asset because of its reputation as a safe haven. The spot price has risen more than 18 per cent since mid-February.i

Demand for the precious metal is also being driven by central banks adding to their gold reserves to hedge against currency and other market risks.

For investors, gold has been an alluring buy for centuries thanks to its association with wealth and power. As a precious metal and a physical asset, it often attracts a certain confidence, which is sometimes misplaced.

Patchy performance

Day traders might be lucky enough at times to buy or sell gold for a decent profit by correctly guessing when to get in or out but, generally speaking, gold is not an easy investment to love.

Over the longer term, it hasn’t always beaten inflation, the price can plunge at a time when market conditions suggest it should be rising and its performance against stocks and bonds has been varied.

In fact, there have been long periods of persistently low prices. It languished for around six years from 1988 before recovering and then again for the decade or so leading up to the beginning of COVID-19 in 2020. The uncertainty of the pandemic-era helped spark a rally that has increased the price by almost 38 per cent.

Pros and cons

So, is gold worth considering as part of a portfolio? As with any investment, there are pros and cons.

Like many other asset classes, gold can help to diversify a portfolio and reduce certain risks. During stock market downturns, gold prices often (but not always) begin to rise. Some investors like the idea that it is a scarce, physical asset and, despite its ups and downs, gold has tended to hold its value over time.

At times gold has provided a good hedge against inflation. For example, in the US between 1974 and 2008, there were eight years when inflation was high and during those times, gold prices rose by an average of 14.9 per cent annually.ii But different periods give different results. While US CPI growth was around 6.8 per cent in 2021 and 2022, gold prices were achieving an annual increase of just over 1 per cent.

How to invest

You don’t need to lug home gold bars and hide them under the bed to have a stake in a gold investment.

Of course, it is possible to own gold bullion by buying online or in person from one of a number of registered dealers in Australia. The actual gold can be delivered to you or held in storage for a fee. You could also own physical gold by buying jewellery although there are high mark ups and resale value isn’t assured.

The ASX provides the avenue to buy shares in one or more of the many gold mining companies. You’ll need to do your homework carefully to consider the credentials of the companies. Some are riskier than others depending on the countries in which they operate and their size.

You could also consider exchange traded funds (ETFs) that are linked to or track the gold price. One advantage is provided by funds that hedge currency risk so that your returns won’t be affected by differences in the US dollar. Although with any fund, you’ll need to factor in an annual management fee, which will reduce your ultimate return.

If you’re interested in achieving a balanced portfolio, we’d be happy to help you.Gold – Price – Chart – Historical Data – News (tradingeconomics.com)
ii Is Gold An Inflation Hedge? – Forbes Advisor


To sell or not to sell is the question for moving into aged care

Moving into residential aged care can trigger a range of emotions, particularly if it involves the sale of the family home.

What is often a major financial asset, is also one that many people believe should be either kept in the family or its value preserved for future generations.

Whether or not the home has to be sold to pay for aged care depends on a number of factors, including who is living in it and what other financial resources or options are available to cover the potential cost of care.

It also makes a difference if the person moving into care receives Centrelink or Department of Veterans Affairs payments.

Cost of care

Centrelink determines the cost of aged care based on a person’s income and assets.i

For aged care cost purposes, the home is exempt from the cost of care calculation if a “protected person” is living in it when you move into care.

A protected person could be a spouse (including de facto); a dependent child or student; a close relative who has lived with the aged care resident for at least five years and who is entitled to Centrelink income support; or a residential carer who has lived with the aged care resident for at least two years and is eligible for Centrelink income support.ii

Capped home value

If the home is not exempt, the value of the home is capped at the current indexed rate of $201,231.iii

If you have assets above $201,231 – outside of the family home – then Centrelink would determine you pay the advertised Refundable Accommodation Deposit (RAD) or equivalent daily interest rate known as the Daily Accommodation Payment (DAP), or a combination of both.

The average RAD is about $450,000. Based on the current interest rate of 8.36% [note – this is the rate from July 1] the equivalent DAP would be $103.07 a day.

Depending on your total income and assets, you may also be required to pay a daily means tested care fee. This fee has an indexed annual cap of $33,309 and lifetime cap of $79,942.

This is in addition to the basic daily fee of $61.96 and potentially an additional or extra service fee.

There is no requirement to sell the home to pay these potentially substantial costs, but if it is a major asset that is going to be left empty, it may make sense.

Other options to cover the costs may include using income or assets such as superannuation, renting the home (although this pushes up the means tested care fee and can reduce the age pension) or asking family to cover the costs.

Centrelink rules

For someone receiving Centrelink or DVA benefits, there is an important two-year rule.

The home is exempt for pension purposes if occupied by a spouse, otherwise it is exempt for up to two years or until sold.

If you are the last person living in the house and you move into aged care and still have your home after two years, its full value will be counted towards the age pension calculation. It can mean the loss of the pension.

Importantly, money paid towards the RAD, including the proceeds from a house, is exempt for age pension purposes.

Refundable Deposit

As the name suggests, the RAD is fully refundable when a person leaves aged care. If a house is sold to pay a RAD, then the full amount will ultimately be paid to the estate and distributed according to the person’s Will.

The decisions around whether to sell a home to pay for aged care are financial and emotional.

It’s important to understand all the implications before you make a decision.

Please call us to explore your options.

https://www.myagedcare.gov.au/understanding-aged-care-home-accommodation-costs
ii 
https://www.myagedcare.gov.au/income-and-means-assessments
iii 
https://www.myagedcare.gov.au/income-and-means-assessments

Investing Cycles – Lessons from the Magnificent 7

Posted by Greg Provians

When it comes to investing in shares, it’s often said that time is your friend.

The data shows that investing small amounts consistently over time and riding out the ups and downs of the market by holding onto your investments for the long term can produce a healthy return.

Over the past two decades, the top 500 US companies averaged a 10 per cent annual return and Australia’s S&P ASX All Ordinaries Index recorded an average annual return of 9.2 per cent.i

Those returns have been delivered despite some catastrophic events that sent the markets plummeting including the dot-com bubble crash, the Global Financial Crisis, and the effects of Covid-19.

It takes grit to hold on as the markets plummet, but the best way might be to avoid the hype and tune out the ‘noise’. It can be a trap checking prices every day and week, causing heightened stress and anxiety about your portfolio, a recent example being the mid-2024 Microsoft outage which briefly impacted investor confidence. We can help you maintain a longer-term view, so it you have any concerns give us a call.

The seasonal cycle of markets

The cycle of endless phases of good and bad times are a constant for markets, says AMP’s Chief Economist and Head of Investment Strategy Dr Shane Oliver.ii

“Some relate to the three-to-five-year business cycle, and many of these are related to the crises … that come roughly every three years. Some cycles are longer, with secular swings over 10 to 20 years in shares,” he says.

Most cycles follow a pattern of early upswing, after the market has bottomed out followed by the bull market, when investor confidence is strong and prices are rising faster than average. Then the market hits its peak as prices level out before negative investor sentiment drives a bear market. Finally, the bottom of the cycle is reached as prices are at their lowest.

There are also certain seasonal market cycles that may be helpful in buying and selling decisions. Note, though, that there are always exceptions. The much-quoted rule, “past performance is not an indication of future performance” is always important to keep in mind.

As the graph shows, April, July and December have tended to be the strongest months of the year.

Since 1985, the ASX All Ordinaries Index has seen gains in April averaging 2.4 per cent, with July averaging 2 per cent and December 1.9 per cent, which compares to an average monthly gain for all months of 0.62 per cent. But these patterns have weakened a little over time, with lower average gains in April, July, and December more recently.iii

The seasonal pattern in shares

Source: Bloomberg, AMP
Note: Data is based on the ASX All Ordinaries Index, which includes about 500 of the largest listed companies.

By contrast, S&P ASX 200 monthly returns from 1993 to 2020 found April, October, and December to be the strongest months, according to 2021 UBS research.iv The research from both indices shows June to be the worst month for performance, often because investors sell before the end of the financial year to reduce their tax bill – a strategy known as tax-loss selling. Investments that have incurred capital losses are sold to offset any capital gains to potentially reduce taxable income.

In the United States, the markets have usually been relatively weak in the September quarter, strengthened into the New Year and remained solid to around May or July, says Oliver.

November and April have been the strongest months for US shares for the past 30 years, with average monthly gains of 1.9 per cent and 1.6 per cent respectively.

The Magnificent Seven

Despite the rise and rise of seven US technology stocks in the past 18 months, known as The Magnificent 7, their price pattern has, more or less, followed these seasonal cycles.

The seven stocks – Nvidia, Alphabet, Microsoft, Apple, Meta, Amazon, and Tesla – returned more than 106 per cent in 2023 alone.v

In the first half of 2024, their prices rose around 33 per cent on the US S&P 500 index while the rest of the index increased by only 5 per cent. Last year’s numbers were even more stark: the Magnificent 7 rose 76 per cent while the rest of the index increased just 8 per cent.vi

During this period the S&P ASX 200 has risen by about 2 per cent.

But another story has been emerging in recent months. The Magnificent 7 has now become the Magnificent 3, thanks to intense excitement around artificial intelligence (AI). Nvidia, Alphabet and Microsoft leapt into the lead on the index, doubling the performance of the other four.vii

Of the seven stellar performers, Nvidia has been the market darling, with its price almost tripling in 12 months. But as is often the way with rapid stock price movements, a correction followed, which has seen Nvidia’s value plunge $646 billion. It has since managed to claw back some of the lost territory and is still worth more than US$3 trillion. This correction knocked the company from the biggest in the world, a title it held briefly before the plunge, to number three after Microsoft and Apple.

The performance of Nvidia and the Magnificent 7 is a real-time lesson in market dynamics and cycles.

Some describe the activity as a bubble that is due to burst at some time in the future. Others say the Magnificent 7 stocks are undervalued and have further to go.

Keep it simple, focus on the long-term outlook to minimise the anxiety associated with the constant ‘noise’ surrounding market movements, we can help ensure you aren’t too inappropriately geared based on your goals.

Be clear-headed about the potential risks and be wary about getting caught up in the hype that surrounds rapidly rising prices.

Get in touch if you’d like to discuss your investment portfolio and to review in the context of your long-term investment goals.

2023 Vanguard Index Chart: The real value of time – Vanguard
ii 
The 9 most important things I have learned about investing over 40 years – AMP
iii 
The ’best’ and the ‘worst’ months for shares – asx.com.au
iv 
CHART: The months of the year when the ASX performs best – and why – Stockhead
The magnificent 7: A cautionary investment tale – Vanguard
vi 
Guide to the Markets – J.P. Morgan Asset Management
vii 
The Kohler Report – ABC News

July 2024

Posted by Greg Provians

With the shortest day behind us, the longer days ahead will give us a chance to enjoy the outdoors, even if there’s still a need to rug up.

Technology stocks have driven Australian shares, and global markets, to new highs in the last 12 months. The S&P/ASX 200 finished the financial year 7.8% higher, slightly less than the previous year. Technology stocks gained 28% during the year.

In the US, the S&P 500 index rose 14% in the first six months of 2024 in one of the strongest performances since the dotcom bubble of the 1990s. Tech stocks were behind much of the gain, in particular AI chipmaker Nvidia, which overtook Microsoft and Apple as the world’s most valuable public company last month.

An interest rate cut is widely expected in September in the US but in Australia, many commentators predict another rate increase before the end of the year to help tame inflation. The RBA left interest rates unchanged at 4.35% at its June meeting but news that annual CPI was up by 4.0% in May compared with 3.6% in April will give the Bank cause for concern.

The Australian dollar ended the financial year almost where it began at just under US67 cents, after 12 months of volatility with highs of almost US69 cents and lows under US63 cents.


Market movements and review video – July 2024

Stay up to date with what’s happened in markets and the Australian economy over the past month.

Despite some signs of a weakening economy with stalling growth and a softening labour market, persistently high inflation is acting as a roadblock to the RBA’s possible rate cuts.

Markets have now priced in a risk that the RBA could hike rates as soon as the next meeting in August.

Australian shares finished the month close to where they started, with investor sentiment influenced by news of higher inflation and fears of another interest rate hike.

Click the video below to view our update.

Please get in touch if you’d like assistance with your personal financial situation.


To sell or not to sell is the question for moving into aged care

Moving into residential aged care can trigger a range of emotions, particularly if it involves the sale of the family home.

What is often a major financial asset, is also one that many people believe should be either kept in the family or its value preserved for future generations.

Whether or not the home has to be sold to pay for aged care depends on a number of factors, including who is living in it and what other financial resources or options are available to cover the potential cost of care.

It also makes a difference if the person moving into care receives Centrelink or Department of Veterans Affairs payments.

Cost of care

Centrelink determines the cost of aged care based on a person’s income and assets.i

For aged care cost purposes, the home is exempt from the cost of care calculation if a “protected person” is living in it when you move into care.

A protected person could be a spouse (including de facto); a dependent child or student; a close relative who has lived with the aged care resident for at least five years and who is entitled to Centrelink income support; or a residential carer who has lived with the aged care resident for at least two years and is eligible for Centrelink income support.ii

Capped home value

If the home is not exempt, the value of the home is capped at the current indexed rate of $201,231.iii

If you have assets above $201,231 – outside of the family home – then Centrelink would determine you pay the advertised Refundable Accommodation Deposit (RAD) or equivalent daily interest rate known as the Daily Accommodation Payment (DAP), or a combination of both.

The average RAD is about $450,000. Based on the current interest rate of 8.36% [note – this is the rate from July 1] the equivalent DAP would be $103.07 a day.

Depending on your total income and assets, you may also be required to pay a daily means tested care fee. This fee has an indexed annual cap of $33,309 and lifetime cap of $79,942.

This is in addition to the basic daily fee of $61.96 and potentially an additional or extra service fee.

There is no requirement to sell the home to pay these potentially substantial costs, but if it is a major asset that is going to be left empty, it may make sense.

Other options to cover the costs may include using income or assets such as superannuation, renting the home (although this pushes up the means tested care fee and can reduce the age pension) or asking family to cover the costs.

Centrelink rules

For someone receiving Centrelink or DVA benefits, there is an important two-year rule.

The home is exempt for pension purposes if occupied by a spouse, otherwise it is exempt for up to two years or until sold.

If you are the last person living in the house and you move into aged care and still have your home after two years, its full value will be counted towards the age pension calculation. It can mean the loss of the pension.

Importantly, money paid towards the RAD, including the proceeds from a house, is exempt for age pension purposes.

Refundable Deposit

As the name suggests, the RAD is fully refundable when a person leaves aged care. If a house is sold to pay a RAD, then the full amount will ultimately be paid to the estate and distributed according to the person’s Will.

The decisions around whether to sell a home to pay for aged care are financial and emotional.

It’s important to understand all the implications before you make a decision.

Please call us to explore your options.

https://www.myagedcare.gov.au/understanding-aged-care-home-accommodation-costs
ii 
https://www.myagedcare.gov.au/income-and-means-assessments
iii 
https://www.myagedcare.gov.au/income-and-means-assessments


When DIY does not pay off

“If you want something done right, you’ve got to do it yourself”

Not necessarily! The appeal of doing it yourself is understandable. There is a great feeling that comes with doing something that challenges you and with being resourceful and learning a new skill. However, there can be pitfalls to DIY and there are benefits from getting an expert involved sometimes.

We tend to be proud of what we create and place greater value on things we have made ourselves. There is a statistical difference between the dollar value someone places on something that they have built, compared to what another person would pay for it (this is for good reason known as the “Ikea effect” as it even applies to putting together flat-pack furniture).

Making DIY look easy

With all the information we have at our fingertips, encouraged by the appeal of learning a new skill and guided by the power of Google and YouTube videos, we are emboldened to give things a go. Whether it’s fixing that dripping tap, troubleshooting the laptop that’s playing up or even investing your hard-earned dollars, DIY has never looked so easy.

The growth in DIY

The DIY mindset seems to be one that is on the increase. When we think of DIY we tend to think of home improvement and fixing things around the home. This market has increased by almost 10 million dollars in the last ten years.i The statistics reveal more than half of us are taking up the tools, with 55 per cent of homeowners deciding to take on home improvement and repair jobs rather than seek professional help.ii

DIY can be a lot more than just picking up a hammer though, and our love of DIY also extends to our financials. The search for additional income in an inflationary environment has seen an increase in traders keen to take the reins and invest for themselves. Over the past decade there has been a steady increase in the share of retail investors, with equity trades by a retail investor nearly doubling in volume from a decade ago.iii Equally, when it comes to getting ready for retirement the number of people setting up self-managed super funds (SMSFs) continues to rise, increasing by around 9 per cent over the past 5 years.iv

Reasons to be careful

There is a lot more to lose if there is a problem with your financial situation than a tap that’s leaking though, so it’s important to think about what is at stake when you manage any aspect of your own financials.

The bottom line is you want to be getting the best outcomes and that does not always happen if you are taking a DIY approach. For example, when it comes to investing, a number of academic studies have shown that DIY investors tend to underperform the market and that underperformance ranges between 1% to 10% per year.v

Getting an expert involved

The trick with any form of DIY is to do your research, understand the task and what’s involved, and acknowledge when you might benefit from a helping hand. There are times when it’s OK to have a go yourself and times when it makes more sense to get advice and support. You can still learn and gain skills that you can apply to future situations but it can make sense to maximise your efforts, while leveraging the skills of the experts.

When it comes to your financial life, whether it’s investing and growing your wealth, protecting your wealth, retirement planning or estate planning, there is a lot to know and consider, and consulting with an expert can really add value and help you avoid potential pitfalls.

Getting help does not mean being passive and not engaged, however. The best outcomes are achieved when we actively work together in partnership to achieve your desired outcomes.

There is a world of difference between totally going it alone and maybe floundering a little, and getting advice and guidance to reach the best outcome. So, if you want something done right, sometimes it is best to call in the experts! We are here to help.

https://www.mordorintelligence.com/industry-reports/diy-home-improvement-market/market-size
ii 
https://blog.idashboard.com.au/2022/05/13/understanding-the-home-improvement-and-diy-market/
iii 
https://public.com/documents/2023-the-retail-investor-report
iv 
https://www.morningstar.com.au/insights/retirement/246207/smsfs-continue-to-thrive
https://occaminvesting.co.uk/do-diy-investors-underperform/


Enjoy the now and secure your future

Managing your financial situation always involves tension between how you live your life now and preparing for your future – whatever that looks like.

The worry about not getting the balance right and making unnecessary sacrifices now – or not having enough money for the things you want to do in the future is a common and valid concern we hear when we talk to clients. You want to be living your best life now which means not living too frugally or worrying about your future. At the same time, you don’t want the choices you are making now in how you live your life to impact or make impossible the wonderful life you envision for yourself down the track.

Balance whatever your stage of life

We all have financial goals – whether you are saving for your children’s education, working towards that once in a lifetime round the world trip, freeing up finances for a gap year, or setting yourself up for a wonderful retirement. It’s important to balance your ‘now’ with your ‘future’ when it comes to spending, saving, and investing to make sure you can achieve those goals. You don’t want to regret your spending – or on the other hand live a frugal life and look back on opportunities you missed while you were squirrelling it away.

The tension between the ‘now’ and your ‘future’ with respect to your finances can be even more heightened when you have retired. It can be a strange adjustment suddenly not having a wage coming in and living off your savings, super and investments. It’s common, and quite understandable, to worry about not having enough to last the distance, particularly given that a 65-year-old today may live well into their 90’s and could spend up to three decades in retirement.i No one wants to outlive their savings.

However, many retirees live unnecessarily frugal lives as evidenced by a 2020 Retirement Income Review which found that most people die with the bulk of their retirement wealth intact.ii Those that live frugally do so often not from necessity but because they don’t have an understanding of their financial needs, including how these will change over time, and how much they can afford to spend.

How the balance changes over time

That balance is hard to hit. It is different for different people, and your approach to saving and spending will change at various stages of your life. 

If you are paying off a difficult to maintain level of debt or in the final stages of scraping together a deposit for a home, making sacrifices now in the way you live life your life might feel OK. Equally if you have spent much of your life building wealth, letting loose the reins a little and going on that cruise might be something you are extremely comfortable with. 

Certainty now and confidence in the future

Whatever your stage of life, achieving the right balance comes from having an in-depth understanding of your financial situation now, and establishing and maintaining a personalised plan that takes into account all aspects of your financials – your earning capacity, level of debt, assets and very importantly, the life you want to live today and your goals for the future.

The importance of receiving support with financial planning is reinforced in a recent report which indicated advised Australians are significantly more likely to say they feel confident in achieving their financial goals (71 per cent) compared with those who are not receiving support (55 per cent).iii

The same proportion said that they were living well now, stating their finances allow them to “do the things I want and enjoy in life.” And those receiving advice are also balancing the “now” with their future needs. Those accessing financial advice also indicated they were more likely to be financially prepared for retirement and have a higher savings balance.

This confidence that comes from receiving personalised advice also means being more prepared when people leave the workforce (and a wage) behind. Advised Australians are significantly more likely to feel very or reasonably prepared for retirement (76 per cent), than those without advice (45 per cent).iv

The key to achieving a balance between living your best life now and being financially secure in the future is knowledge. If we know that tomorrow is shaping up well for us, we may worry a little less today, feel a little less guilty when we spend today and be less likely to have regrets about spending – or about missing out – further down the track.

https://www.aihw.gov.au/reports/life-expectancy-deaths/deaths-in-australia/contents/life-expectancy
ii 
https://treasury.gov.au/sites/default/files/2021-02/p2020-100554-ud00b_key_obs.pdf
iii 
https://www.netwealth.com.au/web/insights/the-advisable-australian/understanding-australian-advice-clients-better/#download
iv 
https://www.netwealth.com.au/web/insights/the-advisable-australian/understanding-australian-advice-clients-better

Going for Gold

Posted by Greg Provians

Gold fever is in the air and it’s not just the prospect of medals at the upcoming Paris Olympics.

Gold prices have been climbing strongly in 2024 as investors, jittery about the effects of wars in the Middle East and Ukraine, buy up the asset because of its reputation as a safe haven. The spot price has risen more than 18 per cent since mid-February.i

Demand for the precious metal is also being driven by central banks adding to their gold reserves to hedge against currency and other market risks.

Turkey, China and India were the biggest buyers of gold in the first half of 2024, aiming to reduce exposure to US dollar movements and to further diversify their reserve funds.ii The United States remains the largest gold depository in the world by far, holding two-and-a-half times more than Germany, the next on the list.iii

For investors, gold has been an alluring buy for centuries thanks to its association with wealth and power. As a precious metal and a physical asset, it often attracts a certain confidence, which is sometimes misplaced.

Controversial history

Gold has always played an important and, at times, controversial role in the global monetary system.

For example, during the Great Depression in the 1930s, the US government forced its citizens to sell their gold at well below market rates to help stabilise the economy. Then a new official rate was set at a higher price. It was the beginning of the end for the gold standard worldwide, the monetary system that pegs a currency’s value to gold.

After World War Two, a new international monetary order was negotiated that saw the US dollar pegged to gold with other currencies linked to the dollar’s value. The USD was convertible to gold bullion at a fixed rate of US$35 per troy ounce.iv

But increasing global financial instability and criticism from European nations eventually led to the system being abandoned by the 1970s when floating exchange rates were introduced.

Patchy performance

Day traders might be lucky enough at times to buy or sell gold for a decent profit by correctly guessing when to get in or out but, generally speaking, gold is not an easy investment to love.

Over the longer term, it hasn’t always beaten inflation, the price can plunge at a time when market conditions suggest it should be rising and its performance against stocks and bonds has been varied.

In fact, there have been long periods of persistently low prices. It languished for around six years from 1988 before recovering and then again for the decade or so leading up to the beginning of COVID-19 in 2020. The uncertainty of the pandemic-era helped spark a rally that has increased the price by almost 38 per cent.

Gold Prices (1970’s – today)

Source: tradingeconomics.com

Pros and cons

So, is gold worth considering as part of a portfolio? As with any investment, there are pros and cons.

Like many other asset classes, gold can help to diversify a portfolio and reduce certain risks. During stock market downturns, gold prices often (but not always) begin to rise. Some investors like the idea that it is a scarce, physical asset and, despite its ups and downs, gold has tended to hold its value over time.

At times gold has provided a good hedge against inflation. For example, in the US between 1974 and 2008, there were eight years when inflation was high and during those times, gold prices rose by an average of 14.9 per cent annually.v But different periods give different results. While US CPI growth was around 6.8 per cent in 2021 and 2022, gold prices were achieving an annual increase of just over 1 per cent.

How to invest

You don’t need to lug home gold bars and hide them under the bed to have a stake in a gold investment.

Of course, it is possible to own gold bullion by buying online or in person from one of a number of registered dealers in Australia. The actual gold can be delivered to you or held in storage for a fee. You could also own physical gold by buying jewellery although there are high mark ups and resale value isn’t assured.

The ASX provides the avenue to buy shares in one or more of the many gold mining companies. You’ll need to do your homework carefully to consider the credentials of the companies. Some are riskier than others depending on the countries in which they operate and their size.

You could also consider exchange traded funds (ETFs) that are linked to or track the gold price. One advantage is provided by the funds that hedge currency risk so that your returns won’t be affected by differences in the US dollar. Although with any fund, you’ll need to factor in an annual management fee, which will reduce your ultimate return. If you’re interested in achieving a balanced portfolio, we’d be happy to help you.

Gold – Price – Chart – Historical Data – News (tradingeconomics.com)
ii 
https://www.statista.com/statistics/1465127/gold-demand-central-banks-by-country/
iii 
https://www.nasdaq.com/articles/top-10-central-bank-gold-reserves-updated-2024
iv 
How the Bretton Woods System Changed the World (investopedia.com)
Is Gold An Inflation Hedge? – Forbes Advisor

 

Coral Coast Financial Services