Innholdsfortegnelse for November 2019 i Money Magazine

Debt is like chocolate. It’s good in moderation but disastrous in excess. The problem is that many of us don’t know when we’ve had too much: three in 10 Australians are over-indebted; two in five can barely cover their home loan repayments; more than 1.5 million Australians are caught in a credit card trap. In short, we are becoming a nation of debt-aholics. That’s why our cover story this month is about debt management (page 36). Before you can build your retirement nest egg, you’d need to knock down your mounting debts first. The impact of good debt management is not limited to personal finance. Companies that borrow money only if they really have to stand to do better in the market. Check out our book extract (page 72) from…

There have been a fair few articles written about “what to ask your financial adviser”. Here’s what you need to know (and what those articles tend to miss). In the past, the advice industry was heavily focused on profits more than client fulfilment. These three questions will help you determine the right adviser for you. 1. Are the adviser’s fees and packages available on the website? If not, they’re more likely to sell and overcharge. Be extra cynical. 2. Do they take any insurance commissions? If yes, they are being paid by a product provider, meaning the more they sell, the more they get paid. Plus, your premiums are 30% higher for no valid reason. Walk away. 3. Do they charge a tiered or percentage amount of the money they…

Accountant turned author Kylie Parker wrote this book to help others through some of life’s trickiest complications including death, divorce and dismissal from work. She says planning a plan B will help you legally and financially in the event that something tragic occurs. It means you can focus on the emotional side of the recovery rather than becoming bogged in what are often difficult situations. The book seeks the advice of several experts in different fields and covers Parker’s personal experiences, with tips for estate planning and checklists, as well as several useful online resources. Ten readers can win a copy. In 25 words or less, tell us your plan B for financial distress. Enter online at moneymag. com.au/win or send entries to Money, Level 7, 55 Clarence Street, Sydney,…

One of the success stories of the sharing economy has been Airbnb, which matches private accommodation to potential renters. But getting involved in letting part of your home through Airbnb can deliver a nasty, and little understood, tax sting. Broadly, if you own an investment property, you’ll pay capital gains tax (CGT) when you dispose of it based on your profit. This, in simple terms, is the difference between the amount you sold it for and the amount you paid for it. With property prices having risen rapidly in recent years, it’s easy to make substantial profits and equally easy to forget that the tax office will want a slice of those profits. In most cases, when you sell your private residence the sale is free of CGT. However, if…

Investors have high expectations for the returns from their investments despite the low-growth, low-interest-rate climate. They expect 10.9%pa on average, according to the Schroders Global Investor Study. It found gen-Yers have the highest expectations (12.9%pa), followed by gen X (10.8%), baby boomers (9.2%) and investors aged over 71 (7.7%). “It is clear that investors still have high return expectations that are not in line with the reality of investment markets,” says Graeme Mather, Schroders’ head of distribution, Australia. When markets underperform, investors react. The Schroders study found that, globally, 70% made immediate changes to the risk profile of their investments during the volatile final three months of 2018. This included 37% who moved some of their portfolio into lower-risk investments and 36% who opted for higher-risk options. Only 21% kept…

An SMSF can be a great way to purchase a rural property and grow your assets, providing you with a better sense of control over your retirement goals. The difficulty today is whether Scott and Casey can borrow to fund this purchase using an SMSF? Since the financial services royal commission our four major banks, AMP and St.George have pulled out of the lending game for SMSFs, leaving few lenders available. Richie Kasai, from Acceptance Finance in Melbourne, says at present there are no commercial SMSF lenders who will accept the farm as security. Nor will they accept the proposed income from the farm business as it is a start-up with no trading history. The concept of having a rural property in an SMSF is valid, as the land would…

Hello Michael … exciting times for you and Annabel with a baby on the way. It is extraordinary how time races by. I have strong memories of our first child being born a bit over 32 years ago and recently he and his wife had their first baby and our first grandchild. The arrival of a baby is a special time. But during all the excitement, life and money go on, so it is great that you have a plan to build wealth. Babies are not cheap!  You may well be correct about a market fall. Many experts agree with you. Here, though, we may have to agree to disagree. Paul’s verdict: I would use dollar cost averaging and buy over a couple of years Once in a while I…

It might seem counter-intuitive, but if you’re wealthy and paying off your home you’re likely to be in serious debt. The latest stats from the Australian Bureau of Statistics (ABS) show 29% of households are over-indebted. Worryingly, almost half of us with a mortgage (47%) are struggling under the weight of repayments and a quarter of high-income households have too much debt. Sydney and Melbourne have the highest debt stress. If this sounds all too familiar, there are plenty of ways to get those debts under control for good. The strategies that will work will depend on your age and where you’re at in life. In most cases, the idea is to knuckle down and plan to pay debt off as soon as you can. You may have to make…

• Make extra repayments. No matter how small, it all makes a difference. “Also make weekly or fortnightly repayments rather than monthly. Making 52 weekly or 26 fortnightly payments instead of 12 monthly repayments will put you ahead financially,” says FinFit’s Donna Sgangarella. • Review your interest rate yearly. The lower your interest rate the faster you can repay your loan. “Unfortunately, most banks don’t reward you for being a longterm customer and will give better deals to new customers,” she says. “They rely on apathy, so once they’ve got you as a customer they know you won’t leave. Compare your rate with the rates other lenders are giving new customers. If your existing lender won’t match it, then refinance and go elsewhere. This could save you tens of thousands in…

Q What is a buy now, pay later (BNPL) service? BNPL is a modern solution to cost of living pressures, and typically allows customers to buy goods or services without paying upfront fees or interest. BNPL services are considered as credit providers.  PETER GRAY Q How do BNPL services work and are they safe? They work in a similar fashion to layby, where you buy a product and pay for it in two or more instalments before taking it home. But with BNPL, instead of securing an item for later purchase, you receive your goods or services upfront. BNPL is designed to make purchases easy to manage by spreading costs into more digestible interest-free amounts. While it is a completely safe and secure method of transaction, as with any financial…

• Since launching in 2014, Mable has facilitated more than 1 million hours of support and has 4200 approved and active independent workers listed.  • No money is transferred between a client and a worker until a rate is agreed and the service is delivered. • Services range from specialised nursing care to help with shopping and preparation of meals preparation. • All workers on Mable are self-employed, operating through ABNs. Costs are kept low by the platform’s technology-driven business model.…

1. Start planning early. You’ll sleep better and make better decisions if you don’t feel under pressure. Make sure your budget includes things like gifts, drinks and cabs, and don’t forget that presents bought online need time to be delivered! 2. Draw up a highly visual diary. Create a December calendar in a format you and your family can access so everyone knows about upcoming events and you can remind yourself of the tasks that need to be done. 3. There’s an app for that. There are many apps specifically designed to help organise your budget, tasks and life over the Christmas period. 4. Set spending limits for you and your partner. Thoughtfulness is always seen as more valuable than simply buying an expensive gift (which we often do if…

Interest rates may be at their lowest since the 1950s, but high property prices make climbing onto the first rung of the property ladder no easy feat. The good news is that help is at hand. The home loan industry, with state and federal governments, is pitching in with new products to give first home buyers a leg-up. Meeting the deposit challenge One of the biggest hurdles is saving a decent deposit. Low-deposit loans are available with a maximum loan-to-value-ratio (LVR) – the amount you can borrow as a percentage of the property’s purchase price – of 95%. So it’s possible to buy a home with just a 5% deposit, though there are strings attached. “Cracking into the housing market with a low deposit may seem tempting, and can absolutely…

Australians are living longer, but whether our retirement income system is coping is a question the federal government wants answered (and consumers need answered) before June 2020. The government wants an answer because the Productivity Commission recommended so. It especially wants to gauge how the retirement income system is tracking before the gradual increase of the super guarantee (from 9.5% to 10% on July 1, 2021, eventually reaching 12% on July 1, 2025). Consumers need an answer because the commission believes there’s currently a danger of people being nudged into retirement products ill suited to their long-term needs, potentially costing them hundreds of thousands of dollars. Among several examples, the commission projects the retirement balance of a 21-year-old female on a $50,000 starting salary. If she was in a super…

The new Top Stocks, now in its 26th annual edition, comes at a time when stockmarkets around the world are volatile and spooked by economic uncertainty, trade wars, Brexit and political instability. Yet 25 new companies have made it into the book, including 18 that have never appeared in any previous edition. This is the second-highest number of new entries. These new stocks are often smaller to medium-sized corporations. Some will be unfamiliar to investors, but all meet the stringent Top Stocks criteria, including solid profits and moderate debt levels. Guiding investors towards value stocks has been one of the paramount aims from the first edition. One of the rationales for the book has always been to highlight the truth that Australia boasts many excellent companies that enjoy high profits…

In last month’s issue, we trawled the universe of exchange traded funds (ETFs), looking for the best option for Australian investors. We went with the BetaShares Nasdaq 100 ETF, adding much-needed industry, currency and geographic diversification to what, for most of us, are Australia-centric portfolios. In that article, I wrote: “Sure, you could open a brokerage account to buy overseas companies (more on that next month), but an ASX-listed ETF, focusing overseas, can be a great option for many.” And, true to my word, we’re going to expand on that theme. Maybe you know the stats. But just in case, would it surprise you to know that Australia represents less than 2% of both global GDP and the world’s stockmarkets? Yes, we punch above our weight in some areas –…

Goodbye financial adviser, hello Money Quite unexpectedly, my husband recently received a call from a financial adviser he has been using for nearly 20 years. We recently moved out of Sydney to a regional area and hadn’t had much to do with him for many years for a number of reasons, but he wanted to visit us. At the meeting he told us he was retiring. At first I felt a bit unsure what to do next and made some inquiries to find another one in our new community. Then I thought, “Now I am retired, and even though I look after my husband full time, with a bit of help and some education there is no reason I can’t take over our finances myself.” The first thing I did…

To little surprise, themostcommon question coming to Money magazine at the moment is about getting some sort of return on cash. This really is a major issue for millions of us. As interest rates rapidly head towards zero – and in some countries they are already negative – what on earth do we do? I do appreciate the point being made strongly by younger people that they have had the blunt end of the stick. Yep, in the 1970s my generation enjoyed free university education, so no debt to be repaid as we started work. Property was not cheap, but if we relate the price of property to a multiple of average earnings, there is no argument that buying a home today is significantly harder. One win for younger Australians,…

As the superannuation system nears maturity, it’s a good time to review how the entire retirement income system, including additional savings and the age pension, are delivering for people in retirement. The Retirement Income Review has broad terms of reference, looking at the incentives people are given to save for themselves versus relying on the age pension. Importantly, it wants to look at the “distributional impacts”, including fairness. The review follows a recommendation from the Productivity Commission as part of its review of the super system. Some of the biggest improvements to retirement incomes would come from its other recommendations. The commission found the system is plagued by duplicate accounts and underperforming investment options. To solve this, it recommended that people be defaulted once into a high-quality super product. This…

63% of Australians living with their parents say they can’t afford to move out. 79% of Australians thought the best strategy to improve housing affordability was to remove stamp duty. 29% of Australians will have difficulty meeting mortgage repayments if interest rates increased more than two percentage points. Price is the most important factor in deciding where to buy, followed by access to good public transport to/from the city and proximity to work. Source: CoreLogic 2019 Perceptions of Housing Affordability report. 2220 Australians between the ages of 18-69 were surveyed for the study.…

Switching your home loan from interest only to principal and interest can save you tens of thousands of dollars in this low-rate environment, research reveals. The Reserve Bank’s lending data for June 2019 shows the average interest-only home loan rate was 0.50% higher than the average principal and interest rate for owner-occupiers. It means you are likely to find a better deal by moving to principal and interest. AMP Bank says if a homeowner with an average 30-year $400,000 home loan (first five years interest only and remaining 25 years principal and interest) switched to paying principal and interest two years earlier, it would initially cost an extra $517 a month. But they would save $14,711 over the life of the loan by paying down the debt earlier. Since the…

“The technologies in the hands of cyber criminals are particularly advanced. Crime knows no bounds.” Chaos reigned in Victoria’s regional hospital network some weeks ago when a cyber attack installed ransomware on its computer systems. Hackers tried to steal millions of dollars in what is an all-too-familiar story. Earlier in the year, a separate cyber attack had emails attempting to steal identities to access Paypal accounts. Another attack included sham emails claiming to be from the CIA and threatening to expose alleged online sexual activities unless people paid $10,000 in bitcoin. Then an apparent intrusion from China on major political parties and Parliament House was exposed leading up to May’s federal election. It seems there’s no end to the threats posed by the internet. Are we fighting a losing battle?…

Goat farming is well suited to western NSW, where Casey and Scott are looking to buy a farm. Around 35% of Australia’s total national goat production of 1.9 million comes from the rangeland of western NSW covering Bourke, Cobar and Broken Hill. When looking for the right property: • Assess the suitability of the land for a goat enterprise by taking into account shelter, soil type, climate, feed availability, access to water, topography, the threat from predators and established infrastructure such as fences. • Consider the scale of your operation, such as the size required to be economically viable. • What are the associated labour and infrastructure requirements? • What is the quality and quantity of feed and water on the property? • Is there room for expansion? • Water…

I’m 32 and my wife Annabel is 28. We have recently sold our first home due to my moving for work. We plan to rent in our new location and we will have around $150,000 cash in savings. I currently have a Vanguard fund with around $10,000 invested and another $10,000 in direct shares, with no debts other than a novated lease on my car. My wife will not work next year as we are expecting our first child in March, so I will be the only earner, bringing in around $150,000 a year before tax. I am not confident about investing more in the stock-market as I have a bearish outlook at the moment. I believe a correction is coming and I want to have cash available to take…

To get on top of your debt in your 20s, set a spending plan, don’t live from pay to pay and spend less than you earn. Sit down and allocate where you want your money to go. “A really easy way to do this is to have separate bank accounts and automate where your money goes each pay,” says FinFit’s Donna Sgangarella. Have an account for day-to-day expenses, an account for periodic bills such as quarterly utilities and car rego and an account to save for a specific goal such as buying your first property and an account for fun stuff. Start investing now. If you invest in growth assets like shares and managed funds when you are in your 20s you will be set up for your 30s, says…

WHAT IS A NEGATIVE INTEREST RATE? In practice, it means the bank charges you to deposit your money and pays you to borrow. And if that sounds like a fast way for the banks to go broke, you’re right. In most cases, negative rates have been applied by central banks on the cash deposited with them by banks. The theory is that by penalising banks for holding excess cash, the central bank will force them to go out and lend more money, which should stimulate the economy. Negative rates generally haven’t flowed through to businesses and consumers, though Denmark’s banks have ventured down that rabbit hole after living with negative rates for most of the time since 2012. The country’s Jyske Bank grabbed headlines in August when it announced a…

Back in 2006, Commonwealth Bank became the first Australian bank to trial a new technology by Mastercard called “tap-n-go”. The label is self-explanatory: all the cardholder had to do was tap the card onto a Mastercard PayPass terminal, wait for the beep and voila! – the transaction would be completed. Today contactless payments are the norm. A retail shop that can’t offer tap-n-go would lose a lot of business. A similar phenomenon is happening in the area of online interbank payments. It’s hard to imagine that only two years ago you had to wait at least one to two business days to receive a payment transferred to your bank from another bank. A payment made on a Friday afternoon wouldn’t appear in your account until the following week. This seemed…

One of the dilemmas for family firms – which make up more than 70% of Australian businesses – is whether to pass it onto family members or sell it to outsiders. It depends on how feasible it is for the next generation of family members to run the business. Do they have the capability, the right motivation, skills, energy, resilience and entrepreneurial attributes to get the job done? Can they adapt to changing markets and competition? Of the businesses that have thought about transitioning, around 60% plan to pass the leadership to another family member and 34% intend to hand it to a non-family member, according to a 2018 survey of family businesses by KPMG for the Family Business Association in Australia. Succession can be tricky for family businesses because…

It would be unusual for someone to buy their home unseen, without research, especially given the sum of money involved. Yet when it comes to super it’s a different story. People mistakenly assume their employer’s default fund, called MySuper, has been professionally assessed and carefully selected and that it is one of the best there is. But that’s not the case and there’s no legal obligation for employers to do that. Alex Dunnin, executive director of research and compliance at Rainmaker Group, publisher of Money magazine, says all an employer is obliged to do is put you in a default fund that complies with the law and has a tick of approval from the superannuation regulator, the Australian Prudential Regulation Authority (APRA). “An employer’s job is to put the right…

Passive These are the most common ETFs and they track a benchmark (for example, index, sector or commodity). Their goal is to move in line with the underlying benchmark and provide a near identical return (less fees). The difference between the ETF’s return and the underlying benchmark’s return is called the “tracking error”. Fees with passive ETFs are typically lower than for active ETFs and managed funds. One of the biggest passive ETFs on the ASX is the SPDR S&P/ASX 200 (STW), which tracks the return of the S&P/ ASX 200 Index. It charges a fee of 0.19% and returned 8.81% in the year to August 2019, and 8.11%pa since inception in August 2001. Active These are less common and can be identified by the use of “hedge fund” or…

Retirement is around the corner. You’ve been reliably topping up your super and managing some additional investments, but are you sure you’ll have access to the income that will make your retirement plans come to life? Retiring with inadequate wealth may mean missing out on the experiences that count: travelling, connecting with distant friends and relatives, or avoiding the drudgery of frugal living at a time when life should be relaxed. Three key risks to retirees’ savings and investments are: The low-rate environment stifling savings returns in term deposits. In most instances, term deposits won’t keep pace with inflation (therefore reducing your wealth in real terms). 1 2 Global trade disputes have rendered volatility the only certainty for equity investors. Equity investing may be worthwhile if you have time to…

Now in its 26th year, Top Stocks is the stock-picking guide every Australian needs. Martin Roth provides the most up-to-date data on public Australian companies to help you determine where to put your money. The book includes company information, latest business results and future outlook. From the All Ordinaries index and beyond, this book cuts through the hype and filters out the noise to show you the best in Australian investing for 2020. To claim your offer, go to educatedinvestor.com.au and click on the Top Stocks 2020 banner. Click “Add to cart”. Enter the coupon code “Money2020”. Click “go”. This will reduce the price of the book by 20%. Shipping will be free for deliveries within Australia. This reader offer expires on December 24, 2019. For more information, email Janene…

The Australian small companies market has the ability to generate significant wealth. This is, first, because stockbrokers don’t earn enough revenue from brokerage on small companies and therefore don’t research them, leaving them undiscovered and potentially cheap. Second, by fostering innovation, small companies provide investors with access to new business models, products and services on, or close to, the ground floor. Small companies also provide a means of beating the market. That’s because a majority of active small company fund managers beat the index. By randomly selecting a small cap manager, investors have a better than 50% opportunity to outperform their passive-investing brethren. With a little due diligence the odds are bound to improve. Small companies’ funds must remain small and nimble themselves to be able to invest and generate…

If you’re going to strike out overseas, I reckon you should start with world-beaters: companies like Amazon, Apple, Disney or Google’s parent company, Alphabet. And there are plenty more besides. Think Nike, Netflix, Facebook, Twitter or Microsoft. (I own shares in Alphabet and Amazon, for the record). But, we’re here to choose the best of the best. For my money – literally, I own shares in the company – it’s a case of “if you can’t beat ’em, join ’em” – and a unique chance to have the world’s best investor, Warren Buffett, on your payroll. That makes Berkshire Hathaway (NYSE: BRK.A) top of my list.…

SCOTT PHILLIPS Scott is the chief investment officer at The Motley Fool. Scott says: “With a first-time-overseas holiday coming up at age 11, I was desperate for a $200 rolling, music-playing robot. The robot was pretty ordinary (it was the ’80s), but I think it helped teach me to save.” VITA PALESTRANT Vita is a contributing writer at Money. Vita says: “When we were growing up we were free to climb trees, play cricket in the street and race homemade billy carts until dinnertime. The billycarts were made out of old prams, wooden boxes and discarded trikes. Our piggy banks financed the rest. It was enormously satisfying!” NICOLA FIELD Nicola is a contributing writer at Money. Nicola says: “I admit I didn’t save as a child. I was obsessed with…

In recent years consumer groups have called for internet services to be regulated in the same way as water, gas and electricity. On the surface this makes sense, especially as more utility providers bundle their services on the one bill. The case for better regulation becomes even stronger when Michael Lavarch, the independent chair of the Telecommunications Industry Ombudsman (TIO), says that consumers “rightly consider telecommunications as an essential service that allows them to participate effectively in the economy and to enjoy the possibilities communication networks offer”. Throughout 2019, the telco ombudsman has cracked down on providers using pressure sales tactics that eventually drive unnecessary consumer debt. In the first six months of 2018, the TIO received more than 7400 complaints from people who had problems managing their telecommunications debt.…

Almost half of Australia’s buy now, pay later users have cancelled or stopped using their credit cards, according to research by comparison site Mozo.com.au. About 30% of Aussies – or 5.8 million – now have buy now, pay later accounts, with 84% of those holding an Afterpay account. The regulator ASIC has cautioned consumers about the pitfalls of self-managed superannuation funds, noting that many Australians set up SMSFs that are ill suited to their circumstances. As at June 30, 2019, there were about 600,000 SMSFs in Australia, holding $748 billion in assets. The first home buyer share of the housing market has soared to a near eight-month high of 30.1%, its highest point since early 2012, according to the latest Australian Bureau of Statistics figures. Meanwhile, investor lending lifted for…

It’s that time of year when we notch up plenty of purchases, so why not get paid for them? Cashrewards is a free app that lets you earn cash back on purchases – anything from shopping, dining out, hotels and travel. Stores pay a commission to Cashrewards when you make a purchase, and part of that commission is shared with app users. Tap the app or shop with your linked credit card to earn cash on festive shopping (both in-store and online) with the funds deposited to your bank or PayPal account. Unlike many cash-back apps, this one features plenty of Aussie retailers. Choose from the likes of David Jones, Myer, Chemist Warehouse, the Iconic, Deliveroo, Woolworths Online, Coles Online and their related outlets BWS and Dan Murphy’s to name…

Paul and his wife plan to retire soon and want to confirm … How much they will need for an income of $90k a year Q We’re hoping to retire in our early 50s – my wife is 46 and I’m 47. We both work full time with a combined income of $200,000 before tax, and hope to save at least $30,000 each year. We still have a few more years of private school fees to pay; we have no debt and currently have just over $1 million in super (combined), plus a further $830,000 in other savings (shares, managed funds). We estimate we’d need to have about $2.4 million to fund our retirement, and that would include super, which we won’t be able to touch for many years. We…

Social media strategist Serena “Dot” Ryan, 43, produces a weekly podcast, Adding Up, sharing tips and experiences from her mission to become debt free and inspire others to do the same. She is on her way to saving her family thousands that she can put towards repaying her debts. In her podcast she outlines important tweaks she’s making to improve her and her family’s financial wellbeing. “When my then six-year-old son said to me, ‘Don’t you like spending time with us?’, I realised I needed to make a change. Working harder and earning more money wasn’t the answer. The answer was better money management,” says Ryan. The first step was performing an audit on everything she spent and then setting a monthly budget. “I started with my bank statements and…

• Super versus first home For younger women, in particular, saving for a home deposit is often more important than super. But Dixon Advisory’s Nerida Cole says the First Home Super Saver scheme allows you to do both. You can contribute up to $15,000 in a year to save for your home deposit, up to a limit of $30,000. She says the money must be on top of your employer’s compulsory super contributions, but can be in the form of either concessional or non-concessional contributions. You then withdraw the money, plus a deemed rate of earnings (minus any contributions taxes on concessional contributions), when you need it to buy your first home. • Near retirement Fitzpatricks’ Colin Lewis says putting in extra super as you near retirement has been made…

The introduction of sharing economy platforms has transformed the way we live and enjoy our lives. Whether it is finding a gem of a holiday home on Airbnb or jumping in an UberPool with a stranger, there’s a mushrooming array of goods and services available through sharing platforms that make our lives easier.  But it’s not only about hotel rooms and shared rides. There are also platforms such as Mable, which can be used to improve the lives of the most vulnerable people.   How does it work? Mable is a profit-for-purpose company connecting older people or those living with a disability to independent support workers. Since launching in 2014, Mable has facilitated more than one million hours of support and has 4200 approved and active independent workers. It enables…

It’s a typical morning in the office. I’m sitting at my desk, coffee in one hand, scrolling through my emails, checking any important requests and organising the day in my head. Nothing unusual: all is calm and well in the world. This is until one of my colleagues casually walks past and says, “It’s hard to believe there’s only seven weekends until Christmas!” Instantly my heartbeat quickens, my vision blurs and a small bead of perspiration forms on my brow. Panic. Seven weeks! I start to think of all the things that need to be done. There’s the summer holiday with our kids, hosting Christmas day at our place, multiple other family gatherings, office get-togethers, people I have promised to have drinks with and presents for my family and team.…

If you can’t afford a home in a capital city, have you considered buying in a regional location? And if you want to invest in property but city prices are beyond your means, how about looking at regional areas where there are strong fundamentals to support rental markets? Regional areas can provide great lifestyles, particularly for those who work in the local area or telecommute for at least part of the week. But regional buyers, especially investors, first need to make sure the area they choose stacks up. Questions you should ask include: 1. Does the area have a strong economy with several sources of employment? Growth in median household income outpacing inflation is a good indicator. New businesses being established in the area – and not too many closing…

Research by Super Consumers Australia, a new advocacy group, shows more than 170,000 people landed in a dud default fund in 2017-18. The group wants super fixed so consumers can only be defaulted into the top funds. Acting director Xavier O’Halloran blames a badly designed default system. “What’s worse is that the industry is resisting changes which would ensure people end up in better performing products,” he says. “We need regulators to take real action to weed out these laggards.” Super Consumers Australia was launched in September in partnership with the consumer advocate CHOICE. Its mission is to keep the super industry accountable and fair.…

In late July, the regulator ASIC halted new ASX listings of active ETFs that do not disclose their portfolio holdings daily and have internal market makers. ASIC is undertaking a review of these products because it’s concerned “the profit generated from internal market making is not well understood by investors”. It may also lead to conflicts and unequal treatment among different groups of investors if, for example, “an unfavourably low bid price was set for selling members”. The role of the market maker is to facilitate an orderly and liquid market in each fund and to satisfy supply and demand for units on the ASX. Passive ETFs use external market makers, which can oversee underlying holdings of the ETF portfolio and disclose these to the market. Internal market making occurs…

Retirement depends on a formula that goes something like this. Assume a 4.5% yield from the stockmarket. Now look at the table of capital and dividend returns (below) from the All Ordinaries index over the past 40 years. Forget the capital return – that’s not the focus. In retirement, the focus is on dividends. As you can see, the average contribution to the All Ordinaries total return from compounded dividends, before franking, is about 4.5% over any time period in the past 40 years. Franking adds another 1.4%, but let’s not factor that in yet (you’ll see why). Assuming 4.5% in a tax-free environment, if a retiree wants to earn $100,000 a year in income from shares, they will need more than $2.2 million invested in the All Ordinaries. And…

A stitch in time saves nine – how I wish the Reserve Bank of Australia (RBA) adhered to this proverb. Having insisted on keeping the official cash rate at 1.5% for longer (from August 2016 to May 2019), the RBA now finds itself doing even more stitching. In October, the RBA announced its third interest rate reduction in five months – 0.25% in June, July and October – taking the official cash rate to another record low of 0.75%. The June and July, rate reductions have turned around the property market in Sydney and Melbourne, and there’s no doubt the latest cut will encourage more home buyers and property investors. As the federal treasurer, Josh Frydenberg, declares, “What this means for an Australian family with a mortgage of $400,000 is…