Innholdsfortegnelse for June 2020 i Money Magazine

We are all facing uncertainty. As much as it would be great to party like it’s 1999 or 2019, we cannot go back to the way we spent, saved or invested before the pandemic. A new approach is needed. Enter our cover story “Beat the Budget Blues” (page 34). The good news is there are many ways to rejig your investing and spending budget to suit the post-Covid-19 world. My best tip? Take action today. This month’s issue is packed with actionable tasks to save you thousands of dollars. For example, don’t get stuck in a high-rate loan (page 49). Latest stats suggest 1 in 14 homeowners has asked for a mortgage deferral, and there are many others who are in a position to re-negotiate their loans while interest rates…

In the post-war years people learnt the hard way to make better use of what was available Living in the time of coronavirus is like nothing we’ve known before. Although the lessons we’re learning during this time are ones we’ve heard many times before. For instance, we’ve experienced first-hand why it’s important to set up that rainy day fund and have three months of expenses set aside. We’ve discovered why it’s a good idea to use the three-bucket method of investing: short term, medium term and long term. If we’d had money in each, our long-term investments might have remained untouched in these tougher times. Reuse, recycle and conserve – three more wise lessons. Not only do they make good financial sense, they also benefit the planet and our future.…

Has our new way of working from home changed the real estate investing landscape as offices are less in demand? The coronavirus has profoundly changed the way people work and travel, most notably those who are now working from home and are likely to continue doing so for some time, either on a full- or part-time basis. The commercial property market will obviously be impacted, but how much depends on how long the necessary health guidelines need to remain in place, how willing employees will be to return to an office as guidelines are relaxed and how employers respond to the needs and wants of these employees. Other sectors are likely to be impacted too. Valuers are reporting falling values and transaction numbers in the residential market across the country,…

We’ve all struggled to quit a bad habit or commit to a good one. Research from Strava, the fitness network, found most of us give up on our new year’s resolutions by January 12. But experts say setting goals and staying accountable give us the best chance of achieving success, and that’s where stickK comes in. Created by a behavioural economist, the app helps you commit to a contract with yourself, and uses planning and accountability to get you to change your habits. Simply set a goal, whether it’s to run a marathon or learn Urdu, and create a timeline of the steps you need to take. Then invite someone you trust to hold you accountable and monitor your progress. If you need an added incentive, you can commit to…

Money has received hundreds of questions from readers about how to manage their personal finances, in all kinds of scenarios. While it’s not possible to respond to every question, we’ve asked four experts to help us answer six questions that broadly cover the areas readers are most interested in. You might find other questions are answered through our regular feature articles; and if you’re seeking answers to JobKeeper eligibility, our website (moneymag.com.au) has more than 100 articles dedicated to Covid-19. Q My wife and I have read articles sayings banks are unsafe at this time and if they get into trouble they will “bail-in” people’s savings. We also read that the federal government’s $250,000 deposit guarantee won’t be enough. If our money was “bailed-in” to prop up banks, we’d be…

Rent Speak to your landlord about decreasing your rent. If you’ve been a good tenant, this puts you in a better position. If you’re a tradesperson, see if you can offer your services in exchange for lower rent. Your landlord might be better off decreasing your rent for the next few months and have the stability of someone paying, rather than risk finding a new tenant and having a potentially vacant property for an indefinite time. Energy There are energy providers that offer pay-on-time discounts, so make sure you pay the bill on or before the due date. Do your homework and see what assistant schemes are available. For example, residents in NSW could be eligible for a one-time payment through the Energy Accounts Payment Assistance (EAPA) scheme. Internet If…

Young adults, like my own children, have been hit disproportionately hard by Covid-19. Their lives – and often those of their parents – have been turned upside down. How do you set them right again? Many adult children are moving back home with their parents and seeking financial help. More than 10% of under-20s and 9% of 20-somethings suddenly lost their jobs in the pandemic lockdown. Or if they are still employed, taking pay cuts, working fewer hours or being stood down on unpaid leave are also leading to requests for financial help. Already young adults are a generation with few resources. Many carry student debt and have to pay high rents in capital cities if they live away from home. They have low superannuation balances and are largely priced…

Nerida Cole, managing director and head of advice at Dixon Advisory, says Covid-19 presents an opportunity for you to re-evaluate your path to ownership, or come up with a plan B if the pandemic changes your circumstances. This would include: • Don’t be tempted to take a larger loan than you can afford. • Aim for the golden rule of a 20% deposit – stick to at least that in this market. • Make sure you have access to some of your deposit or additional savings of three to six months of living expenses in cash, in case of an emergency or drop in income. • Be honest about your personal job security. If you feel there is low security for your industry or role, you should defer taking on…

Is the Australian real estate investment trust (A-REIT) sector in for a severe downturn in the wake of Covid-19, such as it suffered after the GFC? Or does it now represent good buying after prices plummeted in the five months to April 30 – the S&P/ASX 300 A-REIT index fell 30% compared with a drop of about 20% in the S&P/ASX 300 index. And with many investors relying on the sector for regular income, will A-REITs also cut their dividends? This is an especially important question given some banks and other high dividend payers are either slashing or deferring their dividends. Undoubtedly the sector disappointed investors during the GFC. Far from delivering a steady income with less downside risk, it produced negative returns. In 2008, the S&P/ASX300 A-REIT accumulation index…

Hopefully you have used the coronavirus-induced “hibernation” productively and got to grips with your super. While financial markets have been battered, it’s important to remember your super is a long-term investment and knee-jerk responses can be damaging. This doesn’t mean you should ignore things either. The more informed you are the better off you are likely to be. At times like this, people sometimes question whether their investment option is the right one and whether they should switch. Most members are in their fund’s MySuper default option, perhaps because they haven’t made an investment choice. But apart from a few duds, most balanced default options have performed remarkably well since super’s inception nearly three decades ago. But there may be people who are better off in other investment options. Younger…

The regulator ASIC is warning retail (smaller) investors to be cautious when investing in fixed-term products that directly compare themselves to bank term deposits. It is seeing a surge in marketing and advertisements for fixed-term investment products that portray themselves as “alternatives” or “substitutes” for term deposits when this is hardly the case. If these products really were like term deposits, they would be well capitalised, protected by the government guarantee (up to $250,000 per investor) and supervised by APRA. ASIC says investors should be cautious about products that are backed by concentrated portfolios of higher-risk unlisted and illiquid (can’t be sold quickly) assets. The saying “if it seems too good to be true, it probably is” works as a rule when it comes to identifying risky investments. That’s why…

Reserve Bank of Australia (RBA) governor Philip Lowe’s statement – released after the Australian central bank’s May 5 board meeting (where it kept monetary policy settings unchanged, including the targets for the cash rate and the yield on three-year Australian government bonds of 0.25%) – puts into black and white the collective and individual thoughts of all (not most) central bankers and governments on the planet. “A stronger economic recovery is possible if there is further substantial progress in containing the coronavirus in the near term and there is a faster return to normal economic activity,” says Lowe. On the other hand, if the lifting of restrictions is delayed or the restrictions need to be reimposed, or household and business confidence remain low, the outcomes would be even more challenging…

Performance after investment fees. Investment returns after investment fees annualised to describe each fund’s returns per annum. But if your managed fund achieves a high return and charges you an extra “performance fee”, Rainmaker has not taken this into account. Past performance is not an indicator of future performance. Rank. Funds are ranked against all managed funds in each segment, not just those included in each table. Indices and averages. Arithmetic average investment returns or average fees for all fund investment options within each category, that is, not fund size weighted.…

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Our international readers like to stay up to date I am an Indian living in Singapore. Got into the habit of reading Money (digital issue) regularly. I find the articles and advice quite useful. May I suggest some articles on how someone like me could build an exposure to blue-chip Australian stocks or REITs and how this could compare with other developed-market investments. Please include tax implications.  Amit Ed’s note: Thanks for your letter, Amit – it’s always great to hear from our international readers. Your timing couldn’t be any better. In this edition we have articles dedicated to blue-chip stocks (page 74) and A-REITs (page 61). While we haven’t reported comparisons with other developed markets or tax implications in either of these stories, we trust you find them useful…

Australian banks have continued to send proactive messages in the aftermath of the bushfire crisis and during the Covid-19 pandemic. It’s something I wrote about in this column in the April issue. There have been more developments since. One that caught my attention was the regulator, ASIC, fast-tracking approval for banks to issue more than 500,000 Mastercard or Visa debit cards to customers who didn’t have them. The move attempts to assist people with a passbook or transaction account so they can shop online or over the phone rather than using cash or EFTPOS. It’s mainly targeted at those aged 70 and over. This is sensible when you consider federal government advice suggests people 70 and over should stay at home. It’s also useful at a time when some retailers…

BetaShares has launched a currency- hedged government bond ETF designed to provide investors with exposure to long-dated sovereign bonds (20-plus years) from the G7 nations. BetaShares chief executive Alex Vynokur says the fund “offers a robust option for gaining exposure to an important portfolio building block for investors seeking regular income”. IMB Bank has completed its merger with Newcastle-headquartered Hunter United Employees’ Credit Union, following regulatory approval from APRA. “The merger will allow Hunter United to better meet the challenges of increased competition in the banking sector and the increasing costs of operating and responding to regulatory change,” says IMB chief executive Robert Ryan. Ares Australia Management has launched the Ares Global Credit Income Fund, which is actively managed with a target distribution of 3%-4% a year paid monthly. Through…

With millions of us taking a financial hit from Covid-19, there’s never been a more important time to get your taxes right. Tax time 2020 is looming: here’s what you need to know to get the best outcome from this year’s return. If you lost your job or had your hours reduced, it’s likely that your employer will have over-deducted tax earlier in the year in relation to your wage or salary. That could mean you’re entitled to a bigger refund than normal. If you received the $1500 per fortnight JobKeeper payments from your employer or through your business, this is included in your taxable income for the year and will need to be added to your return. Most employers are no longer obliged to provide you with a payment…

Six out of 10 experts say now is not a good time to buy property, according to research from comparison site Finder. It asked property experts and economists how much they expect prices to drop by 2021, considering the effects of the coronavirus pandemic. Among the capital cities, Hobart is expected to see the sharpest average price drop of 10.5% by 2021, with Sydney a close second at 10.2%. Darwin and Melbourne are next with drops of 9.5% and 9.2% respectively, while Brisbane, Perth and Adelaide all have forecast drops of around 8%. Canberra is expected to weather the storm best, with a forecast drop of only 6.4%. Graham Cooke, insights editor at Finder, says with increasing unemployment and growing economic uncertainty, house prices will slide over the rest of…

Retirees are increasingly turning to annuities to fund their lifestyle, according to new research at Melbourne Business School. Annuities provide fixed, guaranteed payments over time, unlike account-based pensions or personal investments, which rise or fall with the sharemarket. Previous studies have shown that industry and government professionals largely have a negative view of annuities. “There’s a belief that Australians ‘hate’ annuities, which is a strong word, but it’s the one that gets used,” says senior research fellow Teagan Altschwager. “When we talked to financial advisers and people from super funds and government about annuities, most of them said they thought customers didn’t like them or understand them, leading them to not purchase. “Our research shows that is only partially true, in that customers do struggle to understand annuities, but there…

The tax office will receive a barrage of tax claims from July 1, as people experiencing financial stress try to get refunds as soon as possible. Refunds may be higher this year, thanks to the new working-from-home deductions, and if you’ve lost work or income you may get a refund from the higher tax paid during the early part of the financial year. The new deduction for people working from home is set at 80c an hour. You need to keep a record of hours worked but no further documentation, such as receipts. Mark Chapman, H&R Block tax specialist, says that as a general rule people will get the highest deductions if they can claim actual costs such as phone, internet, heating, cleaning and depreciation. However, these are the hardest…

During the pandemic, one of my sons had the good fortune of having a job at a local supermarket. This gave him front-row tickets to the Covid-19 human behaviour experiment. At the height of the toilet paper panic, he was given the task of rolling a pallet of deluxe 18-pack toilet paper from the storeroom into the supermarket aisle – a simple two-metre, five-second trek from storeroom door to shelf. Pulling the trolley behind him at a slow pace befitting most teenage supermarket workers, he cautiously approached the store door and headed into the supermarket. By the time he reached the shelves seconds later, he turned to find the palate completely empty. Not a single pack of deluxe paper even made it to the shelf. A lot has been written…

With governments across the country doing their bit to help small businesses navigate Covid-19, staying commercially buoyant is not only about cash flow. Research by online lender OnDeck shows that 75% of small to medium enterprise (SME) owners believe good communication is the top skill they need to succeed. This result also underlines the importance to SMEs of staying in touch with clients. But before you start trumpeting away to your clients, Oliver Wade, head of marketing and partnerships at OnDeck, advises SMEs against sending out opportunistic selling messages. “Pushing your products and services too hard in your communications is undesirable and can be a risk to your brand,” he says. “But staying in touch demonstrates you value the client relationship. If you can offer helpful tips in these challenging…

This year marks the turning point for global economic order and it has nothing to do with Covid-19. I am referring to the fact that Asian economies, as defined by the United Nations, will collectively have a larger economy this year than the rest of the world. It’s not a blip of a single data point, but rather it’s part of a well-entrenched growth trend that most of us have heard about anecdotally. Asia has grown from a 35% share of world GDP to 50% over the past 20 years, largely on the back of the Chinese growth engine. The region is expected to continue growing over the next 20 years for a range of reasons. If anything, the trend might get stronger over the next two decades as China…

Rainmaker Information’s Alex Dunnin says classifying assets as growth or income is not always clear-cut or easy. “The trouble is, people start to argue about how you should categorise some asset classes, like unlisted [direct] property and listed property. Is unlisted property that is held as, say, a building, a growth asset because the super fund expects it to grow in value or is it an income asset because it delivers rental income? It does both so a super fund may split how it classifies this asset.” Similarly, some funds may describe their infrastructure assets as income assets because they deliver income streams much like how a bond does. But critics will say these are growth assets because they are property. The truth is, they are a bit of both.…

There’s an old saying in finance when it comes to valuing stocks. Paraphrased: in good times, everyone focuses on earnings; in bad times, it’s the balance sheet that counts. It might be fair to update it slightly, in these days of companies without huge fixed-asset bases like factories and machinery. And I’d replace balance sheet with quality. When the herd is running, it’s tempting to ignore the quality underpinnings of a company, and just go for growth; to chase whatever’s hot; to keep up with the go-go Joneses. Of course, an economic shock like, say, a pandemic, can really muck up those plans. As Warren Buffett says, it’s when the tide goes out that you find out who’s been swimming naked. Which is why, midway through our 2020 Best in…

The table on this page contains data and information to help you compare superannuation funds. It showcases MySuper investment options offered by some of Australia’s biggest super funds. MySuper options are default superannuation products that employees choose or are allocated by their employers. The performance results displayed are the annualised investment returns each MySuper option has delivered after taking account of all taxes and fees. Past performance is no indicator of future performance. The table also lists each fund’s SelectingSuper Fund Quality Rating. Funds that achieve these quality standards are designated AAA. Research was prepared by Rainmaker Information, which publishes Money magazine. For more info, see www.selectingsuper.com.au.…

What was your first job? My first job was in Brighton, England. I was a teenager and I lied about my age. I so wanted to work in trendy boutiques and I began as a “Saturday girl” selling clothes. I loved it … did that for four years in different but fabulous stores. It taught me about cold selling, being perceptive about people and how to engage customers. My first grown up job was in London, aged 19, working in a top public relations consultancy when the potential for a brilliantly conceived PR campaign was only just beginning to enter the consciousness of corporate marketing teams. What’s the best money advice you’ve received? Find a way to make money while you sleep. What’s the best investment decision you’ve made? Property.…

VITA PALESTRANT Vita, who writes for Money about super, says: “With oodles of time on my hands, thanks to Covid-19, I set about researching the origins of the proverb “patience is a virtue”. Some attribute it to Cato the Elder who said: “Of human virtues, patience is most great.” Others attribute it to a later 5th century epic poem “Psychomania”. Conclusion? Until there’s a vaccine, follow the medical experts – and practice being patient.” SUSAN HELY Susan, a senior writer at Money, says: “I’ve discovered so much on my daily walks: old buildings, wild gardens and historical remnants of early Sydney. I visit a tree full of nesting pied cormorants or paper barks with sleeping tawny frogmouths. I meet people with their beloved pets – this morning a man walking…

It’s been evident for a while that products invested according to environmental, socially responsible and governance (ESG) principles can achieve returns as strong and reliable as other investments. Now Covid-19 shows us how they can perform in a crisis. Research from Rainmaker, which publishes Money, shows, in general terms, that the MySuper index is ahead of the ESG index. However, if we look separately at balanced and growth investment choices, and equities choices, a different picture emerges. If a super fund member invested in ESG balanced or growth options they would have been 1.5% better off over the 12 months to March 31. Over the quarter they would have been 1% better off. This effect also happened in equities investment choices. The SelectingSuper ESG Equities Index, which combined domestic and…

In his fifth book, Brett Kelly examines what really sets apart some of Australia’s most successful investors. The chief executive of Kelly+Partners chartered accountants interviews nine well-known money managers, and asks them how they invest and what insights they can give on business and life. Proceeds from sales will be donated to the Kelly+Partners Scholars foundation, with the goal to sell 40,000 copies to raise $2 million. This will allow 30 Year 11 students a year for the next 10 years to be provided with a scholarship for a study trip to Israel to understand how business innovation and technology drive positive social impact. Five readers can win a copy In 25 words or less tell us your best investment advice. Enter online at moneymag.com.au/win or send entries to Money,…

Fiona Davies Chief executive of the Australian Medical Association NSW. Age 45; shares four children with neurosurgeon husband Brian; lives in Sydney. Business graduate who feels queasy at the sight of blood. First job was assistant to an industrial relations commissioner during the 1990s. Always interested in cooking and maybe becoming a chef. Aware she had choices that women before her didn’t, she champions women around her. Has climbed Tasmania’s highest mountain, Ossa, and getting on top of her finances was a recent achievement.…

Hi Paul, I’m 51 years old and I have been subscribing to Money magazine for the past 11 years – I thoroughly enjoy it. I want to find out where I stand with my finances. I have $50,000 left to pay on a loan for my house, which is valued at up to $1.3 million. I have just sold my business and am looking for work (I know, wrong time!). My wife is 46 and earns $85,000 in the health sector. She contributes $200 weekly to our mortgage and another $200 to her super using salary sacrifice. My super balance is $58,000 (70% balanced and 30% shares), and my wife has $80,000 (76% growth and 24% conservative). Her weekly contribution goes into the conservative side. We have one investment property,…

It’s hard to understate how powerful and advanced the most cutting-edge smartphones are today. What once were basic handsets with terrible cameras and a copy of Snake have been replaced by devices as fast and feature-packed as full-size PCs, with cameras so good the compact camera market is on its last legs. Of course, you pay a price for all that innovation. Flagships from the likes of Apple and Samsung hover around $2000 (and even higher), raising the question: do you really need all those best-in-class bells and whistles? For most of us, no. The best value in smartphones isn’t at the pointy end of the premium market, but in the mid-range, where slightly less powerful tech can be snapped up for a fraction of a flagship’s price. Android devices…

If you are considering withdrawing funds from your superannuation (a limit of $10,000 applies this financial year), HLB Mann Judd’s Mariana von-Lucken suggests thinking about how long it took to build up your balance. “If it took no time to build it, then it will likely not take much time to build it up again. But if it took years, then people should consider other ways to manage cash flow,” she says. Government packages have been released quickly to deal with Covid-19 and some are still being tinkered with, says von-Lucken. Tax agents are asking questions and the government is releasing updates, which are helping to navigate details of the new rules. For retirees, the government has halved the minimum rate to be deducted from an allocated pension. “This is…

1. Set up your 80/20 rule and stick to it. Live on 80% of your income and save 20%. This is what living within your means actually means. 2. Have an outcomes-based approach to spending. Inexpensive activities that achieve the same goals should be preferred over more expensive activities that we justify post hoc. 3. Don’t fall for FOMO. The fear of missing out drives all sorts of misguided spending. We’ve missed out on many things during lockdown and much of it has made little difference. 4. Have faith in local. Sometimes we value things and people more if they come from outside our community, leading to us paying more for “exotic” things. 5. Learn to negotiate. Practise feeling comfortable with negotiating better deals. Just because a company is big…

Tenants  • Determine your income from employer and/or through any government support, and how long this is likely to last • Consider any savings you can use at this time (excluding superannuation). • Calculate your essential expenses. • Work out how much you can pay for rent. It should not exceed 30% of gross income if you are a couple or family. • Collate your evidence of hardship: termination letter, proof of JobKeeper or JobSeeker, etc. Landlords • Investigate what support is available to you if you agree to reduce the rent. • Consider your options if a tenant can’t pay. • Calculate how long can you afford to go without rental income. • Check whether you have any cover from insurance. • See if your mortgage holder or lender…

1 Platinum Asia Fund The experienced Joseph Lai’s fund skilfully harnesses Platinum Asset Management’s local expertise within a broader global context. Its regional analysts work with the team’s global sector specialists to find overlooked ideas. Platinum’s success comes from investing in companies facing temporary setbacks, or where significant positive change is under-appreciated. 2 Fidelity Global Emerging Markets Fund The strategy has a strict focus on corporate governance, sustainable business practices and robust balance sheets. This high-conviction portfolio of 30 to 50 stocks draws insights from more than 50 Fidelity analysts on the ground in emerging markets and 400 investment professionals globally. There is a focus on quality businesses and an objective to provide capital protection in falling markets. 3 Pendal Global Emerging Markets Opportunities Fund Investing in…

DASH FOR CASH The past couple of months have seen a rush of capital raisings by companies looking to shore up their reserves to get through the virus-induced downturn. Around $8 billion was raised by the end of April and the total is expected to rise well beyond that. National Australia Bank (NAB) undertook a $3.5 billion capital raising in May. Other companies calling on shareholders for cash have included big names such as Cochlear, Webjet, Southern Cross Media, Flight Centre, Oil Search, QBE and Lendlease but they have by no means been alone. Capital raisings can take several forms, but in an emergency companies often get the best bang for their buck by doing an institutional placement, selling a tranche of new shares to institutions such as superannuation funds.…

There are a couple of lessons to be learned from the recent correction. The first is that most fund managers didn’t do much. And that’s a fact of life for anyone in big super funds. It’s not a criticism; it is simply reality. Big funds are too big to do anything material to respond to significant market events like the one we have seen this year. Yes, it has been the best buying opportunity in a decade, and just maybe some of the funds have rushed money into the market when they could have taken their time, but by and large they have not responded to the “corona crash”, and here is the proof. It is the performance of the major managed funds over the past three months: As you…

The winner (despite having run its balance sheet too lean, and needing to raise capital a short time back – hopefully a lesson it learns and something it doesn’t repeat) is an Australian business with a dominant brand, high levels of practitioner support and recommendation, industry-leading technology and a long history of successful innovation. It has a large and growing market, particularly as the developed world becomes more affluent, and its clients are almost all, by definition, customers for life. The long-term future is bright, and the Best in Breed healthcare company is last year’s carry-over champion, hearing implant maker Cochlear.…

Performance after fees: When calculating fees, Rainmaker assumes a member has $50,000 in their account. Strategy: Some MySuper products invest your superannuation based on age and are known as lifecycle funds (marked LC). The table includes the LC option for 40-year-old members. Non lifecycle funds are known as single strategy (S). Rank: Funds are ranked against all MySuper investment options available in Australia. Indices and averages: To produce these indices, Rainmaker analyses the results of more than 3300 investment options.…