For most young adults, considering investment strategies can be duller than an episode of Better Homes and Gardens. With recent changes made to superannuation and pension laws, Australians are being forced to consider their retirement at a younger age. But Gen Y is a fickle bunch with a short attention span – how can we break it down into plain English to set them on the path to reaching their long and short term financial goals?

Here are some useful tips to becoming a more savvy investor, helping you – or your kids – to achieve those financial goals.

1) Make sure your personal finances are in order

The most important thing to have when starting an investment portfolio is capital. It is essential to begin saving a sufficient amount of money to invest into the market. Reducing credit card debt, limiting discretionary spending and committing to savings goals are crucial for building up cash.

2) Make it a part of day to day life

While social media has made us more connected, it has also made us more distracted, whittling away at our productivity and opportunities to spend time on personal growth. You have to ask yourself, is seeing what this person eats every day making me a better person? We’re not saying go off the grid; instead, use social media to your advantage. ‘Follow’ industry voices and thought leaders and soon, your social media newsfeed will be full of educational posts that can build your investing knowledge in a fun and relevant manner.

You could also go old school and turn to a book (or kindle if you’re a committed digital native!). Why not get stuck into ‘how to’ guides or autobiographies written by successful investors, or embrace YouTube or Investopedia and watch tutorials on investment basics in your spare time? You can take time out on the train or before bed to upskill in investing, instead of scrolling aimlessly through cat memes on Facebook. Podcasts are another great resource – just search by ‘investment’ in your phone’s podcast app, but try to stick to local market content.

3) Manage expectations

Rome wasn’t built in a day and neither will your nest egg be. While outperforming the market isn’t impossible, it is ill-advised. When individuals begin to speculate rather than truly understand their investments, that is when things can go wrong. Aim for modest returns similar to that of the market you are invested in.

4) Research

Put the same effort into understanding your investment selections as you would when purchasing a car or television. Properly read through research reports provided by various research houses, inspect a company’s financial statements and ask around to gauge the public perception of the product in question. It also a good idea to make comparisons with other companies or funds within the same market or industry – there are websites that can help you do this.

5) Diversify

Having all of your eggs in one basket is a dangerous game, we all know this. For example, if you have all of your money invested in Australian equities and there is a crash in the market, you stand to lose a significant amount of your portfolio. If your portfolio is spread across a range of different asset classes, you are safeguarded against any dramatic declines in one particular asset. Likewise, a dip in international equities could be offset by a rise in property prices if you’ve diversified your investments and placed your eggs in more than one ‘basket’.

6) Speak with a professional

There is no shame in seeking advice, whether it be chatting with a financial adviser or a stockbroker. You go to a doctor when you’re sick don’t you? Get a mechanic to check out your car if it’s broken down? A finance professional will be able to sift through the technical jargon and work with you to achieve your short and long term financial goals. This will give you more time to focus on other, more important facets of your life.

The most important tip of all is just to DO. If you keep your money in your back pocket instead of investing it, your money isn’t working for you; the only money you will have is what you save and it won’t keep up with the rate of inflation. It’s time to have your money working for you, growing in value, so that you can have the lifestyle you desire, now and for the future.

Get the ball rolling and speak to a member of our Financial Planning team. Call 1300 726 082 or drop us a line if you’d like to set up a time to discuss your interest in investing in your future.

 

General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.

While a majority of the Australian population will be ringing in the new year with grand plans and resolutions, hundreds of thousands of retirees aged 65 and over who currently receive a government Age Pension, will be feeling the full effect of changes to their Centrelink payments as of 1 January 2017.

More than 50,000 of this cohort will happily welcome the changes as they will be eligible to receive the full age pension – an increase from their current benefit; but roughly 300,000 people will see their part pension considerably reduce and a further 100,000 will lose their entitlements all together.

The government and mainstream media have focused on the good news that 50,000 more Australians will receive a full age pension, but what they have downplayed – or neglected to discuss at all – is the concern that the majority of retirees receiving a part-pension will be impacted negatively.

What’s the fallout?

If you are currently a couple who own your home and have a superannuation pension and other assets outside your family home with a value of $500,000, you would currently receive 76% of the maximum full age pension. As of 1 January 2017, that same couple will receive 71% of the age pension.

At first glance, this seems like a minor change and that $73 per fortnight should not worry a couple with $500,000 in investable funds available. But looking a little further into this scenario, concerns certainly present themselves.

The challenge to create wealth

With interest rates at record lows with no sign of rising, and share markets with extreme volatility, retirees are finding it harder than ever to create wealth.

The days of 6% term deposit rates are long gone and there is little confidence that a balanced superannuation fund will provide 8% in current global and domestic markets. Add this to our increasing cost of living where currently a comfortable lifestyle for a couple is up to $59,160 per annum. This doesn’t include travel, or any vehicle upgrades, or home renovations that may and probably will arise throughout retirement years.

An ageing population

The Australian Government has major concerns in regards to our ageing population. Between now and 2050, the number of:

• older people (65 – 84 years) is expected to more than double, and
• very old people (85 and over) is expected to quadruple.

This means the proportion of people aged 65 and over will increase from 13% to 23% – that’s less and less tax payers as the years go on, which will result in more pressure on the federal budget. The government is aware of this predicament and is looking at different ways to tackle this problem.

A contingency plan

Having an increased taper rate of $3 for every $1,000 (compared to the current $1.50) over the asset test limit will provide government savings; but at what cost?

If Mr and Mrs Jones need to draw down further on their own assets as a result of these pending changes, how long will it be before they will be solely reliant on a government funded age pension? Many commentators have seen this as extremely short sighted.

Of course, there’s also the 100,000 retirees who will lose all payments, creating further need to draw down on personal assets much quicker.

A summary of the changes

For full pensioners

• For a homeowner (couple), the asset limit will increase from $296,500 to $375,000
• For a homeowner (single), the asset limit will increase from $209,000 to $250,000
• For a non-homeowner (couple), the asset limit will increase from $448,000 to $575,000
• For a non-homeowner (single), the asset limit will increase from $360,500 to $450,000
• A taper rate will increase from $1.50 to $3 for every $1,000 over the asset lest test limit

On the other end of the scale part-pensioners will see a limit of:

• For a homeowner (couple), the asset limit will decrease from $1,178,500 to $816,000
• For a homeowner (single), the asset limit will decrease from $793,750 to $542,500
• For a non-homeowner (couple), the asset limit will increase decrease from $1,330,000 to $1,016,000
• For a non-homeowner (single), the asset limit will increase decrease from $945,250 to $742,500

Every retiree should have already spoken to an authorised representative about how these changes will affect their situation. If you haven’t, you are encouraged to immediately speak to your financial planner about how these changes will affect what you receive from the government, and what strategies can be put in place to limit the effects that they may have on your financial situation.

Please contact The Hopkins Group on 1300 726 082 or drop us a line if you’d like to make an appointment with a financial planner to discuss the pending Centrelink changes.

Sources:

https://www.amp.com.au/news/2016/october/changes-to-the-age-pension-assets-test
https://archive.treasury.gov.au/igr/igr2010/Overview/pdf/IGR_2010_Overview.pdf

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Disclaimer: John Hopkins Financial Services Pty Ltd is a Corporate Representative of WealthSure Financial Services Pty Ltd Level 1 190 Stirling Street PERTH WA 6000 ACN:130 288 578 AFSL: 326450.

General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.

 

Excusez-moi! Où puis-je acheter de la bière? Sound French to you? That’s because it is! It might be hard to get your head around the grammar and intricacies of a foreign language, but once you know the basics, you can at least find out where to buy a beer.

Knowing your way around the language of investing is the same. Sure, there might be some concepts you will never have the time or patience to understand, but with some base level knowledge in your tool belt, you’ll have the confidence to contribute to a dinner party conversation . . . and perhaps take your financial future a bit more seriously.

The financial planning team at The Hopkins Group fancy themselves as some skilled linguists when it comes to the language of investment. They know how daunting it may seem for a first-timer to consider taking an active role in investing – but everyone has to start somewhere. Just like how you need to negotiate the male and female versions of nouns in French, you also need to get a feel for investments inside or outside of superannuation and how they will react to the volatility of the markets, to be able to get ahead in your financial future.

Our advisers have dug into their bag of tricks to share some handy tips that – like a tourist in a foreign city – might just help get you from A to B . . . or at least to the closest pub!

Know yourself

The first step to investing is to know how much risk you are comfortable taking on. Are you a ‘throw everything at it’ kind of person, or more a ‘slowly but surely’ player?
Your propensity to take risk can be decided by completing something known as a risk profile with your financial planner. It outlines a series of questions that have been specifically developed to evaluate your willingness to take risks.

If you’re more of a row boat on a lake, than a jet boat down the rapids character – that’s okay! This discussion with your planner and the nature of your answers will help identify what type of assets classes – and how much of each asset class – you should be comfortable investing in when diversifying your own investment portfolio.

Block out the noise

Probably the most important part about investing is to try and rise above the doom and gloom stories that are strewn across every media outlet, day in and day out.

Here’s what AMP’s Chief Economist, Dr Shane Oliver, had to say on the subject:

“The problem for investors is that the worry list seems more worrying than it used to be. Yes, there is a fundamental element: the normal return potential from most asset classes are lower than they used to be, global growth is slower than it was pre GFC and the world seems awash in geopolitical risks”.

It’s easy to be caught up in the negative talk and be consumed by worry and fear, but by seeking advice from an expert, you can block out the noise and focus on the facts. It’s incredible what a newfound grasp of investment knowledge and impressive suite of vocabulary can do to allay your fears – just like landing in a new city armed with trusty tour guide!

Patience is a virtue

A popular shampoo brand was on to something in the 90s when it coined the term “it won’t happen overnight, but it will happen”. Same can be said for investing.

When you invest – particularly within superannuation – it is for the long haul and you need to keep your eye on the horizon. Short term rises and falls (known in the industry as ‘volatility’) should not sway you from your objectives. Over the years, we have seen several economic downturns, but history dictates that the market returns to normal and recovers – you just need to be patient.

By remaining patient and staying invested during these downturns, you can take advantage of lower unit prices and reinvest more income and distribution than you could if the market was higher. Sure, you may have lost some capital value in the short term, but ultimately, when the market recovers, the uplift is greater over the longer term.

Share the love

You’ll hear people say ‘diversification is the cornerstone of any sound investment portfolio’. Okay, but ‘mi no comprende’. What is diversification?

Diversification basically means not putting all your eggs in one basket – it’s a risk management technique that mixes a wide variety of investments within a portfolio. Diversifying allows you to reduce the overall risk to your portfolio by gaining exposure to different asset classes which could include property, bonds and global investments – assets often ignored by the average ‘DIY’ Australian who tends to invest primarily in the Australian stock market.

If we refer to the 2014/2015* financial year, Australian equities (i.e. ‘shares’) were in fact the worst performer, delivering a 5.6% return for the financial year. No, not all bad, but with some expert advice from a financial planner, you could diversify your investments and benefit from having some interest in a range of asset classes which could deliver higher returns.

Asset classes investment 2014/2015 financial year

• Unhedged international shares – 25.2%
• Australian listed property – 20.2%
• Unlisted property – 10.6%
• Hedged international shares – 8.5%
• Australian Bonds – 5.6%
• Cash – 2.6%

The Lonely Planet of the investment world

So as you’ve seen, you can learn a few words and wing it on your journey to financial freedom, or you can engage a professional and take it to the next level. Our team of financial planners at The Hopkins Group speak fluent ‘investment’ and love playing tour guide to new – and existing – investors.

If we’ve whet your appetite for digging deeper into your investment potential, give us a call to organise a free financial health check. We can have a chat about your goals and objectives and do that all important – and sometimes revealing – risk profile.

Call 1300 726 082 to book in a no obligation appointment with an adviser, or drop us an online enquiry and we’ll be in touch.

 

* https://www.superguide.com.au/boost-your-superannuation/asset-classes-investment-2014-2015-financial-year

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Disclaimer: Shane Light is an Authorised Representative and John Hopkins Financial Services Pty Ltd is a Corporate Representative of WealthSure Financial Services Pty Ltd Level 1 190 Stirling Street PERTH WA 6000 ACN:130 288 578 AFSL: 326450.

General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.

For the first time ever, the average age of members of newly established self managed superannuation funds (SMSFs) fell under 50, to 48.8 in December 2015 – down from 54 in 2010. This is consistent with the generational shift we are seeing with clients, with many starting to seek financial advice from a younger age.

Why are younger people opening SMSFs?

Generation X (those born roughly from the early/mid 1960s to mid 1970s), are the first generation to have entered the workforce since the introduction of the compulsory employer super contribution scheme in 1992. As a result of this, Gen Xers have been able to accumulate a steady rate of growth within their super balances, with the benefit of time.

With ASIC suggesting those considering opening an SMSF have a super balance of at least $200,000 to ensure cost effectiveness, the potential 26 years of compulsory contributions the above cohort have benefited from could see many of them with super balances at this level or higher.

In addition to this, the leaps and bounds made by technology in recent years have effectively lowered the cost of sustaining an SMSF, making this type of super fund more competitively priced than ever before.

What are the benefits of opening an SMSF?

Depending on a client’s specific situation, there may be a number of benefits of establishing an SMSF over continuing in the more traditional retail super products available in the marketplace.

These benefits may include:

• Greater investment flexibility/control
  SMSF holders are not limited by the same investment options provided by retail super funds – effectively, an SMSF member can invest in any asset, subject to legislation and an individual’s specific investment strategy.
• Broader range of insurance products
  SMSF members can select insurance products from a broader range of providers, enabling them the choice of a product best suited to their needs, rather than being limited to the insurance product of choice by provided by their current super fund.
• Greater estate planning control
  In a world where blended families have increasingly become the norm, an SMSF provides members more estate planning options to ensure beneficiaries are looked after.
• Flexibility to take advantage of Government announced changes
  When the Government announces changes to super rules, SMSFs are ideally positioned to jump on these changes as they occur.

Assuming an SMSF is appropriate for their needs, the earlier a client opens an SMSF, the longer they have to reap any potential rewards. For example, a client purchasing an investment property within their fund through a limited recourse borrowing arrangement, will have a longer period to hold the asset (and give it the chance to grow in value) with the option to sell it off in retirement in potentially a tax free environment.

With the continuing growth of professionalism in the industry, more and more financial planners are beginning to recognise the value of SMSFs over retail super funds for their clients with higher super balances. As the cost of holding an SMSF continues to decrease, the question for those in their early 30s becomes when, not if, will an SMSF become appropriate.

If you have any questions regarding SMSFs or superannuation advice in general, please do not hesitate to contact our office on 1300 726 082 and ask to speak with a financial planner today.

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Disclaimer: Michael Williams is an Authorised Representative and John Hopkins Financial Services Pty Ltd is a Corporate Representative of WealthSure Financial Services Pty Ltd Level 1 190 Stirling Street PERTH WA 6000 ACN:130 288 578 AFSL: 326450. 

General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.

It’s been a week since the Federal Government announced its backflip on its proposed superannuation reforms, and now that the dust has settled, it’s time to look at the impact the reworked measures will have on your plans for retirement.

Back in May at The Hopkins Group’s annual economic briefing, #ECON16, you might remember our discussions around the proposed $500,000 lifetime non-concessional cap. Managing Director Michael Williams laid out a bleak scenario for clients who, if they’d exceeded the cap, would have to find other avenues – outside of superannuation – to direct their retirement savings into.

“As we all know, superannuation is a tax effective environment in which to store your money, with a maximum tax rate of 15%. Once you’re in the retirement phase, a zero tax on earnings applies,” says Shane Light, Head of Advice at The Hopkins Group.

“That’s much nicer than a tax rate of assets held outside of the superannuation environment – up to 47.5%. People like the tax conditions that super offers.”

So it goes without saying that there was a huge amount of backlash in response to the Federal Government’s proposals, considering the existing annual non-concessional contributions cap is $180,000 – a far cry from the less-than-generous $500,000 over a lifetime (backdated from 1 July 2007).

But the powers that be listened. And they folded.

Treasurer Scott Morrison has come to the party and last week announced changes that allow people making voluntary after-tax contributions to their superannuation to do so, providing their balance hasn’t exceeded $1.6 million.

The changes are more aligned with the current model with an annual cap of $100,000 (commencing 1 July 2017) – still $80,000 less than the status quo, but much more generous than the half a million lifetime cap that was proposed in May.

“These revisions to the non-concessional cap proposal give our clients so much more flexibility when planning for their retirement,” says Shane who acknowledges that whilst there are more options for clients now, time is of the essence.

“It’s still a ticking time bomb though and the closer you get to 65, the harder it is to be strategic with your retirement plans. You just run out of time, and unfortunately we can’t move the cut off ages. There’s no turning back the clock!”

Shane says it’s important to act now and seek advice on how to best structure your savings to make the most of the years you have left in the workforce.

“You don’t want to find yourself ‘too old’ to make the non-concessional contributions that you had planned, and be left stuck with lump sums of money outside of super in a less tax effective environment,” he warns.
Individuals aged under 65 will continue to be able to ‘bring forward’ three years’ worth of non-concessional contributions in recognition of the fact that such contributions are often made in lump sums. But what does this mean?

If a 59 year old client was to sell an investment property and have $600,000 cash at their disposal, they could take advantage of the bring forward rule and put $300,000 (i.e. three years’ worth of non-concessional contributions post 1 July 2017) into super in one lump sum. The final $300,000 would have to sit outside of super for another three years, after which it could be deposited as another lump sum making use of the bring forward rule again. Within four years, the whole amount would be wrapped up in super.

On the flip side, if that client was 65 or older, that $600,000 would have to go in to super in instalments of $100,000 every year for six years (providing they now meet the work test), opening up the client to huge tax implications with $500,000 sitting outside of super in the first year, $400,000 in the second and so on.

“We try to find the most tax effective solutions for our clients to make sure they’re maximising their retirement savings and their money is working for them. Super is a good option and we’re pleased to see the Government has had second thoughts on their harsh budget measures,” says Shane.

“We look forward to talking to clients about making the most of these revised caps and encourage people to speak to their adviser about any age limits that may apply to them.”

Of course, nothing is set in stone and it’s just a proposed change at this stage. The government’s revised superannuation package still has to be passed by the Parliament.

For more information on what cut-off ages and caps apply to you and your retirement plans, call us on 1300 726 082 and ask to speak to a financial planner.

Seeking financial advice can seem like a daunting task. There are many different providers on the market, each eager to grab your attention. This alone can cause many individuals to be hesitant to seek financial advice and often leads to a number of questions that often go unanswered; “do I really need this advice”, “how much is it going to cost”, “is this the right kind of service for me?” Finding a financial planner can be easy, though finding a financial planner that works for you and your circumstances can be difficult.

One of the questions we often hear from prospective clients is “How do I get good financial advice for myself?” To help you answer this question, we’ve compiled some useful considerations.

Do you need advice?

Opting to do it yourself may be cheaper, but it isn’t for everyone. Those who have more complex financial affairs, don’t have the time or aren’t particularly confident when it comes to financial matters will be better off seeking an adviser.

Most people want a combination of information and advice. The former may cover questions like “how much should I be saving for retirement”, or “what is more tax efficient; a pension or an investment outside of the superannuation environment?” The latter may involve recommending an appropriate strategy or product to help meet your financial goals.

Ask for recommendations

As we are a word of mouth referral business, most of our clients are indeed sourced through this method. Asking friends, family and colleagues for their recommendation can be a great starting point, but don’t rely solely on this. Always check that an adviser is authorised appropriately via Moneysmart’s Financial Adviser Register. All of The Hopkins Group’s financial advisers can be found on this register.

Do your homework

Even if you don’t feel confident making your own decisions, do some research first. Think about your financial goals, your attitude to risk and what you are hoping to achieve from the meeting. Is it specific product recommendations or a complete overhaul of your finances that you are after? The more research you do, the less likely you are to buy into an unsuitable product. The adviser may come up with quite a different plan of action, but should be able to discuss the pros and cons of either course.

Complete paperwork early

Completing a standard fact find in advance and sending it to your adviser can give a reasonable knowledge of your circumstances before the first meeting. This saves time and in some instances reduces your fee if you are being billed by the hour. Usually the fact find is given and completed during the first meeting, but requesting and completing this beforehand can be very beneficial to you and your adviser. At The Hopkins Group we understand that your time is valuable. In your first meeting we spend time getting to know you and building a rapport, rather than filling in forms.

Be honest

To make good recommendations, an adviser will need to ask you lots of questions — some of which may be quite personal. Be honest, don’t just say what you think they want to hear. Be wary of advisers that seem too keen to recommend specific products before getting a full account of your circumstances. Our first meeting with a client is designed to pinpoint what your financial goals and objectives will be going forward and the specific product recommendations will be provided at subsequent meetings.

Know what you are paying

Make sure you ask about the costs of the advice provided. Ask about commissions paid to the adviser, both upfront and on an ongoing basis (known as trail commission). Be suspicious of advisers who appear not to be charging for their services at all – chances are you will end up paying more than you think or receive inferior advice. As the old adage goes, “you only get what you pay for”.

Ask about regular reviews

The initial advice might be great, but a financial plan should not be a ‘set and forget’. What if economic conditions or your personal circumstances change? Do you get regular reviews for the costs paid? Are these reviews one-on-one meetings, or an annual statement through the post? Often people lose more money by failing to monitor investments, and adjust accordingly, rather than being sold poor investments to start with.

Here at The Hopkins Group we pride ourselves on preparing our clients for their financial future and by following the aforementioned points they will be a step ahead of the game when they sit down to speak with us.

If you wish to discuss any of the points raised in this article, or would like to speak with someone with regard to any financial matter, please feel free to call our office on 1300 726 082 and ask to speak with a financial planner who will be able to assist.

 

Financial advice and services are provided to you by John Hopkins Financial Services Pty Ltd as an Authorised Representative of Wealthsure Financial Services Pty Ltd AFSL 326450. John Hopkins Financial Services Pty Ltd is the financial services division of The Hopkins Group.

               

In March 2016, we asked our Facebook friends what they feared most about their retirement.

Head of Advice Shane Light and Senior Financial Planner Anthony Malvaso, sifted through the comments to answer what it takes to achieve a long and comfortable retirement.

What did you get up to last night? Dinner on the couch? Bath the kids? Bit of Masterchef on the television? Not for the finance die-hards at The Hopkins Group.

As the clock ticked over to 7.30pm last night, our team of committed finance enthusiasts was busily preparing to watch, take notes and analyse the potential impacts of the Liberal Government’s budget for 2016-17. Of most interest were the proposed changes that could impact our clients and their wealth management strategies.

The hype and sensationalised media that we have endured over the past couple of weeks was soon to be realised.

As discussed in our recent roundtable discussion, negative gearing has been hot on the agenda but the Liberal Government chose to leave it untouched in next year’s budget. What they have done though – and of most concern to our clients – is to introduce significant changes to superannuation caps. This will mean clients will become restricted in the way in which they can build wealth within the superannuation environment.

To keep this short and sweet – as we assume your inbox has been flooded with other post budget debriefs – we have provided a list of key superannuation and taxation issues that were addressed in last night’s announcement.

The proposed effective date for all is set at 1 July 2017 for all but one key change; the lifetime cap for non- concessional superannuation contributions came into effect at 7.30 pm (AEST) 3 May 2016.

Superannuation

• Contribution caps
  • Concessional (reduction in caps)
  • Non-Concessional (life time limits introduced)
• Catch-up concessional contributions
• Tax deduction for super contributions extended
• Super contributions tax – high income earners
• Removal of work test
• Removal of the maximum earnings test
• Retirement income balance cap of $1.6m
• Transition to retirement
• Low Income superannuation tax offset (LISTO)
• Low Income tax offset spouse threshold
• Anti-detriment

Taxation

Business

• Company tax cut
• Small business tax discount increase and extension
• Small business entity turnover threshold increase
• Small business $20,000 instant asset tax write-off extended
• Simpler Business Activity Statements (BAS)
• Targeted amendments to Division 7A

Personal

• Change to income tax thresholds
• Increased Medicare low income thresholds
• Medicare levy income threshold and rebate pause extended
• Childcare subsidy delayed
• Reversal of decision to remove backdating of veterans’ disability pension claims
• HECS

There’s so much detail within each of these points and we encourage you to book in with your adviser on 1300 726 082 to discuss how your personal circumstances could be affected – especially in relation to wealth creation.

What’s your next move?

In the meantime, an easy way to get your head around the budget and what it means in the grand scheme of things, is to register for #ECON16, our annual economic briefing on Thursday 19 May at ACMI, Federation Square. Scott Fletcher, Director – Client Investment Strategies, Russell Investments will be our keynote speaker on the night and we look forward to hearing his response to Budget 2016-17.

Find out more about #ECON16

Further reading

Budget website

 

Superannuation is an ever changing industry and now, more than ever, it’s essential that young Australians use their retirement fund in an efficient and considered manner.

More often than not, superannuation is something that people sign up to in their youth and then forget about until it’s too late. Typically, Gen X and Gen Y have their retirement savings stored in the first fund they signed up to with their first job. They might even have multiple accounts they’re yet to consolidate.

But times, they are a-changin’! Over the past 12 months, the share markets have proven extremely volatile, encouraging more Australians – particularly young Australians – to consider taking control over what assets their superannuation is invested in.

The latest data from the Australian Tax Office (ATO) shows that 43% of new Self Managed Superannuation Funds (SMSFs) are established by members younger than age 45.

So why the shift?

Easing the sting of fees

SMSFs have always provided greater control and flexibility to members, but fees have sometimes been a deterrent to people with balances lower than $200,000.

The increase in average fees is due to the average balance sitting at $1,050,000* with advisers and accountants using a fee structure at usually 1% of the balance. If you have less than $200,000 in your account, this can be a big chunk of your savings and the reason lots have shied from taking the plunge into the SMSF world. But while fees within SMSFs have increased in recent times, the set up costs have decreased – making it a more accessible option for investors.

As more Australians take an interest in what is required to run a successful superannuation fund, they are shopping around and demanding more cost efficient options to keep fees down. These days, SMSF administrators are coming to the party and providing cost effective SMSF options with set up costs sitting at around $799. With those kinds of figures, SMSFs are not as out of reach for Gen X and Gen Y as they once were.

*As of December 2015

Bricks and mortar

Traditionally, Australians have always considered bricks and mortar a ‘safer bet’ than the share market and as such, the desire to invest in property is another motive that is enticing people under 45 to move towards an SMSF.

Less than ten years after the global financial crisis (GFC), uncertain global markets continue to cause major concerns so it’s common to find people seeking investments that they can touch and feel. The projected population growth in Australia’s major metropolises has also increased the demand for housing – a trend that investors can capitalise on.

With interest rates at record lows and real estate still producing fairly positive returns, Australians in their late 20s-40s are looking to move their retirement funds into bricks and mortar – something they can do through their SMSF.

Keeping a finger on the pulse

Finally, visibility and trust within a superannuation fund has become much more important to younger Australians. In the wake of the GFC, many were shocked when they received their superannuation statements or spoke to their adviser to realise the average fund balance had fallen by more than 17%.

Within an SMSF, people feel they have more control and visibility on the investments they elect, rather than entrusting the direction of their balance to their fund’s administrators. This hands-on approach that’s encouraged in an SMSF ensures highs and lows won’t come as such a shock, and investors can feel more involved in the growth of their wealth.

 

If you are keen to explore your options within an SMSF, call 1300 726 082 to speak to one of our financial advisers. Our team of accountants can also help with the management of the fund and handle all the administration on your behalf, keeping everything in-house and centralised.

 

Stats taken from ‘SMSFs winning over younger Australians’, Financial Standard, 23 March 2016

 

Dislaimer: John Hopkins Financial Services Pty Ltd is a Corporate Representative of WealthSure Financial Services Pty Ltd Level 1 190 Stirling Street PERTH WA 6000 ACN:130 288 578 AFSL: 326450. 

General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.

Many investors are aware that the Australian Securities Exchange (ASX) commences trading at 10am and ceases trading at 4pm, but did you know that there are small windows on either side of these times during which anyone can enter buy or sell orders in the market? The ASX goes through a number of phases on any trading day, and there are trading periods that exist beyond the official ‘opening’ and ‘closing’ times of the market.

Securities open in five groups according to the starting letter of their ASX Code:

Group	Market Open	ASX Code Starting With
Group 1	10:00:00am +/- 15 seconds	0-9 and A-B
Group 2	10:00:00am +/- 15 seconds	C-F
Group 3	10:00:00am +/- 15 seconds	G-M
Group 4	10:00:00am +/- 15 seconds	N-R
Group 5	10:00:00am +/- 15 seconds	S-Z

The time is randomly generated by ASX Trade and occurs up to 15 seconds on either side of the times given above, i.e. any group may open at any time between 9:59.45 am and 10:00:15am.

During the pre-open phase (from 7am to 10am), the overlapping bids and offers which exist within the market are matched off against each other resulting in an official ‘auction’ price, which is the price at which the stock opens. What this means is that investors can enter orders online which are placed in a queue according to price-time priority and will not trade until the markets open.

Between 4:00pm and 4:10pm the market is placed in Pre Closing Single Price Auction, (aka ‘Pre-CSPA’). Trading stops and stockbrokers enter change and cancel orders in preparation for the market closing.

Knowing when the market opens is one thing, but knowing when the right time to buy stocks is another. In general terms, many investors in the share market are drawn to the possibility of long-term wealth building through capital growth and the ability to earn dividend income. However, there are others who are drawn to the possibility of quick, large profits through more speculative trading activities, such as:

• buying ‘penny dreadful’ (cheap stocks with high leveraged aspects),
• buying stocks on ‘hot tips’ or rumours, or
• day trading or speculation (i.e. buying and selling within the same day, usually with large amounts of capital, locking in profits from relatively small price movements).

Australian shares are characterised by generally high liquidity and relatively high volatility, with prices affected by both domestic and overseas influences. With this in mind, there is no real ‘right’ time to buy into a stock. Unless of course, you own a crystal ball and can see the future!

Instead, investors should look to diversification within an investment portfolio. Ensuring portfolios are well diversified at all levels of a portfolio should help ensure investors reach their investment goals in the least volatile manner. Diversification is crucial in reducing the likelihood of underperforming stocks and decreasing risk and volatility.

Whether you’re looking for capital gain or consistent income through dividends, diversifying your portfolio across different stocks as well as sectors and industries is a prudent way of managing your share portfolio.

If you would like to find out more about the share market and advice on how to invest, speak with one of our financial planners today on 1300 726 082.

 

 

 

General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.