Innholdsfortegnelse for October 2018 i Money Magazine

Apart from Best of the Best (our annual awards issue, which goes on sale on December 5) this issue, looking at “Where to Invest $10k”, would have to be one of my favourites. It’s now in its fifth year, and not only does it tackle the questions we’re asking right now but it also gives you a little insight into where industry experts are investing their own money. Naomi Simson, founder of RedBalloon and one of the “sharks” on Channel 10’s Shark Tank TV show, says if she wasn’t involved in the business she’d choose an industry in “growth”. No surprise, then, that she has her eyes on health care, with one of her stock picks being Healthia (see page 43). Ross Greenwood unashamedly calls his pick boring. You can…

DALE GILLHAM Dale Gillham is chief analyst at Wealth Within. Dale says: “This is pretty much a no-brainer for me, as it is not how much money you get, it is what you do with it that counts. So for me it is investing sooner in the markets and in my knowledge.” VITA PALESTRANT Former editor of the Money section of The Sydney Morning Herald and The Age, Vita says: “Having a mortgage and kids makes you careful with money. You treat ‘specials’ as if they were a tarantula: 28% off energy, zero-interest credit cards, discount insurance, etc. But it’s better to check the downside and do the sums.” NERIDA COLE Nerida Cole is head of advice, Dixon Advisory. Nerida says: “In my early 20s I’d been a bit intimidated…

Diligent savers, myself included, have been punished by the Reserve Bank’s rate-cutting regime ever since the GFC hit, with interest rates down from over 7% in 2008 to just 1.5% today. As much as I wish rates were going to head higher in the coming years, I actually think the opposite will happen, and they will be cut to 1% or below by 2020. That might seem crazy but consider the facts. Household debt is at record highs; wage growth is non-existent; under-employment is rife; inflation is below the Reserve Bank’s target band; and retail sales growth suggests consumers are incredibly cautious. Add to this the decline in the housing market, which is wiping tens of billions of dollars from the net wealth of households, and the case for a…

This book is described as the essential toolkit for making smarter decisions whether you’re a buyer, seller or landlord. For sellers, author Andrew Trim covers everything from choosing an agent, the two “lies” to watch out for, working out the best method of sale, presentation as well as negotiation. Buyers are walked through purchasing dangers, the purchasing process and negotiating the right price. Finally, for landlords, there are tips on choosing the right property, attracting and keeping quality tenants, and selling. Five readers can win a copy. In 25 words or less, tell us the biggest real estate danger you’ve seen. Enter online at moneymag.com.au/win or send entries to Money, GPO Box 4088, Sydney, NSW 2001. Entries open October 1, 2018 and close on October 31, 2018.…

If you’ve never heard of “flex” commissions, you are among the vast majority of people, and it is hardly surprising. That’s because flex commissions wouldn’t exist if consumers knew about them. Most people know that car dealers sell on-the-spot financing. Cars are an emotional purchase often made outside normal bank hours. In the excitement of the new car moment and to assure the “great deal”, immediate finance approval leads some car buyers to suspend their normal judgement and take whatever is on offer. Most people would expect the dealer to receive commission on the loan. What surprises is that the dealer can set a higher interest rate than the lender’s base rate, earning higher commission. That “flex” commission, sometimes up to 80% of the increased interest, is quite an incentive…

At 63, I am more into capital preservation. I need income but also exposure to growth assets. I also want low-cost, hassle-free investing. So a simple choice for me with $10,000 is the listed managed fund run by the company of which I am chairman, InvestSMART. Apart from my obvious bias, the Australian Equity Income Fund (ASX: INIF) focuses on generating income while also targeting long-term capital growth. The estimated income is in excess of 4.5%, which is very handy for this stage in my life. I can buy it through a discount broker with zero paperwork and tiny costs. It may or may not suit you but it works for me. Paul Clitheroe is chairman of the Financial Literacy Board and an author. He is also chairman and a…

With my ongoing strategy to buy when others have sold, the soft local economy and path of very low interest rates should see a significant allocation to offshore markets. Emerging markets have been beaten up in recent months. It is high risk, for sure, but history shows that such markets, having dropped around 40% from the peak, don’t stay down for ever and that when they do recover they usually lift by a substantial amount. The prospect for a lower Australian dollar would help this investment. My other picks would be on the local market: funeral company InvoCare (ASX: IVC), which has a solid long-run business model, and animal feed company Ridley (RIC), which is expanding into the Asian markets. Both of these companies have been weaker in recent times…

First, let me call out the elephant in the room. Not everyone who has an idea should be an entrepreneur. The hype surrounding entrepreneurs has reached fever pitch in recent years. University graduates and success-hungry millennials are joining the start-up world in droves, hoping to be the next Elon Musk – lured by the promise of big money, notoriety and the dream of retiring young. Many people want to be their own boss, lead a business, create something truly worthwhile and valuable. And some truly want to make the world a better place. These are all very admirable intentions but how do you give yourself the best chance of success? Here are three tips to help turn your idea into a viable business, with one caveat: be prepared to work…

1. Jess and her friend Anita move into an apartment together. Jess organises the electricity and gas for the apartment and puts the accounts in her name. Six months later they have a fight and Anita moves out and refuses to pay any of the bills. Can Jess make her pay them? A Yes B No 2. Sam has $3000 owing on his credit card at 16.5% interest. If he pays only the minimum amount due each month, as shown on the card statement, how long will it take him to pay off the whole amount? A About 21 years B About 4 years 3. Alex has just completed major home renovations and her home is now worth 20% more than the amount it’s insured for. How much do you…

A tick for guaranteed renewable means that provided premiums continue to be paid the policy will remain in force until the expiry age. The terms applicable at the time of acceptance apply for the duration of policy irrespective of any future change in the insured’s health, pastimes or occupation. A tick for TPD ETE definition means that the occupational requirements for a TPD benefit to be paid are limited to being unable to perform any occupation to which the insured is suited by education, training or experience for reward. A cross for TPD ETE definition means that the definition has extra conditions that must be met before a claim will be paid.…

NAME: Grace Carter BUSINESS: Grace the Dog Walker, Sydney. QUESTION: As my business grows, when is the best time to take it up a notch. What kind of things do I need to take into account when I’m thinking of expanding? I operate a dog-walking business based in Sydney. Apart from just dog walking, we offer walking-and-feeding packages that start at $20 and include a 30-minute walk. There is also a dog-sitting service available to clients who are taking a holiday. For a single visit per day we charge $25, a fee that includes a 30-minute walk and feed. My question is, how do I know when my business is ready to expand? What milestones should I look out for to tell me it’s time for extra staff? 1 Dog…

THEY’VE ALREADY FALLEN QUITE A BIT. ARE THEY REALLY LIKELY TO GO FURTHER? First, let’s state the obvious. Not all property markets are the same and there are always some that will do better than the average and some that will do worse. However, it is significant that five of Australia’s eight capital cities saw falls in August with even Hobart, by far the best-performing capital city over the past 12 months, going backwards. Since peaking last September, research company CoreLogic says housing prices nationally fell 2.2% through to the end of August, with the biggest falls in Sydney – down 5.6% over the 12 months. The decision for some of the banks to raise interest rates independently of the Reserve Bank last month is likely to put further downward…

1. Temper nanosecond reporting with in-depth coverage. 2. Allow time for fact verification, good analysis and well-written reports. 3. Consider outsourcing some of your investment portfolio to a professional. 4. Dismiss definitive statements for what they are. 5. Look beyond headlines and biased coverage. 6. Avoid coverage that only feeds you what management wants you to focus on. 7. Avoid brokers who recommend buying or selling based on a 20-word summary. 8. Curb your attraction to bad news. 9. Remember that commentators can be wrong. 10. Draw on financial history for added context.…

How easily would you forgo $100,000 of a $500,000 super balance purely because of inertia? When you get your annual statement, look at it closely. With such high stakes involved, a more appropriate approach might be that of a rottweiler with a bone. “One per cent more in fees over a 30-year period can decrease your retirement balance by up to 20% – that’s a significant difference,” says Camille Schmidt, market insights manager at research firm Super-Ratings. “It might not sound like much but that extra 1% you are paying is 1% less in your balance, year after year, compounding over a very long period of time.” Schmidt urges fund members to take a more forensic approach to their statement and check the different fees. “We say a total fee…

‘A rate cut would crush spending; a rise would add fuel to the debt fire’ Trust me – I’m an economist. (OK, stop laughing!) October is not “hexed”. Yes, bad things happened in Octobers past (1987, 1997 and 2007) but as my statistician friends tell me, “correlation is not causation”. October is not special – unless it’s your birthday or you’ve got dividends coming your way. Don’t go looking for trouble in October, it’s there all year round. So what about October 2018? Fallout from the royal commission is likely to drain demand for banks. At the same time, rising offshore interest rates and tighter lending regulations are crimping bank margins. In addition, credit growth just isn’t what it used to be, so profit growth will be harder to find.…

If financial advisers and stockbrokers weren’t paid for advice or execution, I reckon that being paid by the cliche would be a pretty good substitute. Not only does the financial services industry specialise in trying to make things sound more complex than they really are but it does so in a fog of jargon and double-speak. Perhaps it’s because they’ve forgotten that they’re talking to real people. Or, less charitably, because the more difficult they make it sound, the less likely you are to do it yourself (and take a little gravy off the fees gravy train). Of course, phrases become cliches largely because they’re true more often than not. Take a universal favourite among financial types: diversification is the only free lunch in investing. Which, on the surface, sounds…

You know, this “age 60” thing is really pretty good. I am a bit surprised to find myself saying this as I have all the obvious problems of what I am told is now called the “new middle aged”. I thought I was old but I'll go with that. Anyway, I can’t read a book, iPad or menu without glasses. This is a pain. I am fine with glasses but being relatively new to them I tend to forget them or just lose them. My solution is to buy loads of the cheap ones from a chemist or supermarket and leave them everywhere. That does help. Next up, my hair is pretty much white, though in an attempt to be pleasant my hairdresser does claim I have “traces of bronze”.…

Is the property market going up, down or sideways? Well, it depends on whether you’re buying or selling ... if you know what I mean! All jokes aside, the fact is there are many markets within markets. Headlines that suggest “the market” is booming or crashing should essentially be ignored. First, each state is doing different things, as are the markets within those states, such as the regional areas and capital cities. Then you have several subset markets that are rarely doing the same thing. For example, houses are often doing something different from terraces and apartments. Price point is another sub-category to consider. The low, middle and upper ends of the market can often be performing quite independently. As always, a big influence is supply and demand. For example,…

Penda is a financial empowerment app for women who face domestic or family violence and are considering separation and divorce. Developed with funding from Financial Literacy Australia, Penda offers tips on financial safety planning, information about accessing emergency money, including crisis payments, plus legal referrals and emergency housing. It offers a number of important security features including an optional passcode security setting and a lock-screen game accessed by shaking the device or tapping an icon. If you don’t feel safe downloading Penda onto your phone, ask a friend, relative or co-worker to download it onto theirs. Penda is packed with advice to help all women whose longterm relationship is coming to an end to find their financial freedom. The broader topics covered include managing money and debt after separation or…

It’s been a tough few months for the superannuation industry following revelations at the royal commission into misconduct in the financial services sector. But before we despair at some of what we’ve been hearing we should appreciate that the problems the royal commission has identified have not been with the funds that are run by the major banks but with the convoluted arrangements that still exist between them, or rather their trustees, and their networks of aligned financial advisers. The irony is that many of the funds they run are actually quite sound – retail funds as a group are now as cheap as industry super funds while in some asset classes retail funds are the best performers in the market. This fee revolution is so sharp that Australia’s smartest…

Despite releasing a poor full-year result, Telstra’s share price soared. Expectations were low and reality wasn’t as bad as it could have been. But Telstra’s core problem remains the same. For years it has dined on excess returns from its various businesses. Those days are over. The copper monopoly has been replaced by the NBN while competition is crimping margins in the mobile market. Earnings before interest, tax, depreciation and amortisation (EBITDA) were flat for the full year and group margins fell from 41% to 39%. Telstra’s two largest businesses – broadband and mobile – were responsible for the brunt of the decline. On a flat revenue base, operating expenses rose 7% to almost $18 billion. Telstra is targeting an aggressive $2.5 billion of cost cuts but some of that…

Paul’s verdict: Sensible risk will give better returns over the long term This is a great time to focus on your young kids and wealth creation My wife and I are 38 and 46 respectively and left having children until later in life, so we have a three-year-old and one-year-old. (Not sure how I got to 46 so quickly.) We both travelled in our youth so our super could be better; we have a combined balance of $210,000. We owe $380,000 on our home and have $5000 in an exchange traded fund with Vanguard (ASX 300). My wife will go back to work part time soon and I work full time. We will have a combined wage of $165,000. So here comes my very confused question. In terms of how…

There are great opportunities right now to buy residential real estate with growth potential, particularly if you can find houses with value-adding opportunities in growth markets. Smart investors will always consider all of Australia as their market and understand that, because of the diversity of scenarios in different parts of the country, it’s always a good time to buy – somewhere. But doing it right takes lots of time and, like many people, I’m time poor. So I’d invest $10,000 in a good buyer’s agent with instructions to find properties with the potential for subdivision, renovation and/or future development in affordable markets in our smaller capital cities and some of the stronger regional markets. I’d be wanting them to look in Adelaide, Brisbane, Perth, the Hunter region and key Victorian…

$ 71,348! That’s the amount one couple managed to rack up on more than eight credit cards. It’s one of the highest personal debts that I’ve ever had to help consolidate into a home loan. While this case is still playing out, one thing I’ve learnt about consolidation (either in my past role as a lending manager or in the editor’s seat) is that it may be the fastest and easiest way to get back on track but it’s not always simple to achieve. It requires some serious preparation. “Banks have different servicing [income versus outgoings] guidelines for different products, so where someone may be able to get a new credit card after getting a home loan, that same person may not be able to get a new home loan…

With market volatility and valuations reasonably high, retirees looking to produce income from part of their portfolio should consider yield-focused investments such as infrastructure. Because of the long-term essential nature of these assets, a key feature can be highly predictable future cash flows, which can help smooth out returns for your investment or super portfolio if markets fluctuate. I’d invest part of the $10,000 in Transurban (ASX: TCL) and Sydney Airport (SYD). While the household sector is under pressure, people still need to use these infrastructure assets to get to and from work and go about their daily lives; Sydney Airport also benefits from huge numbers of tourists visiting Australia, particularly record numbers from China. I’d also consider New Energy Solar (NEW), which invests in large solar power stations that…

I’m rather risk averse, really. I never gambled, bet on a horse or even bought a lottery ticket. The thing that I like about business is what I can control. For what you put in, however, there is no guarantee that you will get it out. But I do like dashboards, scoreboards and learning about what the key drivers of my business are. Which is why at the Big Red Group we have Marketics’ Albert artificial intelligence as one of our investments for future growth. But not all AI is equal and I invest in that business because I know it. If I was not to be involved in the business, I would choose an industry that I know is in “growth”. So my money would go on a publicly…

Many super fund members would be astounded to discover that the premiums they pay for default disability cover may be worthless or subject to “offset clauses” that reduce their benefits, with serious financial consequences. Recent media reports challenge the common notion that in the event of injury or illness your benefits will be paid out, making years of paying premiums worth every cent. It came as a shock to two airline pilots with default total and permanent disability cover that their claim would be offset against their income protection policy benefit, reducing their total and permanent disability (TPD) lump sum of almost $1 million to zero. Both have serious illnesses that have ended their careers. Neither was aware their income protection benefit, payable to age 60, would be offset against…

A few customers hit the panic button when the Commonwealth Bank announced changes to its redraw facilities in August. The fuss centred on the bank’s ability to take money out of your redraw facility if you are behind with your repayments. While the bank could have done a better job explaining the changes, what it was proposing wasn’t too crazy. Put simply: if you chose to reduce your repayments because you put some money in your redraw facility but then you decided to take the money out again, your reduced repayments will no longer be enough to pay off your debt in the agreed time. As a result the bank will use your redraw money to catch up. Now while I’m not too fazed about this change – after all,…

YES RACHEL DAVID CEO Private Healthcare Australia Private health insurance gives consumers the peace of mind to know exactly when they can be admitted for surgery and other essential medical treatments. Few people can afford the uncertainty of having to wait an unknown length of time to get a painful or disabling condition treated. Whether it’s a sports injury that stops you driving your car or a child with an eating disorder, these are the types of medical conditions that can’t wait to be treated without causing real social and economic consequences. People choosing private health also cite the importance of having their own fully trained specialist looking after their care, someone who is responsible 24/7. Research shows that more than 80% of people with private health insurance believe they…

A record number of interest-only loans are due to expire by 2020. The Reserve Bank estimates that, in total, $240 billion of interest-only (IO) loans is scheduled to roll over to principal and interest (P&I) in the next two years. Worryingly, Moody’s Investors Service has predicted Australian mortgage delinquencies will increase over the next two years as a result of the large number of IO loans ending and the resulting “payment shock” from the higher repayments. If you have an interest-only loan that is due to expire soon, it will pay to start getting ready. Start by finding out exactly when the interest-only period is due to end. “Set yourself a reminder three months before this happens to allow adequate time to review your options,” says Aaron Fuda, from Omniwealth.…

When I recently sat down to sort out my tax affairs for my accountant, I was shocked at how often I’d traded shares over the past two years. I’m still not sure why I was such an active trader but after reading a paper on investor bias from Russell Investments I think I may have been guilty of over-confidence. This is one example of behavioural biases by investors that can impact their portfolios. People tend to overestimate or exaggerate their ability to successfully perform tasks, says the paper, and this can lead them to trade too often. The paper, “How to avoid common behavioural biases and their detrimental impact on investor portfolios,” also identifies “herding”, which can result in people buying high and selling low; “familiarity”, which leads to a…

Do you hold hybrid securities in your investment portfolio? If you run a self-managed superannuation fund or have visited a financial planner, the answer is probably “yes”. Investors who are hunting for yield and franking credits are often advised to load up on hybrids because cash and term deposits are giving historically low returns. For example, take the hybrid from ANZ known as ANZPF. It was launched in 2015 and raised $1 billion. It pays out the bank bill swap rate (BBSW), which was 1.9% for three months at the time of writing, plus 3.5%pa, for a total of 5.4%pa, a higher rate than for cash and term deposits. It is not surprising that hybrids have caught the attention of retail, rather than institutional, investors. Retail investors currently hold around…

The Liberal Party implosion has shortened (to use a bad pun) the odds of Labor winning the next election. Suddenly retirees are faced with the reality that they might actually lose the cash refunds of imputation credits after all. The emotion over this issue is unprecedented. So much as mention the removal of cash refunds in polite company and prepare yourself for an hour’s worth of indignant lecturing about how unfair it is. There is a stream of political winners (industry funds) at the expense of the retirees who lose out. But I am more concerned with the question of what you could do about it. Here are a few points on that: • It may never happen. Labor may not win the next election. • Even if Labor does…

What was your first job? I got my first job at McDonald’s as soon as I was old enough to work: 14 years and 9 months! I couldn’t wait to start working and making my own money. I was hoping I’d be on the front counter – I really love interacting with people and was super excited to say “You want fries with that?” Unfortunately, I was usually on dining room duty, and the bins I had to empty were almost as tall as me. I liked it, though. It gave me structure, training and, of course, my very own money. What’s the best money advice you’ve ever received? It came from my parents: never rely on a man for your money. It gave me the mental perspective I needed…

Invest in our own education I’m a long-time subscriber and reader of Money magazine. I was thinking that it would be beneficial to include an article on recommended courses for all asset classes, such as property courses, share trading courses, etc. I know that I’ve tried looking into such courses but am unsure of the quality of each course. I’d be eager to read an issue that not only informs us of key money and investment issues but also helps inform us on the best way we can invest into our own personal investment education. Brenton Ed’s note: It’s been a while since we have done a story around this. Thanks for the suggestion!…

Australians will be breathing a sigh of relief following the announcement that the federal government will no longer push for an increase in the age pension eligibility age. It’s welcome news for people who want to, or are obliged to, stop work at 67, while those who intend to continue in paid work beyond 67 will keep the incentives to do so announced in the last budget. The increase in the pension work bonus remains in place so that, from July 1, 2019, income up to $300 a fortnight will not count towards age pension means testing. The announcement recognises what the Association of Superannuation Funds of Australia (ASFA) has been saying for some time – that with the best will in the world, many people find it difficult to…

If you apply for a new credit card after January 1, 2019, it’s going to be harder to get a high credit card limit. Under the new laws introduced by ASIC, banks and credit providers can only give credit limits that they assess the borrower can repay in three years. They have to use the same criterion for requests to increase a credit card limit. BetaShares is set to launch three new ETFs, which it says will “provide exposure to some of the fastest growing technology investment themes globally”. There will be the Asia Technology Tigers ETF (ASIA), Global Blockchain Innovators ETF (BLOK) and Global Robotics and Artificial Intelligence ETF (RBTZ). No word as yet on fees. Auswide Bank has launched a credit card that tracks the official cash rate,…

If you have a child, or another close relative, with severe disabilities and need to plan for their care when you are no longer around, you can set up a special disability trust (SDT), which can pay for any care, accommodation, medical costs and other needs of the beneficiary during their lifetime. The principal benefits of an SDT are: • It can pay for the beneficiary’s dental and medical expenses, including membership costs for private health funds. • It can also pay the maintenance expenses of the trust’s property assets. • It can spend up to $12,000 in a financial year on discretionary items not related to the beneficiary’s care and accommodation. • Eligible family members can make gifts to the SDT of up to $500,000 combined. The net income…

Being able to identify suburbs in the early stages of gentrification can help owner-occupiers and investors buy into areas where house prices are set to increase markedly and ride the wave of capital growth. The first step in identifying these suburbs is to look in the right general area. These suburbs are close to the CBD and/or the sea. The next step is to ensure that these suburbs have a relatively high percentage of character or period-style homes, for example properties built before World War II. When you have selected inner-city or coastal suburbs with character/period-style homes, then you can start to look at the people who live there and, more importantly, the people who are moving into the area. Consider the following: • Is the number of children under…

The majority of financial professionals are using smart beta strategies to replace actively managed funds, according to VanEck’s third annual smart beta survey. It found that the key motivations for using a smart beta strategy is to achieve outperformance (64%), achieve better risk-adjusted returns (55%), reduce volatility (50%) and reduce costs (46%). “Smart beta is giving active management a run for its money,” says Arian Neiron, VanEck’s managing director and head of Asia Pacific. “For the first time since the survey launched in 2016, the majority of respondents are using smart beta strategies in their portfolios and they are using them as a replacement for active management strategies.” So what exactly is smart beta? “Where traditional market-capitalisation-weighted exchange traded funds consider that market size incorporates ‘all factors’, smart beta ETFs…

If you want a low-cost ethical investment in international shares or bonds, there are two new diversified ETFs from Vanguard. Vanguard Ethically Conscious International Shares (ASX: VESG) invests in over 1600 securities listed in major developed countries, at a low management expense ratio of 0.18%pa. The Vanguard Ethically Conscious Global Aggregate Bond ETF (VEFI) provides exposure to over 18,000 fixed-income securities in major developed and emerging countries for 0.26%pa. “We have been offering screened ESG products internationally for almost 20 years and are excited to be able to provide more choice for Australian investors while leveraging our global scale and investment management expertise,” says Evan Reedman, Vanguard Australia’s head of product and marketing. The shares index fund tracks the FTSE Developed ex Australia ex Non-Renewable Energy/Vice Products/Weapons Index, while the…

After clearing the mortgage, Sharon wants ... Best place to invest savings Q My husband and I are both 46, self-employed and earning a gross wage of $43,000 each and have just finished paying off our house (valued at $850,000). I have one Flexible Lifetime super account with AMP valued at $35,000 and another with Colonial Super Retirement Fund ($120,000); my husband has one Flexible Lifetime account with AMP ($107,000). I also have 661 CBA shares with dividends reinvested and we have joint savings of $10,000. We have three children: one who is 19 and has left home and a 17- and 13-year-old. Now that we have paid off our home we are looking for the best way to invest our money. We were thinking of a managed fund or…

Go for defence, not attack, as the market boom reaches its peak. It’s a matter of when. As the stockmarket boom has progressed, my history or my age is catching up with me. Though, unlike the cryptocurrency boom last year, there has not been a “but this time it’s different” moment in the stockmarket. Not yet, anyhow. But just as inflated prices and questionable underlying assets caught up with cryptocurrency investors in a big hurry, so too will the inflated valuations on many Australian companies catch up with them. FUTURE SHOCKS You might also make a parallel with house prices in the major capital cities. The price increases (which average 70% from trough to peak in Sydney and more than 50% in Melbourne) eventually meant a first home buyer had…

Automatic dollar cost averaging, compound interest, low tax and low fees. Say no more! I’m popping $10,000 into my super to take advantage of the full $25,000 concessional tax contributions limit. Let me explain why. $1640 on a marginal tax rate of 39% is equivalent to $1000 net of tax. I can either take the $1000 (and pay the tax man $640) or put the $1640 straight into super and pocket an extra $394, as super is taxed at only 15%. It makes complete sense to me when I consider my age and salary. Over the past 10 years the median balanced option, according to SuperRatings, has returned 6.7%pa, meaning an account balance of $100,000 at the end of July 2008 would have grown to about $195,000 a year later.…

I’ll assume you’ve paid off any high-interest personal loans and credit cards, and you have a stash for emergencies. After that, here are a couple of scenarios about how I’d invest. If you’re getting started, you want to quickly diversify and keep your costs low. So put half in the Vanguard ASX 300 ETF (ASX: VAS), to get the return of the ASX, and the other half in Vanguard MSCI Index International Shares (VGS), which will give you the return of the world’s other developed markets – think Facebook, Netflix, Apple, Nestlé and Visa. If you’re suitably diversified and looking to invest more money, I’d open a US brokerage account and buy some of the best businesses on the planet. My top three US holdings are Berkshire Hathaway, Amazon and…

You can buy a retail term life and TPD policy from outside super and get a superior product that’s guaranteed renewable and pay for it through your super fund, says insurance expert Roy Agranat. He gives the example of Gertrude, who takes out $1 million life cover and $1 million TPD with ABC insurer. Her life premium of $1000 is paid via an annual rollover of premiums from her existing super fund to her retail super product with before-tax dollars. To get an “own occupation” TPD definition rather than super’s more onerous “any occupation” definition, she pays the $1000 premium personally (it’s not deductible). To ensure Gertrude’s retirement savings aren’t eroded by the premiums coming out of her super account, she makes up the difference with extra concessional contributions, being…

• Compare excess plus price Online quotes don’t always provide an apples-for-apples comparison because excesses can vary significantly. “Make sure you review the excess the insurer is applying when they give you your quote," says Budget Direct’s Jonathan Kerr. "We have seen some examples where the provider has started out with a very high excess in order to produce a relatively competitive quote. It’s worth taking a minute extra and seeing what the quote price looks like when you apply the same excess to all quotes.” • Don’t assume your windscreen is automatically covered “Windscreen repairs are not covered as the cost of the repair is typically less than the basic excess,” says Kerr. “However, windscreen replacements are covered and the excess is the same as the policyholder’s basic excess.”…

The teenage years are full of milestones that come with a hefty price tag. From managing their mobile phone plan to driving lessons to outfits for school formals to schoolies to university fees, there are plenty of big expenses on the teenage radar. Of course, one way to help fund their increasingly busy social life is to encourage them to get a part-time job and save. Two in five Australian parents say their 14- to 18-year-old kids have a paid job outside the home and nearly half of them started working before they turned 16, according to a survey carried out for the Financial Planning Association (FPA). I do recommend a part-time job for teenagers. Often getting a foot in the door for part-time work is harder than it sounds.…

Getting together a deposit to buy a home, especially in expensive city markets, is a major barrier to many of those wanting to become homeowners in the cities where they work. You need at least 10% of the price – and preferably 20% – plus all the buying costs. For example, in Sydney, our most expensive city, you need a deposit of between $86,000 and $172,000 for a median-priced dwelling, which was $855,287 at the end of August, according to CoreLogic. You also need stamp duty of $34,000 for your first home, and money to cover conveyancing, inspections and other odds and ends. Even in our cheapest capital, Hobart, a deposit of between $43,730 and $87,460 is needed for a median-priced dwelling, which was $437,254 at the end of August.…

As well intended as media coverage might be, it’s often highly ambiguous, overly superficial or simply wrong, and the consequences of investing on the strength of this information can be extremely damaging. Thanks to the last US presidential election, the world is less likely to take news reports at face value. That’s great, but when the media collectively sell hyperbole for the sake of a headline, it’s easy for half-truths to gather global momentum. Once it hits a social media website, news can gather a stickiness that’s hard to shake off. As a case in point, crowd support for bitcoin – based on media reports that it would eventually hit $1 million – gave investors the false comfort it was the right thing to get into. More deliberate examples of…

If you are considering hybrids as an investment, find out the answers to these questions from your financial adviser or the prospectus, advises ASIC. • What are the risks of investing in this hybrid security, now and in the future? • Will the returns offered adequately compensate for the investment risk? • How does the interest rate compare with other investments on a “risk-adjusted” basis? Can other less complex, less risky or long-term investments provide a similar or better return? • Does the issuer have to pay interest? If they don’t, do missed payments accumulate? • What is the maturity date? Can the issuer repay the investment early, or leave the hybrid on issue for a very long time? • Are there any trigger events (such as “loss absorption” or…

With reporting season out of the way, it’s necessary to revisit the most widely held sub-sector of the market for private investors – the banks. The royal commission has monopolised the headlines and there are likely to be some enduring implications for the major banks in terms of increased regulation and potentially some brand damage. However, the challenges extend well beyond the royal commission implications. One issue we believe receives little focus but has major implications for long-term returns is the potential for technology to dramatically change the cost of financial products over the next five years. A large proportion of the labour costs relate to the middle and back office processing of transactions, which despite the heavy investment by the banks in technology over the past five years remains…

Rank Super funds have been ranked by five-year returns. Returns are net of maximum fees. High balances may qualify for lower fees and thus better returns. Rankings for one-, three-, and seven-year returns show the performance of the particular fund compared with peers. NP means membership of the fund is restricted. Pr means performance results are preliminary. Returns are as at July 30, 2018. SuperRatings rating Platinum are best value for money funds; Gold are good value for money; Silver, reasonable value; Bronze are below average in performance and features; and Blue are bottom of the ladder.…