Innholdsfortegnelse for August 2020 i Money Magazine

A place for humility I’ve enjoyed Marcus Padley’s rollicking June and July columns very much. The generosity of his advice-giving seems to know no bounds. Far be it from me to accuse him of hubris, but there was precious little in his July column to suggest that he sees any place for humility when it all works out okay. I do wonder, though, what wise nostrums he will have to pass on when he and his team inevitably find themselves guilty of a misstep in the current financial circumstances. Patrick Cashless society? No thanks Interesting ideas in Darren Snyder’s Buzz column in June (page 12) suggesting that we are all moving towards a cashless society and that this movement has been hastened by the banks and by restrictions implemented to…

Contact us To send a letter to the editor, write to: Money, Level 7, 55 Clarence Street, Sydney NSW 2000 or email money@moneymag.com.au For all inquiries and letters, please include name, address and phone details. Letters may be edited for clarity or space. Because of the high number of letters received, no personal replies are possible. How to get Money Subscribe to the print or digital edition, as well as our free weekly email newsletter via the Money website or: Online: magshop.com.au/ money-magazine Call: 136 116…

OVERVIEW DARREN SNYDER Over the next two decades, an estimated $3.5 trillion will be transferred between generations in Australia, according to McCrindle research. The figure, first published in 2016, has led many commentators to question how up-and-coming generations will handle this massive wealth opportunity. The pool of money will unquestionably be a welcome addition, helping people experience greater financial independence, whether it is now or in their retirement. What must also be considered though, is the kind of lifestyle we want to pass on. In our feature "Baby steps for new parents" (page 44) we point out that, at a minimum, it takes $300,000 for two parents to raise two children up to the age of 17. Now in our cover story we look at what financial habits we…

There are several federal government benefits that you may be entitled to once you have a child. Several of the benefits listed here are means-tested and have other detailed terms and conditions. Speak to your financial adviser to see if you qualify or visit the Services Australia website. • Parental leave pay • Family tax benefit A and B • Dad and partner pay • Parenting payment • Newborn upfront payment and newborn supplement • Child care and additional child care subsidy • Rent assistance • Single income family supplement • Assistance for Isolated Children Scheme…

If you’re an eligible student enrolled in an eligible university course or vocational training program, you can access the Higher Education Loan Program (if you’re at university) or the VET student loan program (if you’re at TAFE or another vocational training provider). When you earn enough to make repayments, they’ll be made through the tax system. If you’re an employee, some of your pay can be withheld by your employer to cover your repayments or you can pay at tax time. This will also work if you’re self-employed; you pay once you’ve filed your tax return. The 2019-20 loan repayment threshold was an income of $45,881, but from July 1, 2020 it rose to $46,620. If your income is between $46,620 and $136,740, the amount of your loan repayment rises…

It’s natural to want to help loved ones but lending money to a family member can be tricky and spark drama at the best of times. For this reason, it’s important to think it through before helping a sibling who has lost their job or had hours or pay slashed during Covid-19. A global pandemic makes everything less certain. A kind and generous act during these times, such as a loan, has the potential to sour family relations or even split the family apart. In some cases, family loans can go well and cement bonds, particularly if the borrower pays it back in full. But the unpredictable nature of the coronavirus means the borrower may not find a job any time soon and may be unable to repay the loan…

James Symond, chief executive at Aussie home loans, says some upfront planning is always a good idea. “Simple steps like asking your credit card issuer to reduce the credit limit on your card can make a valuable difference to your borrowing capacity,” he says. “Building up a track record of regular savings is critical. Lenders want to be sure you have the discipline to manage a home loan.” He says lenders each have their own criteria when it comes to employment history, but most want to see that you have at least made it through a probationary period. “Importantly, avoid making multiple loan applications with a variety of different lenders,” he says. “These applications will appear on your credit record, and lenders are likely to issue a ‘please explain’.” Talking…

1 PIMCO Global Bond Fund Managed by one of the world’s largest active fixed-interest managers, the fund provides exposure to predominantly investment-grade securities from around the globe, offering diversification across sectors and geographies and income generation. We see the fund as a core bond holding in portfolios. We are attracted to the PIMCO fund due to: the well-resourced, capable and experienced investment team that is responsible for conducting in-depth research and PIMCO’s well established and methodical investment process. 2 Colchester Global Government Bond Fund The fund aims to deliver a defensive strategy while still providing alpha, it targets 2%pa (gross) over five to seven years. The fund is solely focused on high-quality sovereign bond and currency markets. We believe investors can use this fund as a cornerstone bond…

THREE POSSIBILITIES First, let’s establish just how the economists categorise recoveries. The best option, which is looking increasingly unlikely both here and globally, is a V-shaped recovery where growth falls quickly and then kicks back up again. V-shaped recoveries are typically short and sharp, doing a minimum of long-term damage. Then there’s the U-shaped recovery where the economy falls, then muddles along at this lower level for a period, before rising up out the other side. U-shaped recoveries take longer than V-shaped, but once things start to get better they improve fairly quickly. Which brings us to the W-shaped recovery. This is also known as a double-dip recession. In terms of confidence, these are much more damaging than other types of recoveries as the economy seems to be on the…

While we all focus on the mounting cases of coronavirus infection in Victoria – prompting the NSW government to close its borders with its neighbours for the first time since the Spanish flu of 1919 – something good is coming Australia’s way. Victoria’s second wave in early July was no doubt a cause for concern as our second biggest state could have dragged the rest of this sunburnt country down. The Victorian government moved quickly to lock down Melbourne for six weeks. With infected cases on the rise, premier Daniel Andrews was not ruling out expanding restrictions further and NSW was watching developments closely. But, hey, Australia remains a lucky country. Per capita (cases of infection as a percentage of population), the total number of coronavirus infection (0.033%) was not…

There is, to be sure, plenty of opportunity in wealth management. The sums involved are in the billions, and taking just a tiny percentage of that, as a “platform” provider, would be lucrative. But the game is still being played out, and there is no certainty when it comes to imagining how this tussle will end. The prize this time goes to the granddaddy of fintech, and the company that taught many Australian investors about the value of recurring revenue and measuring both the cost of acquiring a customer and measuring that customer’s lifetime value. Xero is the Best in Breed fintech company on the ASX.…

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.…

What was your first job? I was a checkout chick in a supermarket after school and on the weekends. When I was 12 I sorted mail in a country town for $5 an hour before school but they fired me because I took too many holidays. What’s the best money advice you’ve received? Most recently it would be investing in index products. You definitely can’t judge the market and Vanguard indexing is the best product out there. Before that I was investing in blue chips – classic Australian bank shares, reliable and stable – but they’re not fun and don’t give a good breadth of the market. Now for $5000 I can buy something and let the market do its thing and don’t need to worry about what single blue…

SUSAN HELY Susan is a senior writer at Money. “The whipsawing of the market amidst Covid-19 is a reminder of why buy and hold can be easier than timing the market. But I was pessimistic early on in the crisis. My tolerance to risk is on the low side at my age and as journalism shrinks, so I sold out of growth assets way before the bottom and have been surprised by the bounce.” PAM WALKLEY Pam, founding editor of Money and a real estate expert, says: “I’m a bit of a risk taker when it comes to investing so I don’t hold much cash. As Covid-19 hit the markets I took some share profits to build cash reserves to take advantage of buying opportunities. So far, I’ve not seen many…

THE BUZZ Students bear the brunt of widespread wage theft More than 75% of international students studying in Australia are experiencing serious wage theft, according to a recent report. Of the 5000 international students surveyed, 77% were paid below the minimum casual hourly wage. More than a quarter (26%) earned half the minimum casual hourly wage or less. This hasn’t changed since a 2016 survey was conducted. It’s a damaging assessment of our nation’s employers and the financial future of these students and temporary migrant workers, many of whom may choose to permanently call Australia home. Alarmingly, of the 3850 students experiencing wage theft, 62% suffered in silence. They didn’t speak out for fear of losing their job or visa. International students aren’t the only ones susceptible to wage theft.…

ONLINE TRADING Robo advisers win over more women Robo advice is seeing greater popularity and engagement with women online investors across the world, according to a recent Investment Trends study. Surveying more than 20,000 online investors across Australia, the US, the UK, Spain, Germany, France, Singapore and Hong Kong, the researcher found 29% of women in the US use robo advisers compared with 22% of men. In Australia, women online investors are more likely to consider using robo advisers than men (40% versus 36%). Recep Peker, research director at Investment Trends, says robo advisers that intend to satisfy the strong demand from women will do well. “When selecting a robo advice provider, women online investors are more likely than men to prioritise the user interface (55% versus 49%) and education…

Studied engineering and economics. Traded in a secure job to start a social venture that took off after he sat on a toilet for 50 hours. Who Gives A Crap was Simon’s third foray into a social venture. Kenya, where a lot of innovation in sanitisation is occurring, has special meaning to Simon: three of his beneficiaries are based there. If he has spare time he likes to surf, mountain-bike and garden.…

You have very nicely summed up the current situation and while everyone’s money concerns are different, it is fair to say that interpreting where our economy will be in the future is a bit of a mystery. My crystal ball is as cloudy as yours, but let me peer through the mist of this pandemic and look forward. I think we have some reasonably based facts that indicate the world will not come to an end. The death rate from Covid-19, while devastating for so many families, is not likely to impact on the size of our population but it will certainly impact hugely on our economy. Where we can realistically take some hope about our economy recovering comes from the huge advances in medical science. With human trials happening…

• Most Australians have a will (59%) or expect to make one (22%). • Few people make a deliberate decision not to make a will. • Making a will is triggered by life stage changes or changes in assets. • Older people and those with assets most commonly make wills. • Not all wills reflect current intentions and/or circumstances. • Wills are primarily used to distribute assets. Having a will to nominate guardians, choose executors and/or clarify funeral arrangements is undervalued. • Wills are the major, but not sole, component of later life planning. Enduring powers of attorney and advance directives are much less commonly used to plan for the future. Source: Australian Centre for Health Law Research…

The arrival of open banking – which allows financial institutions to share customer data – should give households the ability to track down better deals and products. But it also raises concerns about the privacy and security of personal information. Here are five “home truths” to help set your mind at ease: 1. You’ll have to wait Let’s say you’re a customer with Bank A and you’re considering switching your home loan to Bank B. Bank B needs to be an accredited data recipient (ADR) to access your personal data under the open banking regime. About 50 applications have been lodged to become an ADR and at the time of writing only two had been approved. Based on the federal government’s timetable on when banks and their customers can…

Ever since my son was little, we’ve loved playing chess together. Chess is a great game to learn how to win at life. Look at the whole board and don’t let immediate threats blind you to other opportunities. Think four moves ahead, but be present in the actual game and change your plans based on your opponent’s moves. Use failure as a way to learn to play better next time. All are fundamental life lessons that we all need to be reminded of, and chess is a great way to practise these lessons. One of the greatest lessons of all is what to do when you lose your queen. The queen is the most powerful piece on the chessboard, and to lose it usually means you are at a significant…

Launching my own small business from an apartment in Sydney’s inner west in 2000 was a dream come true. However, the reality is that operating from a spare bedroom or garage can often hold back a business and you’ll need to set up shop elsewhere. David Ente, a director of Raine & Horne Commercial South Australia, believes small to medium enterprises (SMEs) usually move to a commercial space because they are expanding and want a more professional address. Anne Nalder, founder and chief executive of the Small Business Association of Australia, expands on this theme: “Due to the nature of the business, the owner may feel it will have more prestige by having a physical office.” For me, the decision to shift into commercial space arrived in 2008 when I…

It’s party time for first home buyers who are willing to buy new properties, with plenty of free money on offer as governments move to support the construction industry in the wake of Covid-19 – for example, up to $76,070, including stamp duty concessions, if you build a home valued at less than $600,000 in regional Victoria. And those who are already homeowners don’t miss out either, with $25,000 available for renovations through the HomeBuilder grant to those who qualify. If you want to build a new home you can also benefit from the $25,000 grant. On top of that there are also incentives for homeowners installing solar systems. To qualify for HomeBuilder you need to sign a building contract by December 31, 2020, and construction has to start within…

This is a tough time for retirees who rely on an account-based pension: do they opt for the new, lower minimum drawdown rate or stick with the old one? For the past decade they have enjoyed returns of around 7%, which has supported the higher pension drawdown and kept super balances healthy. But that was then. Now everything is up in the air as a result of the pandemic. The sharemarket has been hit and yields on cash, term deposits and bonds – a favourite of retirees – are at historic lows. The investment environment couldn’t be more difficult. While employees on a regular salary can sit on the sidelines and wait for their super to rebound, retirees have no such luxury. Unless they have cash set aside to tide…

Our fascination with dividends will be challenged in 2020, especially this month (August) as we hit the major reporting season for ASX-listed companies. As we write this in early July, three of the big four banks (CBA, Westpac and ANZ) have already suspended their dividends while NAB has significantly cut its payout. It’s a similar story among oil companies. In June, fund manager Nikko Asset Management told investors that dividend expectations for Australia’s top 200 companies had fallen 30%. Then only days later, fund manager Allan Gray said it’s working towards dividend yields of close to zero in the near future across the majority of ASX-listed companies. There will be a select few companies that haven’t been heavily impacted by Covid-19, such as supermarkets, and it’s likely they will maintain…

Planning prevents piss-poor performance. I love this statement. It was the catchcry for my son’s team during his school rowing seasons and it’s good general advice. It applies to many things from sport to finance and everything in between. Armed with knowledge you can plan for your investment portfolio or how you’ll adapt what you already have. It’s never too late to weed and prune what you’ve got or to invest in some new shares. Planning the “best” investment portfolio for you will require a little preparation but nothing too arduous. Here is a go-to list of points to consider when starting out. First-time investor Are you a student or a young professional saving for a holiday or housing deposit? You can start a portfolio with as little as $500.…

The broking house I worked for in the UK in 1990 lost its number one rated media analyst. He had just written a brilliant piece of research on Maxwell Communications. The research lifted the lid on one of the country’s most powerful media moguls and exposed the company for what it was: an opaque listed plaything with corporate governance standards that would curl the toes of the British “establishment” that invested in it. It was bust, and our man was pointing at the king with no clothes. It was all good, except for one unfortunate thing. Our man could not contain his own wit, something rarely encouraged in broking let alone broking research. He titled his note “Can’t Recommend A Purchase” (get it?). Robert Maxwell rang up and insisted the…

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.…

Melbourne-based Sally is a wellness coach and the founder of Home Sanctuary. She studied under the decluttering expert Marie Kondo to become an accredited KonMari consultant. She now flies around Australia helping clients clear their homes while bringing together her passions of sustainability and mindful practices around the home. Before turning to her current life, Flower was living in New York and working in futures on Wall Street. She met Kondo there – it was the right place and time for Flower and soon after she got her licence and moved full-time into consulting.…

I’ve been an avid reader of Money for the past three years. I have the app on my phone and I don’t miss an issue. Even while I was travelling solo around Europe for three months last year, I still read the mag. Susan Hely’s article “Secrets that end in tears” (July, page 69) struck a strong chord with me. Her article revealed her own personal story about money, family and lies, which was very hard to read. I’m 37 and I find we are constantly told by the media that women are worse off than men financially and that especially when it comes to retirement we need to make sure we are not old and poor by topping up our super. What I love about Susan’s article is the…

As I write this, Victoria is experiencing lockdown once again. It’s a sobering reminder of how Covid-19 continues to control so much of our lives – and the Australian economy is bracing for the repercussions. This takes me back to when the whole country was in lockdown in March and I decided I’d keep a diary, to remember what we did and how we felt. It can be tricky to remember exactly how you felt about a past event. It was an interesting exercise. In the early days of lockdown, I was stressed, in particular about the prospect of losing a large percentage of my super and the many years of work it would take to make it up, if at all. I also started making big plans: working on…

Retiree Mathew is looking for an …. Alternative to an SMSF Q I’m a self-funded retiree always on the lookout for ways in which to invest my assets. I currently operate an SMSF with assets mainly spread across Australian equities but also in some managed funds. I also have money in a “balanced” option industry super fund. I’ve recently been made aware of managed discretionary accounts (MDAs), which may provide an investment alternative as my wife and I age and become less interested in, or capable of, managing a portfolio that requires ongoing, regular attention. I’d appreciate your thoughts on MDAs in terms of pros and cons and whether you think they’re an investment vehicle to consider for ageing retirees. I know many readers will be interested in this issue,…

I’m 53, single and buying my first home with the first home owners grant (FHOG) – the townhouse is being built now. There will be $3000 for lenders mortgage insurance (LMI) owing. However, the townhouse is small and I would want to purchase a larger and older property (not keen on volume builds but due to FHOG it has to be this way) as soon as possible.  Due to the unstable global financial environment, it is even harder to read the crystal ball, and I may have to stay in this townhouse longer than hoped and would then refinance. My bank’s interest rate is 2.9% – this bank is on the FHOG-approved list.  My question is, should I pay the $3000 upfront? If I sell within two years, would I have…

• Take a step back and be present. Look at the long game and don’t lose focus on your end goal. Temporary setbacks are just that – temporary. No one succeeds in life without a few speed bumps along the way. • Reframe. Often loss is also a hit to your pride, and you can incorrectly attribute misfortune to your intelligence (or lack thereof). Look at each of the “beliefs” you have about the situation and reframe them, giving them another causal attribute. This will help de-personalise the situation and encourage more rational thoughts. • Actively look for learnings in failure. People often think that learning from failure is something that happens automatically as a part of the recovery process. This is not so. Proactively seek out what mistakes were made so that…

In the vein of keeping things simple, if you had to choose three asset classes for your portfolio we believe it would come down to shares, fixed interest (bonds) and cash. This way the portfolio construction balancing act oscillates between risk-on (equities) and risk-off (fixed interest and cash) strategies, given prevailing market conditions and future expected returns. Theory states equities and bonds are negatively correlated – if one goes up, the other should come down, which highlights the benefits of holding these asset classes in a multi-asset portfolio. But it’s not uncommon for both asset classes to deliver positive returns over the same time, as was the case in 2019. Granted, they were both going up for different reasons. Do bonds still provide diversification benefits? The short answer is that…

People running a self-managed superannuation fund (SMSF) need to ensure that they calculate the new minimum pension payment correctly. It’s not a matter of merely calculating the annual pension payment using the normal pension drawdown factors and halving it. For example, take Rochelle, aged 66, who has an account-based pension. Her balance at July 1, 2020 was $640,220. The “normal” minimum is 5% x $640,220 = $32,010 (rounded to nearest $10) The “new” minimum is 2.5% x $640,220 = $16,010 (rounded to nearest $10) It is not 50% x $32,010 (“normal” minimum) = $16,005. In the 50% case, the minimum has not been met, which may mean the member has not been running an account-based pension during the year. Thus, earnings, including capital gains, will not be tax-free. Source: Fitzpatricks…

Chinese and American technology giants are fundamentally changing the way we go about our daily lives. But they’re also changing global commerce, and this is rewriting the playbook when it comes to the way investors view them. Technology titans can be split into two camps: the American FAANGs (Facebook, Amazon, Apple, Netflix and Alphabet, which owns Google) and the Chinese BATs (Baidu, Alibaba and Tencent). Microsoft should also be in there, as the world’s most valuable company, but “M” doesn’t seem to lend itself to the acronym, so it misses out. Electric vehicle maker Tesla also deserves a special mention. The FAANG companies should be familiar to readers of Money. The BATs are less known. Baidu is a search engine, like Google, and it is also heavily invested in a…

1. A reasonable allocation of shares is 5%–10% of your capital in any one share for a $10,000 to $25,000 portfolio, and as the amount invested grows I suggest lowering the allocation per share to between 3%–5%. The larger the portfolio the more you may want to consider a bond ETF. 2. Increased exposure to REITs that are exposed to the optimal sectors of the property market for growth and income. 3. The more you increase the weighting to a share, the more risk you’re taking on (the more money you can make and the more money you can lose). 4. Avoid creating a portfolio with 40-plus shares – it’s just too many. 5. Remember to do the weeding and cull the losers or the saggers. The money can be better invested…

Remember that WAAAX acronym? Standing for Wisetech, Altium, Appen, Afterpay and Xero, it was supposed to be our answer to the US FANG stocks: Facebook, Amazon, Netflix and Google. “Supposed to be” because, in part, it was a neat little marketing confection – none of our businesses, unfortunately, measures up to that American quartet … at least, not yet. And it’s partly because the success of the WAAAX group has been mixed – and certainly volatile. None more so than the Australian fintech market darling Afterpay. Crashing from over $40 in February, the company’s shares hit a low of under $9 – essentially a 75% fall. But that was the entree. In the following three and half months, the shares were up seven-fold, to almost $70. Did I say it…

The tables on these pages contain data and information to help you compare managed funds, which are pooled funds managed professionally by investment experts. Managed funds displayed in these tables are multi-sector or asset class specific. Multi-sector managed funds invest across a diversified mix of asset types spanning equities, property, bonds, cash, infrastructure, private equity and alternatives. Managed funds are normally set up as unit trusts. You may be able to invest in them directly or through a platform. These products may be recommended to you by a financial adviser. The performance results displayed are the annualised investment returns each managed fund has delivered after taking into account taxes paid by the unit trust and investment fees. Research was prepared by Rainmaker Information and for more information see www.rainmaker.com.au Source:…

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. Nonlifecycle 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.…

Contact us To send a letter to the editor, write to Rainmaker Group Level 7 55 Clarence Street Sydney NSW Australia 2000 or email money@moneymag.com.au For all inquiries and letters, please include name, address and phone details. Letters may be edited for clarity or space. Because of the high number of letters received, no personal replies are possible. Subscribe Phone: 136 116 Online: magshop.com.au Subscribetothe Money digitaledition for your iPad at magshop.com.au/digital/subscribe/moneydigital Visit Money online Check out our website and while you’re there sign up for our free weekly email newsletter. You’ll get our top money stories plus exclusive finance tips. moneymag.com.au…