Innholdsfortegnelse for March 2016 i Money Magazine

On the flip side, there will be nasty side effects, such as job losses The sky isn’t falling – lower energy prices will benefit most of us, writes Paul Clitheroe IF YOU HAVE ANY IDEA of what sharemarkets are doing at the moment and why they are doing it, please do drop me an email and let me know. As I write this in early February, our market seems to be alternating on a daily basis from fear to joy. It really is quite odd. Given many Australians seem to have a share portfolio consisting of banks and resources, it has been a very volatile time for millions of investors. Those with more broadly spread portfolios have been much better positioned as shares in other sectors such as health, technology…

TAKE A FINANCIAL LEAP Pete Wargent BIG SKY PUBLISHING RRP $24.99 Pete Wargent is an investment expert and coach who has already published two finance books. He believes that if you master three golden rules, you can multiply results – not only in investments but in all areas of life. A chartered accountant by profession, Wargent resists the temptation to overwhelm readers with numbers and instead uses case studies, making this book easy to digest. His philosophy is based on the 80/20 principle (most of your results will be derived from a handful of decisions); “snowballing”, or the power of compound growth; and the pleasure-pain principle (what you link these feelings to will determine the way you act). He describes his book as a “motivational tool which will help you…

Tax scams have been around for years. As each scam is publicised, scammers adopt new techniques to lure unsuspecting taxpayers into either paying fictitious debts or handing over personal information. The latest scam is the most aggressive and blatant yet, with thousands of Australians falling victim over the past few months. It works like this: You receive a phone call purporting to be from a tax office auditor, advising you that you have an unpaid debt which must be settled over the phone immediately to avoid arrest. In some cases, the scammer has access to personal information about you (perhaps your workplace or address), which makes their story sound convincing.…

Sarat has certainly begun her journey but she has some way to go and needs to be sure that her next steps are sound ones. While she says that shares didn’t work out, it’s more likely that she did not have a well-thought-out strategy or the right education for share investing, and the same danger exists in property investing. Too often investors have a misplaced sense that property is easier and this is born of both its familiarity in our lives and its physical presence. Poorly chosen property can perform just as badly as poorly chosen shares and it will be critical for Sarat to know more about how to buy property well before she invests another cent. Under the new APRA requirements around loan-to valuation ratios, Sarat’s portfolio is…

Q I’m 58 and not working and don’t expect to work again – I have a few health issues. I own my home worth $600,000 (it needs repairs) and have $430,000 in superannuation, $220,000 in managed funds (they have not done well), $160,000 in direct shares (some good, some bad), two investment properties ($500,000 and $800,000), an outstanding mortgage of $330,000 and savings of $10,000. I’m finding that I don’t have much cash flow. I did see about doing a transition-to-retirement pension but the fees were very expensive – about double what is paid now. I was surprised. What’s the best tack I should take? A I make a real effort to be proactive and give what guidance I can but based on the small amount of detail here I…

Q I am 35 and my husband is 38. We have two young children (two and four). I earn $113,000 working part time while my husband works full time earning $170,000. Our primary residence is worth $750,000 ($400,000 mortgage). We contribute an extra $850 a month. We have two investment properties worth $1,117,000 ($876,000 mortgage). Our super balances are $100,000 and $200,000 respectively, all in growth portfolios. We are covered for income protection, TPD and trauma. We are in a position where we have $1700 surplus cash each month, and I am not sure how best to utilise it. Ideally we’d love to retire in our 50s but am conscious of increasing life expectancy. Should we put the surplus cash into our home loan? Gear into more property? Gear into…

Although Haselgrove has been around in McLaren Vale for over 30 years, its wines have never been better. Best of all, the budget-priced First Cut label – especially this cabernet, the shiraz and the grenache shiraz blend – offer excellent value. The cabernet sauvignon is made with approachability in mind. There’s just a hint of oak: it is given a year in barrels, only 10% of which are new. The 2013 First Cut cabernet is rich and concentrated with blackcurrant and dark cherry flavours, impressive purity of fruit and a fine, gentle finish. Drink soon with your mid-week bangers and mash.…

This is my second email after my first question was answered by you about five years ago when I was 24. I have just turned 30 and I am doing a master’s degree in statistics part time. I have been working full time for Ambulance Victoria for the past four years. I earn $58,000pa after tax from my full-time work plus $15,000pa from casual jobs. I purchased a house in Doncaster East, Victoria, four years back for my mum and am living with her at the moment until I bring down the house debt. I have $313,000 debt left and expect to pay it back in full by 2021 at the current rate. Mum earns just enough to cover living expenses. I have no credit cards or any other debt…

CASE STUDY 2 NAME: GREG & SUE, 37; $190,000pa SITUATION: NEED BIGGER HOME FOR A GROWING FAMILY STRATEGY: HOME BECOMES INVESTMENT AND TWO MORE PROPERTIES BOUGHT WHERE TO INVEST Centennial Park, NSW • median 1-bed unit price $515,000 • current gross yield 4.5%pa Chisholm, ACT • median house price $505,000 • current gross yield 4.5%pa Southport, Queensland • median house price $515,000 • current gross yield 4.5%pa GREG AND SUE ARE BOTH 37 and have two kids under 10. As in many households, they are grappling with the decision to upgrade the family home, as their kids are getting older. Although they don’t mind where they live, they have always dreamed about a bigger home in a better suburb. They are both back in full-time work as their kids are…

Living with a bad credit score can make life especially difficult. Understandably, many people approach debt management firms to help clean up their credit history, hoping for a fresh start and a better chance at securing, for example, a bank loan. Debt managers advertise a range of services, such as developing and managing budgets, negotiating with creditors, negotiating debt arrangements or removing a name from a default listing. But the Australian Securities and Investments Commission (ASIC) has urged consumers to exercise a high degree of caution when using these firms. It has found that a large proportion of the disputes they handle leave the consumer worse off. ASIC is also concerned about the high fees and costs, describing them as “front loaded” and “opaque”. Unlike other financial services, the debt…

ONE OF THE GREAT JOYS OF small business is being your own boss. This autonomy comes at a cost, however, and it often involves taking on uncomfortable tasks such as chasing up slow-moving debtors. Invoice consistency is fundamental to maintaining business cash flow and minimising the time spent on chasing outstanding debts. Invoicing smaller amounts regularly will often facilitate speedier client payments. On the flip side, if you send a client a significant bill after allowing invoices to pile up, it can be a sure-fire way to get them offside. It might even generate cash flow issues for the customer and create a situation where they take longer to pay – or worse, they don’t pay at all. If you find yourself in the situation where there’s an overdue invoice,…

DO I REALLY NEED AN EXPERT TO DRAW UP MY WILL? These days there is an app for everything, and wills are no exception. Smartphonebased apps are the latest addition to the do-it-yourself will market, which also includes both paper-based and online kits. All claim to offer a cheap and easy way to sort out what will happen to your assets after your death. But some experts warn that by making it too easy, you could be setting up potential problems for your beneficiaries. MAKE IT STICK Contesting wills provides field days for lawyers. There is no shortage of court cases where wills have been contested, and in many cases judges have completely changed the will to include unintended beneficiaries. Anna Hacker, national manager for estate planning at Equity Trustees,…

THE TOURISM SECTOR is one of the bright spots in the Australian economy, with some analysts predicting it will help to fill the hole caused by the demise of the mining boom. A lower Australian dollar, combined with our natural attractions of beach, bush and fabulous cities, has caused overseas visitors to flock to our shores. In the year to November 2015 we had 7.34 million visitor arrivals, up 7.2% on the previous 12 months, reports Tourism Australia. Of these, about 5.4 million were here for leisure purposes. And, for the first time, Chinese visitors topped 1 million in a 12-month period. And more of us are holidaying in our own country because overseas destinations have become more expensive with the fall in the relative value of our dollar. Overnight…

First up, this is not advice but simply my opinion for my personal situation. Having covered that, any spare $5000 that I had would be salary sacrificed into my super fund. At the moment my super contributions are being directed into Australian shares to take advantage of current market volatility. For Australian share investment, I particularly like exchange traded funds as I can easily diversify any amount of money and, at the moment, I'm keen on the iShares S&P/ASX 200 ETF offered by BlackRock. The fees and performance pass muster, and the product is designed to reflect the performance of the largest 200 companies in the domestic market. FACT FILE iShares S&P/ASX 200 ETF • ASX code: IOZ • Management costs: 0.15%pa • Three-year return: 8.71%pa • Commencement: December 2010…

ASK CURMUDGEONS NEARING retirement what they want from their super and they’ll unhesitatingly say they want high returns and low risk. Life-cycle investment funds give you that – just not at the same time. Life-cycle funds put you in high-growth, high-return investments up to about age 50 and then progressively drop to more conservative investments before retirement to preserve capital. They were introduced in the wake of the GFC, which had hit older fund members hardest. Chant West director Warren Chant says the idea of a life-cycle fund is appealing: “Generally there’s a high percentage – 85% or more – invested in growth assets to start with and from age 47 it starts to decline on a regular basis by about 1% every six months. By the time someone retires…

“Consumers can change funds at any time. We say, ‘If you have been paying high fees it’s because you want to’” AT THE START OF 2014, the super industry underwent a quiet but important revolution as it tackled new legal requirements for super’s default options. That is where employees’ contributions go if they haven’t exercised their ability to choose a super fund. Fees dropped by 40% but some fund members are yet to enjoy its full benefits. This is because providers have until July 1, 2017, to transfer $60 billion sitting in old default fund balances across to the newer products. MySuper products are simple, low cost and easy to compare. They are designed to help default fund members navigate super’s complex landscape. “It was really a way of streamlining…

You believe that the shares of XYZ Corp will fall in the future because its sales revenue is dropping. You call your broker and ask them to find 100 shares of XYZ that you can borrow for a short sale. XYZ’s current price is $25 a share and you receive a cash inflow of $2500 after you sell the shares you’ve borrowed. Two weeks later, the price has indeed dropped and XYZ shares trade for $20 each. You buy back the shares (known as covering your short position) for $20 each, spending $2000. The broker returns the shares to the person or institution they were borrowed from. Your profit on the trade is $500: $2500 received from selling the stock minus $2000 paid to repurchase it (ignoring borrowing and transaction…

There were 85 new initial public offerings on the ASX during 2015, raising $7 billion among them. While individual performances varied, the average increase in share price across all new IPOs in 2015 was 10%, which compares with the S&P/ASX 200’s 2% decline over the year. In all, 69% of companies logged first-day gains in 2015, which was up from 55% in 2014. The past two years have been very different in terms of the type, scale and value of IPOs and this diversity is expected to continue. Although market volatility may affect the pipeline, IPO activity was looking healthy at the beginning of the year, with 20 companies planning to list. Although mining dominated the IPO scene previously, this sector will continue its decline, to be replaced with an…

THERE HAS BEEN A HUGE TRADE over the past three years in Australian retirees buying unhedged international equity market exposure, particularly US, and taking advantage of the fall in the Aussie dollar and the rise in international equities. But I was reading a listed investment company (LIC) report in February and it noted that its coverage list of international LICs had underperformed the MSCI World Index (a proxy for what this group of LICs should have done) by 5.4%, not over 2015 but in January 2016 alone. In one month. Clearly some Australians are bailing out of the international bet. I have also noticed recent broker recommendations to sell Magellan Financial Group (ASX code MFG) and we have all seen the share price take a turn for the worse. The…

WHEN COMMENTATORS speak of the financial sector, many investors think only of the banks. To limit one’s portfolio this way, however, is to hobble the returns otherwise available from owning some outstanding businesses that are also in the financial sector. Funds management, for example, is one that receives far less attention than the traditional operations of a bank but it is a sector that can generate disproportionately large returns. It produces a large part of the earnings for some of the big banks: Colonial First State is owned by Commonwealth Bank and MLC by National Australia Bank. And there are other, separately listed managers. During periods of outstanding performance, fund managers are lauded as omnipotent beings, able to forecast and navigate the future like financial clairvoyants. But during periods of…

Big boost to super I feel compelled to respond to Linda’s letter, “No cash to sacrifice” (December 2015-January 2016). Linda, you do have the cash. You just need to do some calculations. By directing just enough money into your super fund to drop into a lower tax bracket, you will have the same take-home pay. Easy. Distribution at source. I’m fast approaching 70. At 50 I started this strategy. It’s easier to get the facts nowadays. The boost to my super funds has been surprisingly significant. Shirley, Qld Inspired by a Socceroo I have been buying Money for a while. I am a single mum raising twin teenage boys who are huge football fans. I handed the boys an article from a previous edition about the Socceroo Tim Cahill (Interview,…

If your accountant usually gives you investment and strategic advice on your self-managed superannuation fund (SMSF), you may have to find another source of guidance. Unless he or she has obtained a limited or full Australian financial services (AFS) licence by June 30, they will be unable to advise SMSF trustees on a range of issues, including investment strategies and pensions. “Unfortunately, SMSF clients will be inconvenienced as their accountant won’t be able to tell them much before they tip over into advice,” says Liz Ward, the head of education at the SMSF Association. Australians typically start an SMSF on their accountant’s recommendation. There are more than 550,000 DIY funds with more than 1 million members. But so far the Australian Securities and Investments Commission (ASIC) has received only 226…

It is hard to go past the AMP Capital Core Infrastructure Fund's 11.3%pa return over the past five years. In a low-yield investment climate, it is a standout. The fund gives self-managed super funds direct access to assets usually available only to large institutions. About half the investments are in direct infrastructure such as Melbourne Airport, Australian schools and Angel Trains in the UK. The other half is in listed infrastructure shares that provide liquidity. The minimum investment is $10,000 and the recommended time frame is at least five years. With term deposit rates low and sharemarkets weak, alternative investments such as infrastructure are being rolled out to investors. Investment managers like to describe infrastructure as a “defensive” asset because it can deliver regular cash flows through economic cycles. And…

Quartz Cost: Free OS: iOS (Android coming soon) It’s been said before, but Quartz might really be the future of news. Curated by a team of Washington, DC journalists the app feeds you global breaking news headlines in an iMessage-style thread. You can set customisable notifications to buzz when a story you’d be interested in is making headlines, ultimately allowing you to filter the news yourself. It’s also wonderfully interactive, as it illustrates stories with humorous GIFs and emojis, and allows you to respond to the news by pressing buttons such as “I’ve got a bad feeling about this” or “What else is new?” By clicking on a message, the app takes you directly to a link to a major news publication. This is an app that delivers short, punchy…

“There was no backup plan. We had two children and we both left the jobs we had” PETA FIELDING Co-founder and CEO of Burleigh Brewing Co and chair of the Australian Craft Beer Industry. Aged 45 Lives at Mudgeeraba in the Gold Coast hinterland. Former corporate lawyer. First job: working in the eatery of a local service station – a three-kilometre walk from home – aged 15. FROM EARLY ON PETA Fielding had a calling – she just didn’t know where it would take her. “I always wanted to be the one carrying the briefcase,” she remembers telling her mother as a teenager. “I wanted to be the boss; not to boss people around, I just had this sense I wanted to create something. I didn’t know what it would…

Under superannuation investment rules, a trustee of an SMSF has the flexibility to invest the fund’s assets in whatever investments they consider appropriate, including overseas residential investment property. However, there are a range of compliance issues that should be considered first. These include: • Whether the fund’s trust deed allows for the fund to invest in property outside Australia – if not, a deed can generally be amended to allow for this. • If the investment would be consistent with the fund’s existing strategy. • That the acquisition would not breach the super investment rules. For example, a trustee is generally prohibited from acquiring certain assets, such as a residential property, from a related party, including fund members and relatives. In addition, a trustee will need to do their homework…

The latest release of this iconic Aussie red is a beauty. As it’s the 40th vintage, Wolf Blass showed a range from the past to illustrate its quality, including Jimmy Watson winners from 1973 (wonderful velvety texture and marvellous complexity), 1975 (mature yet powerful and plush) and 1998 (brooding, briary, youthful, opulent, sheer class). The 2012 Black Label is up with the finest: gently aromatic with sumptuous, fleshy texture, blackcurrant, mulberry and brambly flavours, balanced and seamless. Well cellared, it will provided drinking enjoyment for at least 20 years.…

What is it? Bellini Super Cook Kitchen Machine How much? $499, Target Info: The “generic” brand food processor has 13 cooking functions. It can steam, emulsify, puree, chop, grind, knead, whip, crush, powder and grate, among other things. What is it? Thermomix TM5 How much? $2089, thermomix.com.au Info: The high-end processor claims to replace “more than 12” kitchen appliances. It can weigh, mix, chop, mill, knead, blend, steam, cook, beat, heat, stir and emulsify. It also displays digital recipes on screen.…

CASE STUDY 3 NAME: JENNY, 39; $72,000pa SITUATION: SINGLE MOTHER REBUILDING HER LIFE STRATEGY: USE DIVORCE SETTLEMENT TO LAUNCH PORTFOLIO WHERE TO INVEST Kuluin, Queensland • median house price $420,000 • current gross yield 5.6%pa Palm Cove, Queensland • median unit price $260,000 • current gross yield 6.5%pa Spring Hill, Queensland • median unit price $420,000 • current gross yield 5.5%pa JENNY IS A 39-YEAR-OLD schoolteacher with a son, Sam, who is 13. She has recently received a settlement from her divorce and is looking at her options to rebuild her financial position. Jenny knows that on her single income she cannot afford to buy in the area where she and her son have lived for the past 10 years, but she doesn’t want to leave her network of friends…

“RENT, TRY, $1 BUY." DEALS such as this convinced one Victorian mum of four to enter into four rental agreements. While the household items involved were worth only about $9920, the total amount of rent for the two years was more than $18,500. Michelle Thompson, 26, also had no right to keep the goods. Why anybody would enter into such an agreement is beyond me but, fortunately, I have never been in a situation where essential items such a fridge or washing machine have been out of my financial reach. The question that we should be asking is how can such unconscionable business practice be permitted. With rent-to-buy agreements, you rent a new or used item (for example, a fridge) for an agreed period of time. You make regular rental…

KIDS HAVE GRAND EXPECTATIONS about which computers and mobiles their parents should buy them. But the reality is that they will quickly outgrow many of these items, so it doesn’t make sense to splash out on something they’ll use for only a short time. And they can easily be broken, lost or stolen, making it even more imperative not to overspend. For parents who foot the bill for phones and computers, plus plans, the good news is that prices are coming down while performance improves. For example, a decent smartphone on the Android system costs $30 to $40, making it a throwaway item, says WhistleOut editor Joseph Hanlon. Kids usually need a portable computer for school. Public schools often have a bring-your-own policy and private schools typically supply state-of-the art…

MULTIPLE JOBS ARE BECOMING the norm. Whether it’s a temporary second job to earn extra cash or starting a side business because it’s something you’re passionate about, there are a few issues you should think about when you’re making extra money on the side. Along with making sure you maintain a good work-life balance, there can be financial implications of having a second job – mostly tax related. You need to be smart to make sure you don’t get hit with a big bill at tax time. The simplest way to avoid this is by not claiming the tax-free threshold from both employers. “Generally, the first $18,200 of income is not taxed each year. This is the tax-free threshold,” explains Mark Chapman, director of tax communications at H&R Block. "If…

Last year about 10% of Australian travellers visited the US. While it’s a great place for shopping, eating and visiting iconic landmarks, it’s currently one of our most expensive holiday destinations. The easiest way to beat the dollar? Fly to a destination with a cheaper currency. Mexico: If you don’t have the cash to visit America, why not try one of its South American neighbours? The $A can buy 12.98 pesos, so if you’ve never been to a beach resort at Cabo San Lucas, now could be the time to go. (One Big Mac costs 49 pesos.) Brazil: Even though the Olympic Games are due to be held in Rio de Janeiro in August, the Brazilian real is yet to show much strength against the Aussie dollar or the greenback.…

IN CANADA ABOUT 20% OF HOME owners sell their own properties without paying commission to a real estate agent but, in Australia, only about 2% of home sales are commission free, says Mark Korda, co-founder of KordaMentha. His company is investing in buyMyplace.com.au. Korda says the online business – due to list on the ASX in March – is well positioned to drive digital disruption to the traditional real estate agent model. Sellers who want to save big bucks or have a lack of faith in agents, or the internet generation who do everything online, are the driving forces behind the disruption of the $6 billion home sales industry. There are now several providers, including hello.com.au and propertynow.com.au, set up to enable vendors to sell their own properties at a…

The Australian sharemarket is off to a shaky start. Investors face constrained capital growth and high volatility and, since bank term deposit rates are low (about 2.4%), they need to look elsewhere for income. Shane Oliver of AMP Capital believes now is the time to hunt for dividends, as they are more stable than prices. He predicts interest rates will remain low or fall to 1.75% in the next six months, implying sub-par capital growth. Dividends have provided more than half the 11.6%pa total return from Australian shares since 1900 and are particularly attractive in times of market uncertainty. And to keep shareholders happy, companies avoid cutting their payouts. Dividends will be in demand from baby boomers, who need income investments as they enter retirement. The fully franked dividend yield…

HOW MUCH WILL YOU NEED TO fund your retirement? This may be one of the most important questions you ever ask yourself. Your goals and, more importantly, your lifestyle rely heavily on the answer. The easy answer is about $1 million. If you have that you will be close to attaining the Association of Superannuation Funds (ASFA) estimated income for a “comfortable” retirement – just shy of $60,000pa without the age pension. (Search the internet for “ASFA retirement standard”.) For those reliant on a part pension, $640,000 or more will be close. ASFA suggests that these assets will produce an income that a home-owning couple need for a comfortable retirement with modest holidays. A more budget-level target is said to be around $34,000pa but there’s not much left there for…

Robotics engineer Stewart Worrall, 35 (pictured), is mindful of the role super will play in his future financial security. “I’ve got to live off this when I retire,” he says. A research fellow at Sydney University’s Australian Centre for Field Robotics, he’s put a lot of thought into how his savings are managed. “We’re a bunch of engineers and we like to understand what’s going on rather than leaving it to other people.” Originally in UniSuper’s defined benefit scheme, Stewart had the choice of switching to its accumulation fund and opted to do so. “My dad worked for the Department of Agriculture and was in a good scheme that guaranteed a certain percentage of his income in retirement. But it was discontinued. He’s on that and that’s fantastic but you’re…

Josh Geers, 31, accountant , South Australia Why did you decide to start self-managing your super? I’ve had my fund for just under three years. I had an opportunity to invest in a couple of products that were longterm investments that I thought would be a good opportunity for me. I didn’t have the equity outside super to make those investments, so I chose to set up a self-managed fund to access some of the equity that I’d built up in my super contributions over my previous 10 years of working. Do you have a financial adviser? I do some of it myself and use experts or specialists in other areas to supplement my knowledge because I know there’s things I’m not an expert in and where I need some…

Investors can expect a dividend yield of 5% from the S&P/ASX 200 which, with mid-single-digit earnings per share growth for the market (excluding resources), should provide a high single-digit return in 2016, predicts Brad Potter, head of Australian equities at Nikko Asset Management Australia. Potter expects resource company prices to tumble by 46% while banks and industrials will rise by 5%. He says banks are beginning to look interesting after the substantial capital raisings in 2015 but they will need substantial amounts of capital this year. “This increased capital has a significant dilutionary impact on return on equity, earnings per share, dividends per share and ultimately valuations.” Potter says Nikko has increased its underweight position in banks. With iron ore prices remaining weak, Potter sees no value in the miners.…

I enjoyed your recent article about parents helping kids get into their first home (The Challenge, February). We have two kids and have done this with one so far and are working towards doing something equivalent with the other (in a different city). The gist of what we have done is to pay cash for a percentage of the property as tenants in common (we have gone 50% but the actual percentage doesn't really matter). Our names are on the title and we have a co-ownership agreement that sets out all our expectations (essentially we pay half the rates and house insurance each year, charge no rent, and will fund 50% of any major maintenance and agreed alterations up to 10% of the purchase price. Each party has first option…

Regardless of speculation over legislative changes, if you are over age 60 and still working, you should still commence a transition to retirement pension – even if you do not require the minimum pension to assist with living expenses. A common strategy is to salary sacrifice up to the maximum concessional contribution level, which will provide a tax benefit of the difference between your marginal tax rate and the super tax rate of 15%. You then draw a pension from your TTR to assist with the reduction in your salary so that your household cash flow is not reduced. The additional benefit of this strategy is that your super tax rate reduces from 15% to nil once in the pension account. This can be a substantial tax saving if your…

Generally, your payments will continue for the time you are overseas. However, your rate will be reassessed, depending on how long you are away. Once you have been outside Australia for six weeks, your pension supplement will reduce to the basic amount. Your concession card also becomes invalid at six weeks but will be automatically reactivated when you return. If you are out of the country for more than 26 weeks, your rate of age pension will be calculated on the length of time you were an Australian resident between 16 and age pension age. This is called your “Australian working life residence”. In most cases, the maximum means-tested age pension rate is payable if you have a working life residence of 35 years or more. As a general rule,…

The ASX is introducing a new trade settlement period, shortening the process from three business days to two. The change, which takes effect from March 7, means that your trade will be settled two days after your order is executed. This applies to Australian shares, exchange traded funds, government bonds, warrants and interest rate securities traded on the ASX and its rival Chi-X. Contracts for difference and international shares are unchanged. Exchange traded options will also stay the same, except where an Australian share trade takes place. There will also be some changes to the contra process. If you execute multiple trades over one or two days, the executed trades will be offset and only the difference between the trades will be credited on settlement. Online challenge According to research…

NAME: Sarat and Ranjith STATUS: Married with a three-year-old QUESTIONS: How do I go about buying a property in India with funds from my self-managed super fund (SMSF)? I have six investment properties. Am I on track to becoming financially self-sufficient? Will my investment properties give me an asset base of $4 million and an income of at least $100,000 by 2020? Where should I buy a two-bedroom apartment in Melbourne over the next two years? SOLUTIONS: Pay off the mortgages to build equity in your properties and lower your loan-to-value (LVR) ratio. Draw up a strict budget to find extra repayments to reduce your debt. Check your trust deed as you can buy overseas property only if it is allowed in your trust deed. Follow all the SMSF requirements…

Q I’m 33 years old with a mortgage of $140,000 on a house worth about $430,000. I earn $90,000 and I have established a savings account that would cover my living expenses for around five months if something were to happen. My first and ultimate goal is to own my home by the time I reach 40 and I’m currently working towards this by repaying my mortgage at $850 a week. My second goal is to achieve financial independence by 60 and no longer work. Once I have achieved this first goal of home ownership, what would you recommend with regards to my second goal and setting out a path to achieve this? A What I would really like to know is how come so many readers are doing so…

Q I’m 26, working full time and earning $66,000 (including super). I have $12,000 in savings earning 2.8%, $25,000 in super and a share portfolio worth about $60,000. The share portfolio is currently under a margin loan of about $45,000 with interest payable of 7.4%. I have no other debt. I’m able to save $1000 to $1500 a month after all expenses. I’m contemplating putting the money into the margin loan (thus reducing the deductible interest) or in my savings account. Any thoughts? A Here we can let the numbers give us the answer. Your savings are paying 2.8% and you’ll pay around 35% tax on this, so your real return is some 1.8%. Now we look at your loan at 7.4%. I guess dividends are about 4%, so the…

What is it? According to the OzHarvest website, between $8 billion and $10 billion worth of food is wasted each year in Australia – that’s about four million tonnes of landfill. OzHarvest is a community-run organisation that collects and distributes commercial food waste to the millions of disadvantaged or homeless people around Australia. Every week, the service picks up surplus fresh food such as fruit and vegetables, meat, pre-prepared sandwiches and meals and unsold bakery goods, and delivers them to 500 charities. Where your money goes: Since its inception in 2004, OzHarvest has delivered 41 million meals to the disadvantaged and saved 14,000 tonnes of food from going to waste. Every $1 donated to OzHarvest can deliver two meals to a person in need. How to donate: OzHarvest relies on…

CASE STUDY 1 NAME: STEVE, 25; $64,000pa SITUATION: CAN’T AFFORD TO BUY IN INNER CITY STRATEGY: RENT INCOME WILL BOOST BORROWING POWER FOR FIRST-TIME BUYER WHERE TO INVEST Ascot, Queensland • median unit price $425,000 • current gross yield 4.8%pa Charnwood, ACT • median house price $420,000 • current gross yield 5.2%pa East Brisbane, Queensland • median unit price $400,000 • current gross yield 5.0%pa MEET STEVE – HE’S 25 years old. His financial situation looks like this: Steve lives at home with his parents, which has allowed him to save a decent deposit. He’s had a good run at home but now his parents are looking to move onto the next stage of their lives and are considering downsizing. He is considering his options for entering the property market…

You can lodge a dispute with the Financial Ombudsman Service for compensation for the loss you have suffered as a result of your bank providing you with an unsuitable loan. If the ombudsman decides that your bank has been irresponsible, compensation comes down to what you used the funds for and how much you benefited. For example, if the loan was used to purchase a house, the ombudsman would consider any benefits you received while you owned the property. If you lived in the property while trying to make loan repayments, then you didn’t pay rent, so you received the benefit of not paying rent. The ombudsman decides what portion of the loan you’re expected to pay. See fos.org.au.…

Family-sharing mobile phone plans are a great way for parents to save money. They allow you to pool data instead of paying for separate high-gigabyte plans for each person. This means that if kids tend to use more gigabytes than their parents, you can spread the usage. Family-sharing plans are offered by all big providers such as Telstra, Vodafone and Optus. Joseph Hanlon, editor of the comparison site WhistleOut, says Vodafone offers a control mechanism that allows parents to select one of the mobile numbers in the plan and restrict the data to that phone number. This is a terrific feature if your children download a lot of video and stream music. You can restrict their usage so bills don’t blow out. Or if they don’t do their chores around…

As property investors look to build their portfolios, those with low deposits, or a credit history that isn’t squeaky clean, are having a harder time than most. For a traditional lender, a borrower taking out a loan with a deposit of less than 20% will typically require lenders mortgage insurance (LMI). This not only means thousands of dollars in extra costs but, importantly, it requires extra background checks and any blip on your credit history may stop the loan in its tracks. In a competitive market, investors need quick decisions – not more paperwork and roadblocks. The key for many borrowers in these situations is removing the need for LMI. There are mainstream specialty lenders who will assess and price for risk comfortably without always requiring external LMI as part…

We entered 2016 underweight equities, concerned that markets were still adjusting for the liquidity drain from a stronger US dollar and increasing interest rates. On the whole, valuations have improved in most equity markets but with momentum still weak and earnings struggling to grow we felt there would be better opportunities for allocating capital. Japan is still our favoured equity market. Valuations are attractive and Japanese companies continue to deliver positive earnings growth. We view favourably recent growth initiatives and their focus on unlocking shareholder value. Economic growth is still challenged but cheap oil is a significant tailwind. A stronger US dollar, increased borrowing costs and an imploding energy sector are all weighing on US equity earnings growth. On the positive side, valuations are no longer expensive and, with market…

Run an eagle eye over balance sheets and statements INVESTORS HAVE A DILEMMA RIGHT now. There seems nothing to buy. Well, perhaps there are things to buy but having the confidence to buy them is another thing altogether. Money in the bank earns 2% or 3% – but at least the risk of capital loss is minimal. Dividends from banks and other high-yield companies such as Telstra are better – so long as you’re prepared to take the risk they will maintain the payout rate and are happy to sit with a possible 20% paper loss if markets keep falling. The housing markets appear to have had their run in the two largest cities, Melbourne and Sydney, and there has been a lot of development in Brisbane. Yields here are…

OUR LIFE EXPECTANCY IS RISING and we fear that our money will run out during retirement. So people near retirement are looking for that magic investment formula that offers growth but limits the risk of capital losses, thus allowing them to sleep at night without worrying every time the stockmarket tumbles. The common stressful decision facing retirees is: should they keep funds in cash or other defensive assets – which limit risks but achieve low returns – or should they accept some risk to keep the nest egg growing to last through retirement. The Grant Samuel Global Equity Advantage Fund reckons it has the answer. What is it? Essentially the fund puts most of its assets in the Grant Samuel Epoch Global Equity Shareholder Yield (Unhedged) Fund, managed by the…

If you haven’t chosen a super fund, your employer is obliged to pay your compulsory contributions into a MySuper default fund. It is part of industry reforms introduced by the Gillard government to ensure default funds are simple, transparent and easy to compare. To comply with the rules, MySuper funds must meet minimum standards: low fees, simple features and a minimum level of insurance cover. There are two types of default fund: balanced funds or life-cycle funds, which are mainly offered by retail providers (see table). Typically fees are about 1%. However, cheapest doesn’t always mean best, warns Kirby Rappell, research manager at SuperRatings. “It would be better to examine the long-term returns of the product after all fees and taxes. Over the past decade to the end of 2015,…

LISTED INVESTMENT company Absolute Equity Performance Fund (ASX code AEG) joined the bourse in mid-December and it gave small investors access to the strategy employed by Bennelong Long Short Equity Fund. That fund’s pairs trading strategy has rewarded investors over the long term, returning more than 10%pa above the S&P/ASX 200 since its launch in February 2002. Both Absolute Equity Performance and the unlisted Bennelong fund are managed by Bennelong Long Short Equity Management, headed by Richard Fish. The big difference between them is that investors in the unlisted fund had to stump up a minimum of $500,000 for the privilege, whereas you can invest in Absolute Equity Performance with $500. Absolute Equity is one of a small group of listed investment companies (LICs) giving investors access to long-short strategies.…

I was losing money every day. I wanted to walk away. IF THERE’S ONE THING I KNOW ABOUT people, like me, in their early 20s, it’s that we’re sceptical about everything. When we think about investing, we tend to adopt a pessimistic stance: the mining boom is over; the Aussie dollar is weak against the US dollar (more of a travel inconvenience for us); China had a rough time last year; and our stockmarket has suffered. You’ll have to forgive us for not jumping at the idea of taking a bit of a gamble – it doesn’t make an ideal environment for a first-time investor. Despite my anxiety, I made my first investment in December last year. I live in Sydney and would eventually like to buy a house. Since…

The search for yield should remain popular IT’S FAIR TO SAY THAT GLOBAL sharemarkets have gotten off to a bad start so far this year, reflecting a welter of worries, from rising US interest rates to falling Chinese demand for key commodities. Although the local and global economies do not seem as bad as markets fear, the problem is that equity prices do not have much margin for safety due to already elevated valuations and faltering corporate earnings. The S&P/ASX 200 Index lost 5.5% in January alone to be down 6.1% over the past year. Excluding the 4% return from dividends, our market lost 10% over the past 12 months to the end of January. The weak performance largely reflected hefty downgrades to resource sector earnings due to the near-collapse…