Innholdsfortegnelse for October 2021 i Money Magazine

Teamwork makes the dream work, especially when it comes to personal relationships. This month, we look at matters of the heart and money. As Nicola Field writes, two is better than one when it comes to fast-tracking your wealth. But there are caveats and ways to navigate the thorny issues of secret spending, over-borrowing and poor savings habits. After reading our cover story (page 32), we hope you’ll find a way to enjoy coupledom without breaking each other’s hearts and bank accounts. Once you’ve looked at that, turn to our Super Booster article (page 55), where Julia Newbould explains what “lifecycle” investing means. The way to invest through your super fund has changed over time and it’s in your best interest to get under the bonnet to see what it…

Back in 2007 I was given a book called The Black Swan by Nassim Nicholas Taleb. At that time the concept of black swans was rarely talked about: those random events that underlie our lives, ranging from world disasters to great advances. Their impact is huge, and nearly impossible to predict. The book’s message was to stop trying to predict everything and take advantage of uncertainty. The term became quite overused during events such as September 11, the global financial crisis and, of course, now the pandemic. But the idea of accepting uncertainty has never been more important than it is today. The last pandemic occurred 100 years ago – almost none of us had to live through it, but we can still learn from this and other disruptive life…

The Federal Court has found Colonial First State misled members of its FirstChoice Fund on at least 12,978 occasions over two years. “[Colonial told] its members that recent legislative changes [MySuper legislation passed in 2012 and effective in 2014] required Colonial to contact them and obtain an investment direction to stay in the FirstChoice Fund when that was not the case,” ASIC said. Self-managed super funds are enjoying a boom in popularity, according to the latest date from the tax office. In the year ending June 2021, 25,312 were established and 2187 were wound up. There are currently 597,900 SMSFs representing 1.1 million members. Neobank Volt has partnered with crypto exchange BTC Markets. Over the current months, BTC Markets will invite its customers to open Volt Bank accounts, which will…

The deadline for lodging your tax return, October 31, 2021, is looming. But did you know that you can lodge much later than that without being penalised? You simply need to be registered as a tax agent client by that date and you can lodge your return through that agent as late as May 15, 2022. If you don’t lodge by October 31 (or haven’t registered with an agent), you could be looking at a stiff fine. The so-called “failure to lodge” penalty is calculated at the rate of one penalty unit for each period of 28 days or part thereof that the return is overdue, up to a maximum of five penalty units. The value of a penalty unit is $222, so the maximum penalty for an individual is…

First job at 14 was working at Bookworld in Stafford City shopping centre, Brisbane. “We got massive discounts, which was great.” His first savings were stashed in a hollowed-out book. “It was a top-secret thing. Eventually, I worked out you could take it to the bank and get interest.” Once, when his wife Geraldine accepted an attractive job offer from Virgin Australia, he became the primary carer for their two children. When they had a nap, he worked on his start-up ideas in the front room. He says he has learned something from every job, including about values-based focus leadership when at the CSIRO. electric…

Debt can have a dark side especially as it can reveal more about a person than you suspected. Financial adviser Kate McCallum says she is surprised at how many people squirrel money away for a gambling or alcohol addiction. Money spoke to one woman who experienced this problem firsthand. Wishing to remain anonymous, she says: “When I started dating a man a few years ago, I felt we had a real connection and a long-term future together. I did notice some odd behaviour – he was continually going to ATMs to withdraw cash from his credit card rather than paying for purchases with a debit card. But it seemed like a minor matter, and I felt we were so compatible. It was only as the relationship progressed that I realised…

Disputes between siblings can sometimes spiral out of control. In July brothers Garry and Malcolm Taylor were so jealous of their sister Kerrie’s appointment as executor of the estate of their late mother, Lois, that they took extreme revenge. The brothers had previously unsuccessfully challenged their older sister’s role as executor and the County Court of Victoria ordered them to help Kerrie sell the family home in Murtoa, in north-western Victoria. A day before the home was going to auction, the pair flew down from Queensland, hired a car and drove to the home where they went on a rampage. They hired an excavator and rammed the machine’s bucket through the walls, trashing the home so their sister would not “get a cent”. The value of the property plunged from…

The federal government has released its Retirement Income Covenant position paper, which aims to codify the obligations of super fund trustees to improve retirement outcomes. In response, the Actuaries Institute has issued a major public policy review calling for the retirement system to be fairer, simpler and more efficient. It says “carrots and sticks” should be used to encourage efficient use of lifetime savings and the role of guidance and advice should be enhanced. “The ‘three pillars’ of compulsory superannuation, the age pension and voluntary savings mean that individuals are required to make complex choices about how much to save and consume, and how to invest,” says Elayne Grace, the institute’s chief executive. “We support simplifying age pension means testing, improving the interaction between the retirement income and aged care…

Only a few months ago we thought we were out of the woods, and then Delta came along and changed everything. As most of the country went into lockdown, property prices kept rising. Many people were scratching their heads. If you’re sitting there thinking this doesn’t make sense, you’re not alone. We have never lived in such a strange period when asset prices are rising while the underlying economy is being disrupted, and in some cases destroyed. It only starts to make sense when we look at both demand and supply in the real estate equation. Most of the discussion around property prices focuses on the demand side of the equation. You’ll hear arguments such as: people have more money saved up, they can’t travel overseas, interest rates are low,…

We have come across plenty of market commentators and investors who have put forward an argument for a significant rise in inflation and interest rates in the coming months and years which, if it happens, would cause a painful repricing of bonds and growth assets. The evidence that I am about to share with you should confirm why the current era of generationally low interest rates and inflation is going to be with us for a long time. So, income assets should remain fully priced, but growth assets should also continue to see support. Let’s start with the secular trend of an ageing demographic. The world is experiencing a rapidly ageing population with the average proportion over the age of 50 years increasing from 15% to 25% since the 1950s.…

Which leaves us where? For my money, the best use of an ETF is, frankly, the most boring. But also the most powerful. It’s an investment you can add to regularly, giving you low-cost diversification and the power of dollar cost averaging. And given that a great number of investors will go on to own individual (mostly ASX-listed) shares, one of the best ways to aid diversification is to go international, from here at home. And for that, at a pretty low cost, this year’s Best in Breed ETF is the Vanguard MSCI International Shares ETF (ASX: VGS).…

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.…

Air travel has a huge environmental cost “As humans get richer, they travel more” ... so said Steve Johnson in “Why predicting the future isn’t enough” (August). According to the German non-profit organisation Atmosfair, flying return London to New York generates about 1000kg of carbon dioxide per passenger, which is more than many people in the Third World create in a whole year. The pollution disparity is gobsmacking. Moreover, we know it is the poorer people who will suffer the most dire effects of climate change. Meanwhile, according to a report published by the Brookings Institution in 2018, the middle class is already the largest segment of demand in the global economy and is projected to reach some 5.3 billion people by 2030. If 5.3 billion people express their newfound…

Taking time off work to raise children has put women behind the superannuation eight-ball, but could a simple tax rebate help even the gender divide? Yes, according to a new report by KPMG. The median super balance for men aged between 60 and 64 is $204,107. By contrast, women in the same age group have a median balance of $146,900, or 28% less. For the pre-retirement years of 55-59, the gender gap is 33% and in the peak earning years of 45-49 it’s 35%. As of December 2020, 55% of those collecting the full pension were women. “Time spent out of employment is a major contributor to unequal levels of superannuation balances, as women miss out on super contributions in some of their peak working years,” says Alison Kitchen, chair…

Trademark your business’s name, logo and/or slogan to avoid impacting your goodwill. Most, if not all, household brands are protected under trademark. But it’s surprising how many smaller businesses fail to protect their IP and it could cost them thousands of dollars, if not millions. Athletes and entertainers should also be open to trademarking their IP. There have been many cases where failing to protect an IP has been detrimental, such as the legal case involving pop star Katy Perry and a local Australian designer over trademark infringement. Registering trademarks protects your business’s identity from a legal point of view. It also protects brand awareness by deterring potential “trademark pirates” or newly formed businesses from deliberately, or naively, using your name, logo or slogan to promote or market their business,…

Q We are in our mid-40s, both working full time and preparing for early retirement overseas. I have $419,000 in super and Max has $297,000. We want to travel while we can and have a quality of life that is more than just working and paying bills. The cost of living is becoming ridiculous in Australia. We can sell our home and walk with about $550,000 cash. In 15 years our combined superannuation should be $1 million-plus. During the next 15 years we can rent a property in a country like Indonesia, Vietnam or Mexico for $300-$400 a month, moving where we like and travelling. Overseas we’d have an approximate total cost of living per month of $850. We’d like to invest at least $250,000. We don’t plan to work…

Q I am 57 years old and have $1.16 million in my super fund (currently UniSuper, conservative balanced, returning about 5%). After a long and well-paid career in IT, I am transitioning to be a disability care worker for my final few work years. So, I won’t be contributing much from my salary for the next three years. I plan to start drawing on my super at 60 but may continue part-time work for a few years. I will also have about $100,000 in shares when I retire, own my own home and have no debts. I’m tempted to move back to the UniSuper balanced fund to get better returns. Is this too risky at my age? Hell no, Fiona. My view is that you are 57 years young. Life…

I have an old school friend (let’s call him John). He was your classic introvert, preferring the simplicity of numbers over complex relationships, trading basketball cards over playing sport, chess over parties. John’s superpower was numbers. Following school, John found he was a natural accountant, and quickly became the managing partner in a small accounting firm that specialised in small “mum and dad” businesses. You can imagine my surprise, when we reconnected in our 30s, and he revealed with some bewilderment that when couples came in to get their finances in order, more often than not it turned into a couple’s counselling session. You can imagine how hilarious that was for me to picture this small, socially awkward, introverted, number-loving accountant being thrust into high-empathy and sometimes quite tense discussions…

“When you are investing for your retirement, working and making contributions over a very long time into the future, some of those investments are made when markets crash,” says Fidelity’s Richard Dinham. “So that concept of investing through a long period of time is beneficial. Some of those contributions you make perform very well because they’ve been made at times when markets have been depressed.” For instance, if you were investing $100 a month, and continued to do so through the GFC, when markets fell by 50%, that $100 you made at the bottom of the market would have doubled in value in a year. “Volatility in markets is beneficial when you are saving. If you are disciplined and keep on investing throughout your savings period, sometimes the contributions you…

Want to renovate but not too sure where to start? At some stage homeowners delve into the land of renovating, with a view to increasing the value of their property. The process can certainly be overwhelming. Whether applying fresh paint or investing in a significant renovation, every dollar you spend must add value. Sadly, the dream renovation takes a wrong turn for many and before you know it you are on the path to doom and gloom and haemorrhaging money into correcting silly mistakes that you cannot believe you didn’t see coming. Renovating for profit is about strategically targeting what you spend your money on and the return it gives you. Engaging the services of experts and not cutting corners are essential. Due consideration at the outset should be given…

1 Ardea Real Outcome Fund The fund provides investors exposure to a bottom-up-driven, macro-unaware strategy that seeks to deliver a return of CPI plus 2% through trading the mispricing of government bonds and interest rate derivatives. There is significant experience and expertise and a good track record in this strategy to warrant a consideration by investors. The fund could be a solution for investors seeking greater certainty of income (paid quarterly) while seeking to preserve capital. 2 Perpetual Diversified Income Fund The objective is to deliver 2% over the Bank Bill Index each year (gross), which it has achieved over the past five years (outperforming by 2.33%). The fund also has been a strong performer relative to its peer group. In our view, it offers clients an attractive proposition…

YOUR GUIDE TO MANAGED FUNDS DATA 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…

SHARYN MCCOWEN “As soon as ‘lockdown unhappens’, as my youngest nephew says, my husband and I will be heading for country NSW to be reunited with my family. It’s the longest we’ve ever been apart from them, and FaceTime family dinners, while lots of fun, are no match for the real thing. Not to mention the challenges of maintaining a long-distance relationship with my beloved blue cattle dog …” BOB CHRISTENSEN “As the family outlier, I have a lot of catching up to do with siblings who live in a state that treats NSW citizens with undeserved suspicion and with in-laws who live halfway around the globe and have plenty of their own problems. Thank goodness for Zoom, FaceTime and good old-fashioned phone calls. On the upside, I’ve saved a…

As you near retirement, it may be a good time to move shares into super. Many people are surprised when I tell them it is possible to contribute your shares to your SMSF in what is called an “in-specie” contribution. Shares that are owned personally will have dividends and capital gains taxed at your marginal rate. If you are retired and drawing an account-based pension, the dividends and any capital gains are tax free when your super balance is in pension phase. There are a few things to consider: 1. Making an in-specie contribution of shares triggers a capital gains event personally. This means that if you are transferring shares that have gained in value you may need to pay CGT. 2. You must choose a date for the transfer,…

BOOK OF THE MONTH THE PSYCHOLOGY OF MONEY By Morgan Housel Harriman House, RRP $32.99 In the real world, people don’t make financial decisions on a spreadsheet. They make them at the dinner table or in a meeting room, where personal history, unique views of the world, ego, pride, marketing and odd incentives are scrambled together. In his book, subtitled Timeless lessons on wealth, greed and happiness, the writer says ordinary folk can be wealthy if they have a handful of behavioural skills that have nothing to do with formal measures of intelligence. Five readers can win a copy. In 25 words or less, tell us one of the best lessons you’ve learnt about wealth, greed or happiness. Enter at moneymag.com.au/win or send entries to Money, Level 7, 55 Clarence…

REFINANCING Borrowers chase a better deal Refinancing hit an all-time high in July, according to the latest Australian Bureau of Statistics numbers. Borrower refinancing of housing loan commitments between lenders reached $17.2 billion, with a monthly rise of 6%. “This reflected borrowers seeking out lower interest rates, particularly for fixed-rate loans, and cashback deals across a large number of major and non-major lenders,” says Katherine Keenan, ABS head of finance and wealth. The pandemic has prompted people to reconsider their financial arrangements. “The stay-at-home orders have allowed customers extra time to reassess their home loan situation and identify refinancing opportunities for saving money on their interest payments, particularly in this time of uncertainty,” says Andrew Walker, CEO and co-founder of Nano Home Loans. But consumers should proceed with caution. Banks…

As a young man, James Chin Moody was deeply involved in advocacy as co-chair of the United Nations Environment Programme’s youth council. A core was sustainable consumption. Fast-forward 20 years or so, and the devoted campaigner is putting the beliefs he supported then into practice via a unique courier delivery disruptor called Sendle. That business contracts mid-tier courier companies to collect parcels for Sendle’s clients, initially from the premises or homes of small business operators. Once the couriers delivered their regular loads for the day for other contractors, they had been returning empty to base. What better way to make extra income than to backload Sendle’s parcels for despatch around the country? It’s a simple idea, and it is giving Chin Moody a reputation for innovation. He initially tried to…

Paul’s verdict:The tax will make a vast difference to your wealthYou would be over $250k better off in super I am a 31-year-old, earning $118,000 before tax and I salary sacrifice $760 to my super each month. I am considering retiring abroad, preferably by 50, and that got me thinking whether I need to continue salary sacrificing. Could I instead use this money to invest in shares/ETFs on a monthly basis as that would allow easier accessibility to the funds if needed? Yash This is a very interesting question, Yash. It is one that is important to millions of Australians and not because millions want to live overseas. While a lot of us would love to take an overseas holiday, not so many are thinking about living overseas. But during…

A relationship breakdown, especially where children are involved, creates trauma and it can also put strain on your small business. It seems many SME owners must cope with a breakdown annually. Family Business Australia research shows there are more than 1.4 million family businesses in Australia. Meanwhile, the Separation Guide shows a 314% increase in the number of couples considering a separation during lockdown, of whom many presumably own an SME.   Play on or sell up Craig West, the founder and chief executive of Succession Plus, a business succession and exit planning firm, says if the business is managed well, it should have a “shareholder agreement” covering the eventuality of a personal relationship breakdown between business partners. A shareholder agreement also covers other aspects of the business, including its…

As a super fund member, you typically spend your working life drip-feeding monthly contributions into your account without thinking about it too much. But thanks to your time in the market, dollar cost averaging and the power of compounding, those savings could land up being your biggest asset outside the family home. Default super funds – where most members’ money is invested – have performed extraordinarily well, earning Australia an enviable reputation around the world. But what happens when the drip-feeding stops and retirement starts? There is no shortage of research that shows many retirees face retirement with trepidation. Members could turn to their fund and get free intra-fund advice, but it won’t take their partner’s super or other assets into account. Funds have largely focused on accumulators rather than…

House prices have hit an all-time high based on what properties are fetching at sale. National home values rose 13.5% in the financial year to June 30, the highest annual rate of growth since 2004.  But turn it around and look at it from the viewpoint of mortgage repayments, especially on fixed loans, and you could conclude that our house prices are cheap, as commentator Alan Kohler points out. “The only way to value a home, as opposed to an investment, is by the repayments and on that basis there is a once-in-a-lifetime sale right now,” he says. “So, while the price tags, particularly in Sydney, Melbourne and Hobart, might look over the top, when valued by the repayments they’ve arguably never been cheaper.” Our historically low interest rates mean…

Lithium could, over the coming years, be what buy now, pay later providers have been over the past years. So why is this soft, silvery-white metal the next big thing, and how can investors jump aboard? Lithium is mined from either hard rock or, in the case of South America, in the brine deposits found under dry lake beds. Most of the world’s lithium is in South America, mined in the so-called “lithium triangle” that connects Chile, Argentina and Bolivia. Most of it is then shipped to China, which makes 95% of the anodes and cathodes found in lithium-ion batteries. The world has known about lithium since 1817, when it was first discovered just outside the English town of Redruth. In 1948, the Australian psychiatrist John Cade worked out it…

One of the bright spots of 2021 has been the number of questions I’m getting about exchange traded funds. The message, it seems, is getting through. Most investors can benefit from ETFs, and they are a wonderful way to get started, offering low-cost, immediate diversification and avoiding the paralysis of “which company’s shares do I buy first”. Except that, as the old Castrol ad reminded us, “Oils ain’t oils, Sol.” ETF was once synonymous with “index fund”, a way of getting hold of a super low-cost managed fund that just tracked a given index (say the S&P/AS;X 300 or S&P 500). But rather than sending the index fund manager a cheque, you could buy and sell directly on the ASX. Simples, as the meerkat would say. Of course, the finance…

Ultimately, the rules of income investing are unpretentious: keep it simple, buy reliable yield, not high yield, share prices are more important than dividends, go large on the banks, add some hybrids if you’re a chicken and don’t forget the golden rule of income investing: only buy for income if the share price is going up. It’s called the “idiot income portfolio”. It’s the same as the “idiot portfolio” but slightly different. The idiot portfolio is the portfolio financial professionals buy you so they can’t be sued. They distil it by listing all the shares in the S&P/ASX 200 index on Excel, sorting them in market cap order and then, starting at the top, crossing out any stocks they can’t spell, don’t understand and wouldn’t be able to defend if…

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.…

The Bureau of Statistics released its “national accounts” report for the June 2021 quarter, and it was good … nay, it was great! It showed the economy grew by a better-than-expected 0.7% in the second quarter of the year, taking Australia’s annual GDP growth rate up, up (and away) to 9.6% - the highest year-on-year growth rate on record since the 1960s. Australia is up there with the big boys. The June quarter’s annual growth rate is faster than China’s 7.9% and Japan’s 7.6%. While it’s below that of the US (12.2%), the eurozone (13.7%) and the UK (22.2%), these economies suffered deeper and/or longer contractions than the land down under. But it’s akin to a death row inmate getting a sumptuous meal before their execution? Well, this is perhaps…

What was your first job? I always wanted to work the minute I was able to. I had a neighbour who owned a restaurant at the top of the street, and I’d constantly ask if I could work there but was told that it wasn’t allowed until I was 14 and 9 months. The day I turned 14 and 9 months, I started in the restaurant as a waitress, taking every shift I could through high school and uni. I bought my first car at 15 even though I wasn’t able to drive. I wanted to be successful and independent from a young age and wanted to know how money could change lives. You became a business owner at 18. How did that happen? I did six months of uni…

Business Chicks founder Emma Isaacs believes Covid has ended the need to hustle – a view she sets out in her new book, The New Hustle. Instead, we’ve had plenty of time to think about the way we want to work in the future, whether it is remotely, or part-time, or in our own businesses. She’s living her best life in LA with her husband and six children, and through Business Chicks (a networking company for women) has played host to speakers such as Sarah Jessica Parker, Sir Richard Branson, Deborah Lee Furness, Elizabeth Gilbert, Seth Godin and Arianna Huffington. Isaacs bought Business Chicks after she attended one of its events and discovered it was for sale. At the time it was just a website and a database of members.…