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January 2023 Newsletter

As a new year begins, we wish everyone a happy, healthy and prosperous 2023. Many families will be glad to put 2022 behind them and although challenges remain, we look forward to better times ahead.

As 2022 drew to a close, investors remained focused on inflation, interest rates and recession worries. Inflation is running at around 7% to 11% in most advanced economies, including Australia (7.3%). The Reserve Bank of Australia (RBA) lifted its target cash rate by another 25 basis points to 3.1% in December, the eighth monthly rise in a row, up from 0.1% in May. The RBA noted that “inflation is expected to take several years to return to target range (2-3%)”, and most economists expect at least one more rate increase.

High inflation and borrowing costs continued to weigh on consumers in December. The ANZ-Roy Morgan consumer price index was steady at 82.5 points in the run-up to Christmas, 26 points below the same period the year before. Slowing consumer demand and rising costs also dragged the NAB business confidence index into negative territory for the first time in 2022, down to -4.4 points in November.

But it’s not all bad news. Australian company profits rose 18.6% in the year to September, the fastest pace in five years. Unemployment remains low, despite edging up to 3.45% in November and annual wages growth was 3.1% in the September quarter, the fastest pace in a decade. The Aussie dollar lifted slightly to US68.13c in December, down 6% for the year. Iron ore prices lifted 8% over the month but were down 1% for the year, while oil prices (Brent Crude) eased slightly but were up 11.4% in 2022 as war in Ukraine disrupted supply.

2022 Year in Review

2022 Year in Review

Inflation dominated the economic landscape

The year began optimistically, as we finally began to emerge from Covid restrictions. Russia threw a curve ball that reverberated around the world and suddenly people who hadn’t given a thought to the Reserve Bank were eagerly waiting for its monthly interest rate announcements.

2022 was the year of rising interest rates, surging inflation, war in Ukraine and recession fears. These factors created cost-of-living pressures for households and a downturn in share and bond markets.

Super funds suffered their first calendar year loss since 2011. Ratings group Chant West estimates the median growth fund fell about 4 per cent last year.i

The big picture

Even though investors have come to expect unpredictable markets, nobody could have predicted what unfolded in 2022.

Russia’s invasion of Ukraine in February led to a global economy and investment markets shake up. It disrupted energy and food supplies, pushing up prices and inflation.

Inflation sits around 7 per cent in Australia and the US, with the Euro area around 11 per cent.ii

As a result, central banks began aggressively lifting interest rates.

Rising inflation and interest rates

The Reserve Bank of Australia (RBA) lifted the cash rate from 0.1 per cent in May to 3.1 per cent in December,iii quickly flowing through to mortgage interest rates.

Australia remains in a better position than most, with unemployment below 3.5 per cent and wages growth of 3.1 per cent running well behind inflation.iv

Australia’s economic growth increased to 5.9% in the September quarterv before contracting to an estimated 3 per cent by year’s end.vi

Volatile share markets

Investors endured a nail-biting year.

Global shares plunged in October only to snap back late in the year on hopes that interest rates may be near their peak. The US market finished 19 per cent lower, due to exposure to high-tech stocks and the Federal Reserve’s aggressive interest rate hikes. Chinese shares were down 15 per cent as strict Covid lockdowns shut down much of its economy.

Australian shares performed well by comparison, down just 7 per cent.

Energy and utilities stocks were strong due to the impact of the war in Ukraine on oil and gas prices. The worst performers were information technology, real estate and consumer discretionary stocks due to cost-of-living pressures.

Property slowdown

After peaking in May, national home values fell sharply as the Reserve Bank began increasing interest rates. The CoreLogic home value index fell 5.3% in 2022, the first calendar year decline since the global financial crisis of 2008.

Sydney (-12 per cent), and Melbourne (-8 per cent) led the downturn. Bucking the trend, prices edged higher in Adelaide (up 10 per cent), Perth (3.6 per cent), Darwin (4.3 per cent).

Rental returns outpaced home prices, as interest rates, demographic shifts and low vacancy rates pushed rents up 10.2 per cent in 2022. Gross yields recovered to pre-Covid levels, rising to 3.78 per cent in December due to strong rental growth and falling housing values.

Despite the downturn, CoreLogic reports housing values generally remain above pre-COVID levels. At year end, capital cities combined were still 11.7 per cent above March 2020 levels, while regional markets were 32.2 per cent higher.

Looking ahead

While the outlook for 2023 remains challenging, there are signs that central banks are nearing the end of their rate hikes.  

Issues for investors to watch out for in the year ahead are:

  • A protracted conflict in Ukraine

  • A new COVID wave in China disrupting supply chains further, and

  • Steeper than expected falls in Australian housing prices which could lead to forced sales and dampen consumer spending.

If you would like to discuss your investment strategy in the light of prevailing economic conditions, please get in touch.

Note: all share market figures are live prices as at 31 December 2022 sourced from: https://tradingeconomics.com/stocks.
All property figures are sourced from: https://www.corelogic.com.au/news-research/news/2022/corelogic-home-value-index-australian-housing-values-down-5.3-over-2022

i https://www.chantwest.com.au/resources/another-strong-month-for-super-funds-as-recovery-continues/

ii https://tradingeconomics.com/country-list/inflation-rate

iii https://www.rba.gov.au/statistics/cash-rate/

iv https://www.rba.gov.au/snapshots/economy-indicators-snapshot/

v https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release

vi https://www.rba.gov.au/publications/smp/2022/nov/economic-outlook.html

Keeping yourself accountable

Keeping yourself accountable

At the end of the day, we are accountable to ourselves – our success is a result of what we do – Catherine Pulsifer

It can be both empowering and a little uncomfortable to think that we are responsible for our successes – and failures. Being willing to accept the consequences of our actions, choices or behaviours is not always easy.

We’ve all at some time or another played the “blame game”. It’s so easy to look outward and blame others for our problems, hardships or the obstacles that are getting in the way of us achieving our goals and dreams. For example, it’s the company’s fault that I keep getting passed over for that promotion, my team at work is holding me back, my partner is not being supportive enough of me.

The reality is there are always external forces at play that impact our lives and focussing on these external forces takes away our personal accountability.

What does it mean to be accountable?

Being personally accountable means taking responsibility for one’s own actions (or in some cases – lack of action!). It’s maintaining an ongoing commitment to yourself and what is important to you.

Here are a few ways you can become more accountable.

1. Remove the roadblocks

It all starts with your mindset. Choose to consciously embrace an accountable approach and recognise that you are the architect of your destiny.

That means letting go of the excuses and recognising them for what they are – roadblocks that are holding you back from taking responsibility for your own actions.

2. Set goals

It helps to know what you are trying to achieve – whether that be in your career, relationships or personal life. Take the time to set concrete goals, jot them down, and have a plan of how you will achieve them and in what timeframe.

Start by setting yourself smaller goals as they will be easier to achieve in the beginning. Setting goals (even if they are small ones) and achieving them allows you to prove to yourself and others that you can and will hold yourself accountable.

3. Create your own opportunities

Accountability empowers you to be in control of your actions in your personal life and career. You can create your own opportunities rather than passively allowing life to happen to you.

Being accountable is about fulfilling your obligations to yourself as well as to others, so when you achieve what you’ve been aiming for, take time to recognize these milestones and celebrate them.

4. Take responsibility for your decisions

Embrace the ‘good, the bad – and the ugly’ and accept the consequences of your actions, choices and behaviours, be they positive or negative.

Revel in the positives, but don’t be afraid to admit and own up to your mistakes. One of the most powerful ways we learn is through making mistakes and taking responsibility for them. That means acknowledging that there is a problem, identifying your role in it and proposing a solution to minimise or eliminate the chances of it happening again.

5. Learn from your mistakes

To reach your potential it’s necessary keep extending what you are capable of and taking risks and that means making mistakes. Don’t beat yourself up but think of what you would have done differently and what you’ve learned from the experience.

6. Ask for help

The road to success does not have to be a lonely one. While you are responsible for your own successes, that doesn’t mean you can’t ask for a hand or even better, work with another, or others to get the support and encouragement you need.

An accountability partner can be someone who shares your goals and supports you to keep your commitments or maintain progress on a desired goal.

Having an accountability partner has been proven to increase your chances of success to an astonishing 95% if you have a specific accountability appointment with a person you’ve committed to.ͥ

So, if you are wanting to be more accountable to your own success this year don’t go it alone – make a time for a chat with us and we can work with you to help you achieve your goals and dreams.

i https://www.afcpe.org/news-and-publications/the-standard/2018-3/the-power-of-accountability/ 

How to plan a gap year for grown ups

How to plan a gap year for grown ups

It’s not just school leavers who dream of a gap year. Those of us who’ve been working for a decade or two (or more) may also long for a real break from career and commitments.

It does not even need to be a year – just enough of an extended break to reset and to take stock of what’s important to you. There‘s the opportunity to learn new skills or another language, explore different cultures or do a road trip around Australia.

By planning ahead and making sure your break is not going to derail future financial goals, taking an extended period off work can be achievable.

Dare to dream

Start by finding an idea that might work for you. There are a host of websites that can help you to plan your adult gap year. They will provide tips and tricks for travel and where to find work (paid or volunteer).

You might consider:

  • Setting off around Australia. Taking off on an extended trip you can take the time along the way to really get to know parts of the country you’ve never seen. You could camp, caravan or stay in quirky country motels along the way.

  • Chasing the sun. Research affordable countries in warmer climates and set up in a beach shack. You will need to check rules on tourist visas.

  • Becoming a backpacker. There are plenty of cheap but comfortable accommodation options around the world to allow you to prolong your time away.

  • Taking a long walk. You can find much-loved and ancient tracks in Australia and around the world to expand your horizons. From the Great Himalayan Trail in Nepal – to Spain‘s Camino De Santiago, or one of Australia‘s iconic walks such as the Heysen Trail in South Australia.

The importance of planning

Once you have established what your break will involve, work out a budget that takes account of the costs you will continue to incur (such as mortgage or loan repayments, insurance, utilities, car registration and rates) as well as your best estimates for accommodation, food, travel and spending money for your destination.

Don‘t be daunted by an amount that may appear unachievable at first glance.

Work out how to save on costs when travelling. Some ideas include:

  • Living like a local. Try swapping your house with someone in another part of the world. House swap websites match up homeowners looking to live in different places for varying periods of time. Alternatively, you could rent out your home while you are away and/or sign up to a housesitting website.

  • Working differently. Your gap year might be more about doing something different than taking it easy. Find organisations and websites – such as workaway.info and wwoof.com.au – that cater for working travellers. You could choose to work on farms around the world in return for food and board for example.

  • Becoming a digital nomad. If manual labour isn‘t your thing, you could pack your computer and hook up to one of the many digital work websites – such as digitalnomadsworld.com, upwork.com or fiverr.com. Many countries now encourage this trend by offering digital nomad visas.

Then, with your costs under control, and a clear goal in mind, it‘s time for a savings plan.

You will want to reduce your current living expenses as much as possible to maximise savings and think about setting up a direct debit to a high interest savings account. Check the MoneySmart Savings Goal calculator to see how much you will need to save every month.

If you have more than a few years to plan your gap year, you could look into some longer term savings and investment options such as shares, exchange-traded funds (ETFs), or term deposits.

While a gap year is exciting, planning ahead financially is essential to ensure you don’t fall into debt.

You also need to carefully consider how this could affect your long-term financial goals. You probably won’t be making super contributions, so this may impact your super balance and retirement plans.

If you’d like to take time off in the future, contact us today to ensure that taking a break from earning an income won’t impact your future financial security.

This Newsletter provides general information only. The content does not take into account your personal objectives, financial situation or needs. You should consider taking financial advice tailored to your personal circumstances. We have representatives that are authorised to provide personal financial advice. Please see our website https://superevo.net.au or call 02 9098 5055 for more information on our available services.

Summer 2022

It’s December, summer is here and holidays are just around the corner. We take this opportunity to wish you and your family a happy festive season!

The big story on the global economic front continues to be inflation, and how high interest rates will go to tame it. November began with the US Federal Reserve hiking its federal funds target range by another 75 basis points to 3.75-4.00%. There are signs the tough approach is working, with the annual rate of inflation falling from 9.1% in June to 7.7% in October.

In Australia, the Reserve Bank lifted the cash rate another 25 basis points to a decade high of 2.85%. Inflation fell to 6.9% in the year to October, down from 7.3% in September, but remains high and economic signals are mixed. Reserve Bank governor Philip Lowe is keeping a close eye on consumer spending, where higher interest rates are having an impact. Retail trade fell 0.1% in October for the first time this year. And while the ANZ-Roy Morgan consumer sentiment index was up 5.6% to 83.1 points in the last three weeks of November, it remains 22.9 points below the same week last year. But rate hikes are not yet affecting the labour market, with unemployment falling to a 48-year low of 3.4% in October, while annual wages growth rose 1% to 3.13% in the September quarter, the fastest growth in a decade.

The Aussie dollar lifted 3c to around US67c over the month, crude oil prices fell 10% while iron ore lifted 0.5%. Shares remain skittish but positive overall. The ASX200 index rose more than 5% in November while the US S&P500 index was up more than 2%.

Sustainable investing on the rise

Sustainable investing on the rise

Sustainable investing isn’t new and is becoming more mainstream. From climate change to gender diversity, more people are aligning their money with their values.

In 2021, Australia’s sustainable investment market increased 20 per cent to a record $1.5 trillion. The Responsible Investment Association Australasia (RIAA) 2022 benchmark report found sustainable investments represents 43 per cent of total professionally-managed funds.

In addition to traditional shares and fixed interest sustainable investments offer a wide range of assets, including property, alternatives such as forestry, infrastructure, private equity and cash.

Most big super funds offer a sustainable investment option and some offer this as their default option. You can also buy sustainable managed funds, including a growing list of exchange-traded funds (ETFs).

What are sustainable investments?

Focus on people and planet

Sustainable investing is also known as ethical, responsible and ESG (environmental, social, governance) investing, with the focus on people, society and/or the environment.

Sustainable investments are selected using a variety of screening methods, including:

  • Positive screening selects the best investments in their class
  • Negative screening excludes harmful sectors, companies or activities such as arms, gambling, animal testing, tobacco and fossil fuels
  • Norms-based investing screens for minimum standards of relevant business practices
  • Impact investing has the explicit intention of generating positive social or environment impacts.i

The term ESG investing is used when a fund or company commits to sustainable investing in these three areas:

  • Environmental – air and water pollution, biodiversity and climate change
  • Social – child labour and labour standards, ethical product sourcing, gambling and human rights
  • Governance – board diversity, corruption, business ethics, corporate culture and whistle-blower schemes.

The report found gender diversity and women’s empowerment are also gaining popularity.

Sustainable investing is not all warm and fuzzy. Performance still matters.

Performance gains

Initially, sustainable investing often came at the expense of returns but that is no longer necessarily the case.

The report compared the performance of what it terms responsible investment funds and mainstream investments funds (on average and net of fees) over the past 10 years to December 2021.

Responsible multi-sector growth funds consistently outperformed mainstream funds and their benchmark over 1, 3, 5 and 10 years. Responsible Australian share funds generally outperformed or were on par with mainstream funds. Only responsible international share funds disappointed, underperforming mainstream funds across all timeframes.

Watch out for greenwashing

Increased demand for sustainable investments has led to a rapid increase in the number of products available. The rush to cash in on the trend has sometimes led to what is known as ‘’greenwashing”. The Australian Securities and Investments Commission (ASIC) describes greenwashing as the practice of misrepresenting the extent to which a financial product or investment strategy is environmentally friendly, sustainable or ethical.

ASIC warns investors to review the product terms. For example, a fund might describe itself as ‘’no gambling” but may invest in companies that earn less than 30 per cent of revenue from gambling.
Look for a clear explanation of how the product will achieve its aims and don’t rely on vague language like “considers”, “integrates” or “takes into account”.

Australian companies lifting their game

It’s not just super funds and managed funds taking sustainable investing more seriously, Australian listed companies are also adapting to changing investor preferences and regulatory environment. A recent analysis of ESG reporting by Australia’s top 200 listed companies, PwC found a 13 per cent increase in companies declaring a commitment to net zero emissions. However, only 55 per cent of those disclosed a transition plan or activities that will enable them to reach net zero.

There was also a 10 per cent increase in companies disclosing climate risks and opportunities, and a 30 per cent increase in companies disclosing a gender diversity policy.

For investors seeking sustainability along with financial returns from their investments, momentum and choice is growing. So please get in touch if you would like to discuss your investment options.

i https://responsibleinvestment.org/wp-content/uploads/2022/09/Responsible-Investment-Benchmark-Report-Australia-2022-1.pdf

Buying shares for kids: a gift that keeps on giving

Buying shares for kids: a gift that keeps on giving

Many parents and grandparents worry about how to help the children in their lives achieve financial independence. But the value of long-term investment can seem like a dry and complicated idea for kids to get their heads around.

In fact, many young people would like to know more about money, according to a Young People and Money survey by the Australian Securities and Investments Commission MoneySmart website. The survey found more than half of the 15-21-year-olds surveyed were interested in learning how to invest, different types of investments and possible risks and returns. What’s more, almost all those young people with at least one investment were interested enough to regularly check performance.

One way to introduce investment to children may be to begin a share portfolio on their behalf. The child can follow the progress of the companies they are investing in, understand how the market can fluctuate over the short- and long-term, as well as learn to deal with some of the paperwork required, such as filing tax returns.

How to begin

Setting up a share portfolio doesn’t need to be onerous. It’s possible to start with a minimum investment of around $500, using one of the online share trading platforms. Then you could consider topping it up every year or so with a further investment.

Deciding on which shares to buy comes down to the amount you have available to invest and perhaps your child’s interests.

If the initial investment is relatively small, an exchange traded fund (ETF) may be a useful way of accessing the hundreds of companies, bonds, commodity or theme the fund invests in, providing a more diversified portfolio.

ETFs are available in Australian and international shares; different sectors of the share market, such as mining; precious metals and commodities, such as gold; foreign and crypto currencies; and fixed interest investments, such as bonds. You can also invest in themes such as sustainability or market sectors such as video games that may appeal to young people.

Alternatively, buying shares in one company that your child strongly identifies with – like a popular pizza delivery firm, a surf brand or a toy manufacturer – may help keep them interested and excited about market movements.

Should you buy in your name or theirs

Since children cannot own shares in their own right, you may consider buying in your name with a plan to transfer the portfolio to the child when they turn 18. But be aware that you will pay capital gains tax (CGT) on any profits made and the investments will be assessable in your annual income tax return.

On the other hand, you could buy the shares in trust for the child. While you are considered the legal owner the child is the beneficial owner. That way, when the child turns 18, you can transfer the shares to their name without paying CGT. Your online trading platform will have easy steps to follow to set up an account in trust for a minor.

There is also some annual tax paperwork to consider.

You can apply for a tax file number (TFN) for the child and quote that when buying the shares. If you don’t quote a TFN, pay as you go tax will be withheld at 47 per cent from the unfranked amount of the dividend income. Be aware that if the shares earn more than $416 in a year, you will need to lodge a tax return for the child.

Taking it slowly

If you are not quite ready to invest cash but are keen to help your children to understand share investment, you could consider playing it safe by playing a sharemarket game, run by the ASX.

Participants invest $50,000 in virtual cash in the S&P/ASX200, a range of ETFs and a selection of companies. You can take part as an individual or a group and there is a chance to win prizes.

Another option, for children able to work independently, is the federal government money managed website. This is pitched at teens and provides a thorough grounding in savings and investment principles.

Call us if you would like to discuss how best to establish a share portfolio for your child, grandchild or a special young person in your life.

Celebrating the festive season, the Aussie way

Celebrating the festive season, the Aussie way

If you’ve ever hosted a visitor from overseas during the festive season you may have seen them a little bemused by the way we celebrate. It’s quite understandable as we do things a little bit differently down under.

Christmas in Australia – while fundamentally a religious festival celebrating the birth of Jesus – is also a melting pot of traditions we have inherited over time, mainly from the northern hemisphere.

Look no further than our Christmas carols, many of our festive songs and imagery reference snowflakes and cosy nights by the fireside. Think of how many of our songs are about chestnuts roasting on an open fire, riding in one-horse sleighs, and building snowmen – even though this kind of imagery is not so appropriate in Australian on a scorcher of a day.

Warm weather traditions

Santa would be much more comfortable in Australia in a pair of board shorts and a t-shirt than his fur trimmed red robes and warm hat. In fact, he has been spotted at Bondi Beach on a few occasions hitting the surf, in the lead up to his busiest time of year.

Instead of playing in the snow, we are playing in the waves, with those who live near the coast hitting the beach for a picnic or game of beach cricket during the festive season.

Prawns on the barbie at lunch

While many still opt for the roast with all the trimmings, Australians have embraced the seafood platter or something they can throw on the BBQ – or better still – seafood on the BBQ. Pavlova and trifle are common alternatives to Christmas pudding. And with no eggnog or mulled wine in sight, a refreshing drink of something icy cold is the Aussie way.

As opposed to the European tradition of having dinner on the 25th of December, we Aussies tend to have a big, long Christmas lunch (preferably with a snooze on the couch after opening all the presents).

Christmas street parties

In the suburbs, entire neighbourhoods organise street parties, getting council permission to close streets to traffic. Barbeques are pulled out onto the asphalt and tables set up with goodies. Kids roam around with water pistols and inflatable wading pools are set up if it’s warm enough, with games organised. Tug of war between the odd and even house numbers anyone?

Carols and pageants

Even though we are singing about snow falling gently and jack frost nipping at our toes, we are usually watching carols on a balmy evening with bats flying overhead in the Botanic Gardens if we are in Melbourne or the Domain Gardens in Sydney.

In Adelaide and Perth millions of kinds have grown up watching annual street parade pageants which liven up the festivities with a carnivale atmosphere and floats, music, and dancing.

Boxing Day sales and the cricket

While the various origins of Boxing Day are not universally agreed upon, the day is traditionally a day of rest after the excesses of Christmas day. It is said to have its origins in England when the wealthy gave their servants a day off and sent them home to their families with boxes of gifts and leftover food from their celebrations the day before.

We don’t tend to have much of a rest on Boxing Day. If we are not hitting the Boxing Day sales or packing up the car to head off on holiday, we are at the cricket. The Boxing Day test is one of the most attended and watched games in the country since its inception in 1950.

The start of summer holidays

Christmas in Australia comes at the start of the summer holidays so the lead up to the festive season also involves workplace break ups and celebrations with colleagues.

Then after the festivities on the 25th are done and dusted it is time to take off for what will hopefully be a nice relaxing break.

Of course, there are many ways to celebrate at this special time of year. We are blessed to live in a vibrant multicultural nation, feeling the influence of other cultures and traditions from all over the globe.
However you choose to mark the occasion, we wish you much joy and happiness in your celebrations.

This Newsletter provides general information only. The content does not take into account your personal objectives, financial situation or needs. You should consider taking financial advice tailored to your personal circumstances. We have representatives that are authorised to provide personal financial advice. Please see our website https://superevo.net.au or call 02 9098 5055 for more information on our available services.

Federal Budget 2022-23 Analysis

Budget October 2022: sign of the times

In his first Budget, Treasurer Jim Chalmers emphasised the three Rs – responsible budget repair and restrained spending, right for the times.

For good measure, resilience also got a mention with spending targeted at building a more modern economy to deal with the challenges ahead.

This is the first budget from a federal Labor government in almost a decade, barely five months since Labor was elected and seven months since the Coalition’s pre-election budget in March, so it was bound to be a little different. The Treasurer used the opportunity to update the shifting economic sands and reset spending priorities to align with the new government’s policy agenda.

For Australians wondering what the Albanese Labor government will mean for them and their family, this is the first piece of a puzzle that will be completed over the next three years.

The big picture

The Labor government has inherited an improving bottom line, with the deficit for 2022-23 expected to come in at $36.9 billion, an improvement of more than $40 billion on the pre-election forecast. This was due to high commodity prices for our exports and higher tax receipts from a strong labour market and robust corporate profits.

The deficits of $224.7 billion previously forecast for the next four years have shrunk to $182 billion. The difference of around $40 billion will go towards funding the government’s election promises and budget repair.

Labor has also found $22 billion in savings by cancelling or redirecting programs planned by the previous Coalition government, and a further $3.6 billion in cuts to external consultants, marketing, travel and legal expenses. Savings will also come from clamping down on tax avoidance by individuals and foreign corporations.

But as the Treasurer is fond of saying, storm clouds are looming, and he singled out inflation as the biggest challenge.

Economic challenges ahead

Inflation is forecast to peak at 7.75% by year’s end, before returning to 3.5% in 2023-24. Despite low unemployment currently at 3.75% it is tipped to rise to 4.5% by 2023-24, the surge in inflation means wages are unlikely to grow in real terms until 2024 at the earliest. Wages growth is forecast to be 3.75% in 2023-24, overtaking inflation of 3.5%.

With more interest rate hikes expected to tame inflation, debt is also set to climb from $895.3 billion last financial year to a forecast $927 billion in 2022-23 and upwards over the forward estimates.

With global economic headwinds building to gale force, Australia’s economic growth is expected to slow as cost-of-living pressures bite into household budgets.

While Dr Chalmers does not expect Australia to slide into recession like many of our trading partners, economic growth is already slowing. Real gross domestic product (GDP) is forecast to be 3.25% in 2022-23, down from 3.9% last financial year, and 1.5% in 2023-24, 1 percentage point lower than predicted in the March Budget.

Support for families

Childcare and improved parental leave are a priority area for the new government, in an effort to support families, reduce cost-of-living pressures and improve women’s workforce participation.

Already, $4.7 billion has been earmarked for childcare over the next four years, with families earning less than $530,000 to receive extra childcare subsidies from 1 July 2023. An extension of paid parental leave from the current 18 weeks to 26 weeks is also set to be phased in from next July, so neither initiative will add to the current Budget.

Health and aged care

Pressures on the federal health and aged care budget are mounting in the wake of COVID and an $8.8 billion blowout in the NDIS budget which will reach $166.4 billion over four years. An extra 380 staff will be hired at a cost of $158.2 million to speed up claims and make the system more efficient.

$750 million will be spent strengthening Medicare and $235 million over four years to roll out Urgent Care Clinics to reduce pressure on public hospitals.

Following revelations from the Aged Care Royal Commission and lessons learned during the pandemic, the government has pledged to fund an increase in aged care workers’ wages.

And the cost of subsidised prescription medications will be cut from $42.50 to $30 from January 1, at a cost of $756 million over four years.

More affordable housing

A centrepiece of the Budget to improve housing affordability and chronic shortages is a new Housing Accord to build 1 million new houses in five years beginning in 2024.

The new $10 billion Housing Australia Future Fund will provide a sustainable funding source to increase housing supply, including 20,000 new social housing dwellings, 4,000 of which will be allocated to women and children impacted by family and domestic violence and older women at risk of homelessness.

The plan paves the way for significant public and private investment in new housing across the country, following an historic agreement between the federal government, the states and private investors including superannuation funds.

Jobs, skills and education

Federal, state and territory governments have committed to a $1 billion one-year agreement to deliver 180,000 fee-free TAFE and community-based vocational education places from January 2023. Support will be targeted to priority groups, including First Nations people, and priority areas such as care sectors.

The government will also create 20,000 more subsidised university places over 2023 and 2024. The initiative will be targeted at disadvantaged groups to study courses where there are skills shortages.

Nation building and future-proofing

As part of its budget review, the government will ‘’realign” $6.5 billion of existing infrastructure spending. It will spend $8.1 billion on key infrastructure projects including the Suburban Rail Loop East in Melbourne, the Bruce Highway and other important freight highways.

The government has also committed to at least $40 billion in new borrowing to set up funds and companies to invest in policy promises. These include the $20 billion Rewiring the Nation Corporation to invest in the electricity grid, $15 billion National Reconstruction Fund for local manufacturing and the $10 billion Housing Australia Future Fund to invest in social housing.

In an acknowledgement of the increased frequency and severity of natural disaster, up to $200 million per year will be set aside for disaster prevention and resilience.

Climate change

A more comprehensive approach to climate change is also back on the agenda, with total climate-related spending of $24.9 billion over 2022-23.

As many of the nation’s largest emitters are in regional areas, the government will establish a $1.9 billion Powering the Regions Fund to help transition regional industries to net zero. And $345 million will be made available to increase uptake of electric vehicles.

Superannuation, pensioners and tax

What’s not in the Budget is also important. There was little new spending to help retirees and welfare recipients, but pensions and payments will increase due to indexation.

As previously announced, the amount Age Pensioners can earn before they begin to lose pension entitlements will temporarily increase from $7,800 to $11,800 this financial year.

While most superannuation fund members will welcome the lack of tinkering to the super rules, the investment potential of the new affordable housing initiatives should provide a valuable source of income to super funds and their members.

Women’s safety

The Treasurer pledged a record investment of $1.7 billion to support implementation of the new National Plan to End Violence Against Women and Children. This will include funding for 500 new frontline service and community workers to support women in crisis.

The Government is also legislating 10 days of paid family and domestic violence leave for all types of employees.

Looking ahead

The next 12 months are likely to be challenging for the economy and for households trying to budget for rising prices and interest rates, including higher mortgage repayments, at a time when home values are falling and real wages are going backwards.

The Treasurer has tried to walk a fine line between budget repair and responsible spending with long-term economic benefits for individuals and the nation.

Coming just months after the federal election, this Budget should be seen as laying the groundwork for the three Budgets to follow.

Information in this article has been sourced from the Budget Speech 2022-23 and Federal Budget Support documents.

It is important to note that the policies outlined in this publication are yet to be passed as legislation and therefore may be subject to change.

This Newsletter provides general information only. The content does not take into account your personal objectives, financial situation or needs. You should consider taking financial advice tailored to your personal circumstances. We have representatives that are authorised to provide personal financial advice. Please see our website https://superevo.net.au or call 02 9098 5055 for more information on our available services.

October 2022 Newsletter

It’s October and the footy finals are almost over, depending on which code you follow. In Canberra though, Treasurer Jim Chalmers is warming up for his first Budget on October 25 against a background of mounting economic pressures.

In September, persistently high inflation and aggressive rate hikes by the world’s central banks put global share and bond markets under pressure. The US Federal Reserve has lifted rates seven times this year, but US inflation remains at 8.3%. There is now growing fear that central banks may push the world into recession. In a surprise twist, the Bank of England (which has also lifted rates seven times this year) was forced to switch back to Quantitative Easing, buying government bonds to support the British pound which crashed to a record low in response to a stimulatory mini-Budget released by the new Conservative Party leadership. This led to a late relief rally on global sharemarkets and a fall in the US dollar and global bond yields. Even so, major global sharemarkets finished the month down 6% or more.

In Australia, the picture is a little brighter. Economic growth was up 3.6% in the year to June. Company profits are also strong, up 28.5% in the year to June, and unemployment remains low, at 3.5% in August. While inflation eased from 7% in July to 6.8% in August, due to falling petrol prices, it is still well above the Reserve Bank’s 2-3% target. Aussie consumers continue to spend at record levels, pushing up retail spending by 19.2% in the year to August, and petrol prices are set to increase by at least 22c a litre after the reinstatement of the fuel excise. Both will put upward pressure on inflation and interest rates.

The Aussie dollar fell more than 3c against the surging US dollar in September, to US65c.

Mortgage vs super

Mortgage vs super

With interest rates on the rise and investment returns increasingly volatile, Australians with cash to spare may be wondering how to make the most of it. If you have a mortgage, should you make extra repayments or would you be better off in the long run boosting your super?

The answer is, it depends. Your personal circumstances, interest rates, tax and the investment outlook all need to be taken into consideration.

What to consider

Some of the things you need to weigh up before committing your hard-earned cash include:

Your age and years to retirement

The closer you are to retirement and the smaller your mortgage, the more sense it makes to prioritise super. Younger people with a big mortgage, dependent children, and decades until they can access their super have more incentive to pay down housing debt, perhaps building up investments outside super they can access if necessary.

Your mortgage interest rate

This will depend on whether you have a fixed or variable rate, but both are on the rise. As a guide, the average variable mortgage interest rate is currently around 4.5 per cent so any money directed to your mortgage earns an effective return of 4.5 per cent.i

When interest rates were at historic lows, you could earn better returns from super and other investments; but with interest rates rising, the pendulum is swinging back towards repaying the mortgage. The earlier in the term of your loan you make extra repayments, the bigger the savings over the life of the loan. The question then is the amount you can save on your mortgage compared to your potential earnings if you invest in super.

Super fund returns

In the 10 years to 30 June 2022, super funds returned 8.1 per cent a year on average but fell 3.3 per cent in the final 12 months.ii In the short-term, financial markets can be volatile but the longer your investment horizon, the more time there is to ride out market fluctuations. As your money is locked away until you retire, the combination of time, compound interest and concessional tax rates make super an attractive investment for retirement savings.

Tax

Super is a concessionally taxed retirement savings vehicle, with tax on investment earnings of 15 per cent compared with tax at your marginal rate on investments outside super.

Contributions are taxed at 15 per cent going in, but this is likely to be less than your marginal tax rate if you salary sacrifice into super from your pre-tax income. You may even be able to claim a tax deduction for personal contributions you make up to your annual cap. Once you turn 60 and retire, income from super is generally tax free. By comparison, mortgage interest payments are not tax-deductible.

Personal sense of security

For many people there is an enormous sense of relief and security that comes with having a home fully paid for and being debt-free heading into retirement. As mortgage interest payments are not tax deductible for the family home (as opposed to investment properties), younger borrowers are often encouraged to pay off their mortgage as quickly as possible. But for those close to retirement, it may make sense to put extra savings into super and use their super to repay any outstanding mortgage debt after they retire.

These days, more people are entering retirement with mortgage debt. So whatever your age, your decision will also depend on the size of your outstanding home loan and your super balance. If your mortgage is a major burden, or you have other outstanding debts, then debt repayment is likely a priority.

All things considered

As you can see, working out how to get the most out of your savings is rarely simple and the calculations will be different for everyone. The best course of action will ultimately depend on your personal and financial goals.

Buying a home and saving for retirement are both long-term financial commitments that require regular review. If you would like to discuss your overall investment strategy, give us a call.

i https://www.finder.com.au/the-average-home-loan-interest-rate

ii https://www.chantwest.com.au/resources/super-members-spared-the-worst-in-a-rough-year-for-markets

Getting the balance right in decision making

Getting the balance right in decision making

We all approach decision making in our own way, making a multitude of decisions every day: ‘Should I hit snooze again on the alarm?,’ ‘Do I take the train to work, or do I drive,’ ‘What should we have for dinner?’

In fact, researchers estimate that the average adult makes 35,000 decisions every day.i While most of these are fairly insignificant, we also constantly make complex decisions that may support us in many areas of our lives – from navigating a change of career, handling a new project at work, or even managing the complexities of interpersonal relationships.

Having some knowledge of the decision-making process can help you to be more self-aware when faced with those larger, more complex decisions.

The biology of thought

The human brain is an intricate organ. It contains about 100 billion neurons and 100 trillion connections, and controls our emotions, thoughts, and actions. Our brains appear wired to work in complex ways to enable us to make the best decisions possible with the information we’re given. In very simple terms the process is a little like a court trial. Our brains register sensory information like sights and sounds and then act as a jury to weigh each piece of ‘evidence’ to make a judgement or decision.

Thinking fast and slow

Nobel laureate Daniel Kahneman in his hugely successful book Thinking, Fast and Slow – suggests that there are two distinct and different ways the brain forms thoughts.ii

‘Fast thinking’ is automatic, intuitive, and used for most common decisions. It is our brain conserving energy by making the bulk of its decisions on some degree of autopilot. This style of thinking uses cognitive shortcuts to let us respond quickly and instinctively to a wide range of fast and ever-changing inputs, like discerning emotions from facial expressions, ducking when something is thrown at us, reading words on a billboard, or driving a car on an empty road.

On the other hand, ‘slow thinking’ is more thorough and logical but also takes more time and is resource intensive. It kicks in when you focus on a task or problem, monitor and control your behaviour, formulate an argument or do anything that causes your brain to exert itself.

Different thinking for different situations

Of course, both styles of thinking have their place. It’s important to be able to make fast decisions when required – in fact, fast thinking comes from the most primal part of our brain to help us make the kind of snap decisions integral to survival. However, there are times when you need to analyse and think through all the implications of a complex decision like whether to accept that new job offer interstate or buy that new car.

Amongst the multitude of small decisions we face every day, it can be hard to find the time and energy for the big ones. Steve Jobs famously explained that he wore the same outfit every day to have one less easy decision to make so that he could focus his energy on the more complex decisions he was dealing with.

Minimising mistakes

If you find you rely heavily on fast thinking in your life, making choices based on gut instinct with little research or consideration, it may be time to consciously slow it down.

While that may not mean wearing the same outfit day in, day out, you might be able to have a few things in your life on autopilot, like putting together a weekly meal plan so thinking about what’s for dinner is one less decision to make in your busy day.

Slow thinking takes discipline and effort. It’s important to approach critical decisions in a measured way and give yourself the time and head space to think things through, rather than being swayed by emotion or the cognitive biases associated with fast thinking.

Good decision-making, either financial or otherwise also benefits from having a sounding board to talk things through with, and of course we are here to assist with any important financial decisions you may be faced with.

i https://iise.org/details.aspx

ii https://en.wikipedia.org/wiki/Thinking,_Fast_and_Slow

Guide to concession cards for seniors

Guide to concession cards for seniors

The excitement of heading towards retirement and a new stage of life can be tinged with concern over how to manage finances. For many people, seniors’ concession cards are a good way to help make ends meet.

While discounts on goods and services are always welcome, they’re even more valued right now as living costs continue to climb.

Concession cards for seniors provide significant discounts on medicines, public transport, rates and power bills. Many private businesses – from cinemas to hairdressers – also offer reduced prices to concession card holders.

There are different types of concession cards offered by federal, state and territory governments. While some are for those receiving government benefits, others are available to almost anyone aged over 60.

The cards are free and should not be confused with commercial discount cards that require an upfront fee or ongoing subscription.

Seniors Card

The Seniors Card is offered by all state and territory governments when you turn 60 (64 years in Western Australia) and are no longer working full time. This card is offered to everyone, regardless of your assets or income.

The Card will allow you to claim discounts on things like public transport fares, council rates and power bills. Thousands of businesses across Australia also offer reduced prices to Seniors Card holders. In some states, a separate card is offered to access discounts provided by private businesses and another card is provided for public transport.

For eligibility requirements and the range of services offered in your state or territory, click on a link below:

Victoria

South Australia

Western Australia

Northern Territory

Queensland

New South Wales

Australian Capital Territory

Tasmania 

Federal Government concession cards

If you’re receiving a government pension or allowance, you’re a self-funded retiree or you’re a veteran, you may be eligible for one of several cards issued by the Federal Government.

The Pensioner Concession Card is automatically issued to people receiving pensions or certain allowances.

The card provides discounts on most medicines, out-of-hospital medical expenses, hearing assessments, hearing aids and batteries, and some Australia Post services.

In most states and territories, card holders receive at least one free rail journey within their state or territory each year.

Commonwealth Seniors Health Card

If you’ve reached the qualifying age for an Age Pension (currently 66 years and 6 months) but you’re not eligible to receive a pension, you may be entitled to the Commonwealth Seniors Health Card.

You can receive the card if you:

While there is an income test, no assets test applies. You will receive similar benefits to the Pensioner Concession Card.

Low Income Health Card

For those on a low income but not yet at Age Pension age, the Low Income Health Care Card can be a big help. If you meet the income test, you’ll get cheaper health care and medicines and other discounts.

Your gross income, before tax, earned in the eight weeks before you submit your claim is assessed and must be below certain limits.

The types of income included in the test includes wages and any benefits you receive from an employer, self employment income, rental income, super contributions as well as pensions and government allowances.

Other types of income are also counted including:

  • Deemed income from investments
  • Income and deemed income from income stream products such as super pensions
  • Foreign income
  • Distributions from private trusts and companies
  • Compensation payments
  • Lump sums such as redundancy, leave or termination payments.

Veteran Card

The Department of Veterans’ Affairs has a concession card for anyone who has served in the armed forces and their dependents.
Like other government concession cards, the Veteran Card provides access to cheaper medicines and medical care as well as discounts from various businesses. The Veteran Card is a new offering, combining the former white, gold and orange cards. There is no change to entitlements or services with the new card.


As you can see, the potential savings from seniors concession cards can be significant so be sure to check your eligibility. If you would like help working out your income and other eligibility requirements, give us a call.

This Newsletter provides general information only. The content does not take into account your personal objectives, financial situation or needs. You should consider taking financial advice tailored to your personal circumstances. We have representatives that are authorised to provide personal financial advice. Please see our website https://superevo.net.au or call 02 9098 5055 for more information on our available services.

Market movements & review video – September 2022

Stay up to date with what’s happened in the Australian economy and markets over the past month.

In August, the focus was on US Federal Reserve chair Jerome Powell’s speech, during which he reinforced the focus on bringing US inflation down, even at the risk of recession.

In Australia, economic conditions are less gloomy, with a good results recorded on our trade surplus and annual wages growth.

The ASX 200 showed resistance to US and global falls, performing more steadily over the month.

Click the video below to view our September update.

Please get in touch if you’d like assistance with your personal financial situation.

This Newsletter provides general information only. The content does not take into account your personal objectives, financial situation or needs. You should consider taking financial advice tailored to your personal circumstances. We have representatives that are authorised to provide personal financial advice. Please see our website https://superevo.net.au or call 02 9098 5055 for more information on our available services.

September 2022 Newsletter

Welcome to our Spring newsletter. September means it’s football finals season and hopefully the beginning of warmer weather despite the recent late winter chill.

In August, the focus was on US Federal Reserve chair Jerome Powell’s speech at the annual Jackson Hole business gathering on August 26, and he was blunt. To hose down talk of interest rate cuts in 2023, he said the Fed was focused on bringing US inflation down to 2% (from 8.5% now), even at the risk of recession. He said this will “take some time”, will likely require a “sustained period of below trend economic growth”, and households should expect “some pain” in the months ahead. The S&P500 share index promptly fell 3.4% and bond yields rose. Economists expect the US central bank will continue lifting rates each month for the remainder of 2022.

In Australia, economic conditions are less gloomy. Australia’s trade surplus was a record $136.4 billion in 2022-23. Unemployment fell to 3.4% in July while wages growth rose to an annual rate of 2.6% in the year to June, the strongest in 8 years but well below inflation. The ANZ-Roy Morgan consumer confidence index rose slightly in September to a still depressed 85.0 points while the NAB business confidence index jumped to +6.9 points in July, well above the long-term average of +5.4 points. Half-way through the June half-year reporting season, CommSec reports ASX200 company profits increased 56% in aggregate while dividends are 6% lower on a year earlier.

The Aussie dollar fell more than one cent over the month to close around US68.5c. Aussie shares bucked the global trend, finishing steady over the month.

How much super do I need to retire?

How much super do I need to retire?

Working out how much you need to save for retirement is a question that keeps many pre-retirees awake at night. Recent market volatility and fluctuating superannuation balances have only added to the uncertainty.

So it’s timely that new research shows you may need less than you fear. For most people, it will certainly be less than the figure of $1 million or more that is often bandied around.

For most people, the amount you need to save will depend on how much you wish to spend in retirement to maintain your current standard of living. When Super Consumers Australia (SCA) recently set about designing retirement savings targets they started by looking at what pre-retirees aged 55 to 59 actually spend now.

Retirement savings targets

SCA estimated retirement savings targets for three levels of spending – low, medium and high – for recently retired singles and couples aged 65 to 69.

Significantly, only so-called high spending couples who want to spend at least $75,000 a year would need to save more than $1 million. A couple hoping to spend a medium-level $56,000 a year would need to save $352,000. High spending singles would need $743,000 to cover spending of $51,000 a year, and $258,000 for medium annual spending of $38,000.i

While these savings targets are based on what people actually spend, there is a buffer built in to provide confidence that your savings can weather periods of market volatility and won’t run out before you reach age 90.

They assume you own your home outright and will be eligible for the Age Pension, which is reflected in the relatively low savings targets for all but wealthier retirees.*

Retirement planning rules of thumb

The SCA research is the latest attempt at a retirement planning ‘rule of thumb’. Rules of thumb are popular shortcuts that give a best estimate of what tends to work for most people, based on practical experience and population averages.

These tend to fall into two camps:

  • A target replacement rate for retirement income. This approach assumes most people want to continue the standard of living they are used to, so it takes pre-retirement income as a starting point. A target replacement range of 65-75 per cent of pre-retirement income is generally deemed appropriate for most Australians.ii
  • Budget standards. This approach estimates the cost of a basket of goods and services likely to provide a given standard of living in retirement. The best-known example in Australia is the Association of Superannuation Funds of Australia (ASFA) Retirement Standard which provides ‘modest’ and ‘comfortable’ budget estimates.iii

SCA sits somewhere between the two, offering three levels of spending to ASFA’s two, based on pre-retirement spending rather than a basket of goods. Interestingly, the results are similar with ASFAs ‘comfortable’ budget falling between SCA’s medium and high targets.

ASFA estimates a single retiree will need to save $545,000 to live comfortably on annual income of $46,494 a year, while retired couples will need $640,000 to generate annual income of $65,445. This also assumes you are a homeowner and will be eligible for the Age Pension.

Limitations of shortcuts

The big unknown is how long you will live. If you’re healthy and have good genes, you might expect to live well into your 90s which may require a bigger nest egg. Luckily, it’s never too late to give your super a boost. You could:

  • Salary sacrifice some of your pre-tax income or make a personal super contribution and claim a tax deduction but stay within the annual concessional contributions cap of $27,500.
  • Make an after-tax super contribution of up to the annual limit of $110,000, or up to $330,000 using the bring-forward rule.
  • Downsize your home and put up to $300,000 of the proceeds into your super fund.
    Thanks to new rules that came into force on July 1, you may be able to add to your super up to age 75 even if you’re no longer working.

While retirement planning rules of thumb are a useful starting point, they are no substitute for a personal plan. If you would like to discuss your retirement income strategy, give us a call.

*Assumptions also include average annual inflation of 2.5% in future, which is the average rate over the past 20 years, and average annual returns net of fees and taxes of 5.6% in retirement phase and 5% in accumulation phase.

i CONSULTATIVE REPORT: Retirement Spending Levels and Savings Targets, Super Consumers Australia,

ii 2020 Retirement Income Review, The Treasury

iii Association of Superannuation Funds of Australia (ASFA) Retirement Standard

How is my insurance taxed?

How is my insurance taxed?

With the cost of living on the rise, it’s more important than ever to have a financial safety net that protects you and your family in case the unexpected happens.

Most Australian employees have some form of life insurance, often through their superannuation fund, but many of us tend to ‘set and forget’.

To make the most of your life insurance policy, it’s useful to understand how it works, and how premiums and payments are affected by tax.

Various types of life insurance

Life insurance is an umbrella term for a range of policies that cover different situations. They include:

  • Life cover, which pays out after your death to someone you have nominated.
  • Income protection covers you if you’re unable to work because of illness or injury.
  • Total and permanent disability (TPD) insurance provides medical and living costs if you become permanently disabled.
  • Accidental death and injury cover pays a lump sum if you die or are injured.
  • Critical illness or trauma insurance pays a lump sum to cover medical expenses for major medical conditions.
  • Business expenses insurance covers ongoing fixed business costs if you’re a business owner suffering serious illness or injury.

Tax benefits and deductions

The premiums for most types of life insurance are not tax deductible, but there are exceptions. Premiums for income protection held outside of super are tax-deductible and inside super for the self-employed. Business expenses insurance premiums are also tax deductible.

The tax treatment of benefits paid out by policies also varies according to the type of policy and your situation, so it’s important to talk to us. Generally, life cover paid to someone who’s financially dependent on you (typically a spouse and children under 18 years) is not taxed. But if the beneficiary isn’t your financial dependent, they can expect to pay tax.

Income protection insurance payments must be declared on your tax return and will be taxed at your marginal rate, just like your usual salary. Business expense insurance payouts also taxable.

Lump sum payments made through other policies are not taxable.

Inside super or outside?

Some of these insurances, particularly life cover, income protection and TPD, can be purchased through your super fund. Most people have a basic level of cover held this way, but you should check to see if it’s adequate for your needs.

If you are aged under 25, have a super balance of $6,000 or less, or your account is inactive, you will need to “opt in” if you want insurance cover.

If you have a self-managed super fund (SMSF), you’re required to consider whether to hold life insurance for each of the fund’s members, although there’s no obligation to buy.

Super pros and cons

You’ll need to do the sums for your circumstances, which is where an adviser can assist, but there may be an advantage to using your super to pay the premiums. The main reason is cost.

Sometimes, the buying power of larger super funds allows them to negotiate competitive pricing for insurance products.i It’s not always the case, so you’ll need to shop around to make sure you’re getting the best deal.

Another potential financial benefit in paying the monthly premiums out of your super account, is that you’re using funds taxed at 15 per cent. Whereas, if you pay the premium from your own bank account, you’d be using funds already taxed at your marginal tax rate, which may be higher. That means your pre-tax dollars are working harder and you’ve still got your cash in the bank.

The main drawback to paying insurance premiums through super is that you’ll be reducing your super balance, which means less for retirement. However, you could choose to boost your balance using salary sacrifice or personal contributions.

Your safety net checklist

  1. Decide on who and what needs to be financially protected if something should happen to you.
  2. Weigh up the best type of life insurance to meet your needs and shop around.
  3. Be clear about any tax implications of an insurance payout
  4. Make sure the policy benefit is adequate and check it annually.

Deciding on the type of life insurance you need can be tricky, so give us a call to discuss your insurance needs.

i Insurance through super – Moneysmart.gov.au

Go on... take a break!

Go on… take a break!

One of the things many of us have been missing over the past few years is holidays, but now that the world is opening up again for travel and destinations that have been pretty quiet are now eagerly welcoming back tourists, taking a break has never been more appealing.

Holidays are not just a lovely way to spend time, they are fantastic for us on so many levels. Having a break from the daily grind gets us out of our usual routine, opens us up to new experiences and is good for us mentally and physically.

However, the stats tell us that for many Australians it’s been a long time between breaks.
In fact, around 8 million Australians have accrued nearly 175 million days of leave over the past 12 months, up from 151 the previous year.i That’s a lot of missed holidays!

Whether you are one of those who hasn’t had much of a break lately or even if you’ve just got back from a trip and are planning your next one – there are a host of good reasons to take a holiday.

Holiday to keep the doctor away

Holidays have been proven to lower stress which has a myriad of benefits including addressing the risk of cardiovascular issues like stroke and heart attack. A study following more than 12,000 middle-aged men at high risk for heart disease, found those who took yearly breaks were less likely to die from any cause, including heart attacks and other cardiovascular issues.ii

It’s not just physical health that benefits, taking a break is unsurprisingly pretty good for mental health with even a short break of a few days having a powerful mood enhancing effect.iii

Travel to broaden the mind

Lifelong learning is not only good for our careers but also important for our personal growth. And travel is a learning experience like no other, whether you are heading to a new country or a different part of your city or state you’ll meet new people and experience a different way of life.

Travel is also the ultimate experience in mindfulness – you are living in the moment when you are on holiday. A break in routine takes us off autopilot and puts us in charge.

Having a break makes you more productive

If you are worried about the impact a break can have on your career – don’t be! Research by Boston Consulting Group found that professionals who took planned time off were significantly more productive than those who spent more time working.iv Holidays offer time for introspection, goal setting and a chance to recharge your batteries for a new lease on life.

Planning for a wonderful time

Not all vacations are created equal. Just taking any quickly thrown-together escape may not provide all the health and productivity benefits associated with taking a vacation. A poorly planned break can be a source of tension and stress, rather than the opposite.

So how do you get the best out of a break?

Be flexible – While it’s important to plan before you leave, have enough flexibility for discovery – be open to new experiences and willing to change the schedule to accommodate those spontaneous magical moments.

Don’t sweat the small stuff – Things can and do go awry once you are away but don’t let silly little things spoil the break.

Switch off – Don’t be tempted to check your emails or socials every few minutes – stay in the moment. A decent break from work will also reinforce that the office doesn’t need you 24/7 and that life comes first.

Watch the budget but have some allowances to splurge – Focus on experiences and the memories you’ll take home with you rather than what’s on sale at the gift shop or duty free.

And finally, don’t feel that a holiday must be a luxurious destination or for a long period of time to count. A change of scenery can be as good as a holiday – even taking a mini break and heading off for a weekend away to a lovely destination can provide all the benefits of a holiday. So, what are you waiting for? Start planning that next trip. The wide, wonderful world awaits!

i http://www.roymorgan.com/findings/8696-annual-leave-holidays-march-2021-202105170711

ii https://pubmed.ncbi.nlm.nih.gov/11020089/

iii https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5800229/

iv https://hbr.org/2009/10/making-time-off-predictable-and-required

This Newsletter provides general information only. The content does not take into account your personal objectives, financial situation or needs. You should consider taking financial advice tailored to your personal circumstances. We have representatives that are authorised to provide personal financial advice. Please see our website https://superevo.net.au or call 02 9098 5055 for more information on our available services.

August 2022 Newsletter

It’s August and as winter draws to a close there’s snow in the Alps and the wattle is blooming. Many Australians will soon receive a sizeable tax refund, if they haven’t already, which should help ease those rising cost-of-living blues.

Rising inflation and interest rates were the focus of attention in July. The US Federal Reserve lifted its target rate by 75 basis points to 2.25-2.50% to tackle surging inflation of 9.1%. At the same time, the US economy contracted by 0.9% in the June quarter, following a 1.6% drop in the March quarter.

By contrast, Australia is performing relatively well. In his first economic statement, treasurer Jim Chalmers downgraded growth forecasts to a still solid 3.75% last financial year and 3% this financial year. Inflation jumped to 6.1% in the year to June and is forecast to peak above 7% in December. And the Reserve Bank lifted the cash rate by 50 basis points to 1.35% in July, with a similar increase tipped this month and more to come. Governor Philip Lowe said he expects rates to get to ‘at least’ 2.5%. Unemployment fell to 3.5% in June, but rising prices and interest rates dented confidence. The ANZ-Roy Morgan consumer confidence index sits at 82.4 points – below 100 is pessimistic. While the NAB business confidence index fell 5 points to +1.4 points in June.

The biggest hit to inflation has come from housing and construction prices and petrol. But the housing market is cooling due to rising interest rates, with national home values easing 0.6% in June and new dwelling starts down 6.5% in the March quarter. Petrol prices are also easing, down 19c to below $1.93 a litre in late July on falling global oil prices. The Aussie dollar gained a cent to finish the month around US70c.

Guide to aged care at home

Guide to aged care at home

As we get older, most of us want to remain independent and in our own home for as long as possible, but this can be challenging without some help with household tasks and personal care.

Recognising this, the government runs a Home Care Packages program where approved aged care service providers work with individuals to deliver co-ordinated services at home.

Approval for a Home Care Package starts with an assessment by the Aged Care Assessment Team (ACAT). Eligibility for a Home Care Package, or other government subsidised help at home, is based on your care needs as determined through the assessment. You must also be an older person who needs co-ordinated services to help them stay at home or a younger person with a disability, dementia, or other care needs not met through other specialist services.

You can make your own referral via the government’s My Aged Care website or by calling 1800 200 422 and answering some questions.

Financial eligibility

Your financial situation won’t affect your eligibility. But once you have been assigned a package, you will need a financial assessment to work out exactly how much you may be asked to contribute.

There are four levels of Home Care Packages – from Level 1 for basic care needs to Level 4 for high care needs.

The annual budgets for the packages are (in round figures) $9,000 for a Level 1, $16,000 for a Level 2, $35,000 for a Level 3 and $53,000 for a Level 4. The government contribution changes on 1 July each year.

The idea is that a person, using a consumer directed care approach, can decide how they would like to use that money for help which may include equipment such as a walker or services such as household tasks, personal care, or allied health.

Your contribution could be a basic daily fee up to $11.26 a day, as well as an income tested fee up to $32.30 a day or $11,759.74 a year.i These fees are adjusted in March and September each year.

Expect a wait

Demand for packages is high, with a wait of 3-6 months for a low-level package and 6-9 months for a higher level package.
It’s not unusual to be approved for a high-level package but be offered or ‘assigned’ a lower level package as an interim measure.

Once approved for a Home Care Package, you must appoint a provider approved by the government, whose role is to administer, and manage the package for you.

The provider will charge a fee for their services which is deducted from the Home Care Package. This essentially reduces the amount of money from the package that can be spent on services. Administration costs can be 10-15 per cent of the package and case management another 10 per cent, or thereabouts.

The services offered and the way they are delivered can vary between providers, so comparing offers is important.

How much help you get from a package will depend on your care needs and fees, but generally a Level 1 package might provide two or three hours of help a week, a Level 2 about four hours, a Level 3 package about 8 hours and a Level 4 about 12 hours.

A recent Fair Work Commission ruling mandating minimum two-hour shifts for casual home care workers, while improving conditions for low-paid workers, is also expected to lead to increased costs for providers and ultimately Home Care Package recipients.

Self-managed home care

One way to get more hours of help and have a greater say in who delivers it, is to self-manage your Home Care Package. As well as saving the case management fee you can generally negotiate directly with workers the hours worked and the rate of pay.

You still need an approved provider to administer the package, with the fee being about 10-15 per cent.

There are currently five providers offering a self-managed option. One way to find support workers to assist with your care needs is through one of several online platforms where carers register their willingness to help, along with their hourly rates.

If you are weighing up your aged care options for yourself or a loved one, and would like to discuss financing arrangements, please get in touch.

i https://www.myagedcare.gov.au/home-care-package-costs-and-fees

Coming to terms with stagflation

Coming to terms with stagflation

First, we had to brush up our understanding of inflation and what it means for our hip pocket and our investments. Now the term stagflation is being thrown into the economic mix.

For those with long memories, stagflation is a reminder of the late 1970s and early 1980s when the world economy fell into what then-Treasurer Paul Keating called “the recession we had to have”.

The word has raised its head again with the World Bank warning that there is a rising risk of stagflation.i This took the wind out of the sails of global sharemarkets, with Australian shares down 10 per cent in the year to June, although they have since started to show signs of recovery.ii

Despite the term stagflation re-entering conversation, the general belief is that things will not get as bad as last century but they are still likely to be challenging.

So, what is stagflation? Basically, it’s the combination of rising inflation, high unemployment, and weak economic growth. When all three happen at the same time, then the economy and living standards struggle. So let’s look at each of these three markers in turn.

Rising inflation

The definition of inflation is a general increase in prices and a fall in the purchasing value of money.

Certainly, we are experiencing rising inflation right now. It’s currently running at just over 6 per cent in Australia. The war in Ukraine took its toll on commodity prices globally which is contributing to the hike. While prices are off their highs, they are still hurting.

On the local front, floods on the east coast of Australia have damaged crops which will also push inflation higher.

Reserve Bank governor Philip Lowe has pointed to a top inflation rate of about 7 per cent in this current economic cycle which is well above the 2-3 per cent inflation target the Reserve Bank uses in setting monetary policy.

Slowdown in economic growth

Looking next at economic growth, and this is certainly slowing.

The OECD cut its outlook for global economic growth from 4.5 per cent in 2021 to 3 per cent this year and 2.8 per cent in 2023. In Australia, growth is expected to fall from 4.8 per cent to 3.5 per cent this year and 2.1 per cent in 2023.iii

The definition of economic growth refers to the size of a country’s economy over time. It’s measured in real and nominal terms.
Nominal refers to the increase in the dollar value of production over time; real economic growth just looks at the volume produced. Real growth is the figure generally used.iv

Low unemployment

Unemployment, meanwhile, is at the lowest levels in Australia since 1974 at 3.9 per cent.v But despite the low unemployment rate, wage growth is less than half that of inflation, so it is hard to keep pace with the rising prices.

Looking at the three criteria for stagflation, unemployment in Australia is less than 4 per cent, inflation is running at just over 6 per cent and GDP growth is 3.3 per cent. At these levels it seems more likely, but far from certain, that we will experience a recession rather than stagflation. Recession is defined as two consecutive quarters of negative growth.

Stagflation would be a bigger problem than a severe recession because the traditional ways to deal with it are either increased government spending or cutting interest rates. Unfortunately, these solutions are both inflationary and therefore not good tools for the current economic environment.

Big mortgages put brake on rate rises

Back in the 1970s and 1980s, interest rates hit 18 per cent as the Reserve Bank struggled to contain inflation. With mortgages at their current size, increased rates will start hurting much sooner so this will put a brake on inflation well before rates reach double digit levels.

The general view is that mortgage rates will peak at just over the 5 per cent mark.vi

Concern about the possibility of stagflation has fuelled the recent sharemarket volatility and uncertainty, although it seems unlikely on current evidence. As the future is impossible to predict, it is better to sit tight and wait for the market to recover rather than sell as a kneejerk reaction and realise losses.

If you would like to discuss your overall financial position in these uncertain times, then call us.

i https://www.washingtonpost.com/business/2022/06/07/world-bank-global-growth-forecast-stagflation/

ii https://tradingeconomics.com/australia/stock-market

iii https://www.oecd.org/newsroom/oecd-economic-outlook-reveals-heavy-global-price-of-russia-s-war-against-ukraine.htm

iv https://www.rba.gov.au/education/resources/explainers/economic-growth.html

v https://www.abs.gov.au/media-centre/media-releases/unemployment-rate

vi https://www.ratecity.com.au/home-loans/mortgage-news/high-will-rates-go-here-experts-think-rba-cash-rate

Tech tips to get more hours in your day

Tech tips to get more hours in your day

Life just seems to get ever busier as the years roll by and our most precious commodity is often our time. We could all do with a few more hours in the day and technology continues to play a vital role in bringing efficiencies into our daily lives.

In fact, research indicates that technology saves the average person around two weeks a year – or almost two and a half years of our lifetimes.i The main time savers are the things most of us are generally already using – self-service checkouts, online banking and shopping, and mobile traffic updates. It’s certainly worth ensuring you are making the most of these time savers and spending the least amount of time on mundane tasks by setting up online shopping lists and automating bill paying.

Then to take your time saving efforts even further, there are a myriad of applications that have sprung up to help you create efficiencies in your professional and personal life. Let’s look at the best ways to stop wasting your precious time and then look at specific applications that may be of benefit.

Taming the email beast

Email is certainly nothing new. Once prized as a valuable communication tool, email is now singled out as a black hole for lost time. What is relatively new is the number of email management applications you can turn to for help. Such applications are indispensable if you use multiple inboxes, or if you have so many unread emails that you can’t organise them on your own. A good example is Clean Email which deletes thousands of old emails and organises new incoming messages automatically. It’s also becoming more common to only check and respond to email a few times a day rather than on a continual basis as it can be a constant distraction.

Avoid distractions and stay focussed

When it comes to distractions it can be hard to stay on target 100 per cent of the time, however if you find that you are spending too much time on online diversions, apps like Freedom and the aptly named Selfcontrol block irrelevant content.

There is also a growing trend away from multi-tasking that suggests it’s more effective to focus on one thing at a time, giving each task your undivided attention before moving on to the next. If that’s an approach that you find challenging, there are a number of apps that have sprung up to help you keep focussed. If you find you jump from one thing to another and end up with a stack of half-finished tasks, apps like Focuskeeper provide discipline and the motivation to complete tasks.

Save time by being aware of time

One way of saving time is to become more aware of where your time is being spent so you can reduce wasted time. While it can be a little disturbing to find out how much time you spend checking your social feeds, apps like RescueTime are great for keeping you on target. RescueTime tracks what you’re working on and suggests the best times for uninterrupted work and when you’re losing focus and trying to tackle too many tasks the prompts help you to prioritise.

Get organised and outsource

Making the most of your time is all about getting organised. Apps that help you to break down your hectic life into tasks and ‘to-do’ lists also help you to prioritise and make sure nothing gets dropped. Remember the milk allows users to manage tasks, share lists and allocate them to others so it’s a useful tool to keep your whole household or team at work organised.

It’s important to put a value on your precious time and sometimes that means getting a hand with all the low-value tasks in your life that get in the way of what you really need to do. There are heaps of apps like Fivver or Airtasker that can help you to outsource all sorts of annoying, time-consuming jobs.

Is it time to start exploring how technology can help you to be more efficient and reclaim some of those lost hours? The challenge will then be deciding what to do with all that extra time on your hands!

i https://www.thelondoneconomic.com/tech-auto/modern-technology-saves-brits-the-equivalent-of-two-weeks-every-year-111552/

This Newsletter provides general information only. The content does not take into account your personal objectives, financial situation or needs. You should consider taking financial advice tailored to your personal circumstances. We have representatives that are authorised to provide personal financial advice. Please see our website https://superevo.net.au or call 02 9098 5055 for more information on our available services.

Market movements & review video – July 2022

Stay up to date with what’s happened in the Australian economy and markets over the past month.

June was a big month in an eventful year for the local and global economy, with inflation and interest rates continuing to dominate.

With inflation sitting at 5.1% in Australia, cost of living pressure is mounting. The Reserve Bank lifted the cash rate to 0.85% in June, with more rises anticipated.

June also saw a global sell-off in shares, with the ASX 200 posting its worst month since March 2020.

Click the video below to view our July update.

Please get in touch if you’d like assistance with your personal financial situation.

This Newsletter provides general information only. The content does not take into account your personal objectives, financial situation or needs. You should consider taking financial advice tailored to your personal circumstances. We have representatives that are authorised to provide personal financial advice. Please see our website https://superevo.net.au or call 02 9098 5055 for more information on our available services.

July 2022 Newsletter

Welcome to our July newsletter and the start of a new financial year. With winter in full swing, it’s a great time to rug up by the fire, take stock of the year that was and make plans for the future.

June was a big month in an eventful year for the local and global economy, with inflation and interest rates continuing to dominate. The US Federal Reserve lifted official rates by 0.75% to a target range of 1.50-1.75% to combat surging inflation of 8.6% in the year to May, stoking fears of a US recession.

Australia faces similar but less acute challenges. With inflation sitting at 5.1%, the Reserve Bank lifted the cash rate by 0.5% to 0.85% in June and Governor Philip Lowe hinted at more to come in July. The Australian economy is still growing relatively strongly at an annual rate of 3.3%. Retail trade rose 10.4% in the year to May on the back of low unemployment and high household savings. Household wealth rose to a record high of $574,807 in the year to March, but since then there has been a global sell-off in shares, a slowdown in the Australian housing market and cost of living pressures are mounting. The ANZ-Roy Morgan consumer confidence reading remains weak at 84.7 points (100 is neutral).

Australia’s national average petrol price rose to 211.9c a litre in June, the second highest on record, on the back of a surge in global oil prices. Brent Crude rose almost 45% over the past year as the war in Ukraine disrupts supply. Despite a late bounce in shares, the ASX200 fell 9.6% in the year to June, while US shares were down more than 12%. The Aussie dollar lost ground over the financial year to finish below US69c.

A super window of opportunity

A super window of opportunity

New rules coming into force on July 1 will create opportunities for older Australians to boost their retirement savings and younger Australians to build a home deposit, all within the tax-efficient superannuation system.

Using the existing First Home Super Saver Scheme, people can now release up to $50,000 from their super account for a first home deposit, up from $30,000 previously.

Another change that will help low-income earners and people who work in the gig economy is the scrapping of the Super Guarantee (SG) threshold. Previously, employees only began receiving compulsory SG payments from their employer once they earned $450 a month.

But the biggest potential benefits from the recent changes will flow to Australians aged 55 and older. Here’s a rundown of the key changes and potential strategies.

Work test changes

From July 1, anyone under the age of 75 can make and receive personal or salary sacrifice super contributions without having to satisfy a work test. Annual contribution limits still apply and personal contributions for which you claim a tax deduction are still not allowed.

Previously, people aged 67 to 74 were required to work for at least 40 hours in a consecutive 30-day period in a financial year or be eligible for the work test exemption.

This means you can potentially top up your super account until you turn 75 (or no later than 28 days after the end of the month you turn 75). It also opens potential new strategies for a making big last-minute contribution using the bring-forward rule.

Extension of the bring-forward rule

The bring-forward rule allows eligible people to ‘’bring forward” up to two years’ worth of non-concessional (after tax) super contributions. The current annual non-concessional contributions cap is $110,000, which means you can potentially contribute up to $330,000.

When combined with the removal of the work test for people aged 67-75, this opens a 10-year window of opportunity for older Australians to boost their super even as they draw down retirement income.

Some potential strategies you might consider are:

  • Transferring wealth you hold outside super – such as shares, investment property or an inheritance – into super to take advantage of the tax-free environment of super in retirement phase
  • Withdrawing a lump sum from your super and recontributing it to your spouse’s super, to make the most of your combined super under the existing limits
  • Using the bring-forward rule in conjunction with downsizer contributions when you sell your family home.

Downsizer contributions age lowered to 60

From July 1, you can make a downsizer contribution into super from age 60, down from 65 previously. (In the May 2022 election campaign, the previous Morrison government proposed lowering the eligibility age further to 55, a promise matched by Labor. This is yet to be legislated.)

The downsizer rules allow eligible individuals to contribute up to $300,000 from the sale of their home into super. Couples can contribute up to this amount each, up to a combined $600,000. You must have owned the home for at least 10 years.

Downsizer contributions don’t count towards your concessional or non-concessional caps. And as there is no work test or age limit, downsizer contributions provide a lot of flexibility for older Australians to manage their financial resources in retirement.

For instance, you could sell your home and make a downsizer contribution of up to $300,000 combined with bringing forward non-concessional contributions of up to $330,000. This would allow an individual to potentially boost their super by up to $630,000, while couples could contribute up to a combined $1,260,000.

Rules relaxed, not removed

The latest rule changes will make it easier for many Australians to build and manage their retirement savings within the concessional tax environment of super. But those generous tax concessions still have their limits.

Currently, there’s a $1.7 million limit on the amount you can transfer into the pension phase of super, called your transfer balance cap. Just to confuse matters, there’s also a cap on the total amount you can have in super (your total super balance) to be eligible for a range of non-concessional contributions.

As you can see, it’s complicated. So if you would like to discuss how the new super rules might benefit you, please get in touch.

Source: ATO

A Will to give

A Will to give

As baby boomers shift into retirement, Australia is on the brink of the nation’s biggest ever intergenerational wealth transfer. Yet estate or inheritance planning is rarely discussed by families.

Talking openly about how you want your assets to be passed on can help avoid family disputes that take a toll both financially and emotionally. It provides a certain peace of mind for you – that your intentions will be met – and for your family and friends.

Certainly the stakes have never been higher, with growing house prices and healthy superannuation balances contributing to a considerable increase in the wealth of many older Australians in the past two decades.

Around $1.5 trillion was transferred in gifts or inheritances between 2002 and 2018. In 2018 alone, some $107 billion dollars was inherited while $14 billion was handed out in gifts.i

The importance of planning

With so much at stake, having an estate plan in place helps to protect the interests of those you care about and to fulfil your wishes. It takes careful thought and professional advice, but that is no excuse for putting the task aside for later. If something happens to you in the meantime, your assets may not be distributed as you would like and there could be tax implications for your beneficiaries.

An estate plan includes a Will and, in some cases, funeral arrangements and instructions for the care of children and animals. Without a Will, your assets will be distributed according to state inheritance laws which may not be what you intended.

A plan may also include instructions for a testamentary trust to hold assets that are then distributed in a tax-effective way to your beneficiaries. And don’t forget your ‘digital will’, a list of any online accounts and passwords that may be important.

Meanwhile, to protect your interests in case you are incapacitated in some way, an enduring power of attorney and a medical power of attorney nominate the people you would like to handle your affairs until you are better.

Complex families

Estate planning is even more important in the case of blended families or for those with complex family relationships, especially where the emotional issue of the family home is concerned.

Disputes often centre around who gets the house when there are children from a previous marriage, but your new spouse is living in the family home. You could allocate other assets to the children and leave the home to your spouse or require that the house be sold and the proceeds distributed to all. Alternatively, your Will could grant lifetime tenure in the home for your spouse with it passing to your children after your spouse dies. Having conversations early about your intentions, can help alleviate possible conflict.

If you are concerned about protecting the interests of a family member with mental health or addiction issues, a testamentary trust can help to look after your assets and distribute funds in a controlled way. A testamentary trust is also often used to provide for young children, holding the assets until they reach adulthood.

Dividing it up

When it comes to deciding how best to allocate assets among children, some prefer to hand out equal shares no matter their individual financial circumstances, while others prefer to give extra to one who may be struggling. Given that Wills are frequently challenged by family members or others who believe they are owed a share or an even bigger share, it’s wise to make your intentions clear in your Will including reasons and documentation.

While people who receive inheritances are usually well into middle age – on average 50-years-oldii – and perhaps comfortably well-off, you could choose to bypass the next generation. Instead, you might consider leaving your estate to grandchildren, to help set them up with a deposit for a home or covering school fees.

Another option is to begin distributing your estate while you are alive and can share the enjoyment of the benefits the extra financial help might bring.

What’s not covered?

It is important to note that some assets are not covered by your Will. These include assets jointly held with someone else (such as a bank account or a house), super benefits and life insurance.

In the case of jointly held assets, ownership generally passes to the surviving partner and life insurance is paid to the beneficiary named in the policy. For super, it’s vital to complete a binding death benefit nomination to ensure the funds are paid to the person you choose.

With so much to consider, expert advice is critical when preparing an estate plan, so call us to begin the discussion.

i https://www.pc.gov.au/research/completed/wealth-transfers

ii Wealth Transfers and their Economic Effects – Commission Research Paper – Productivity Commission (pc.gov.au)

Your investing style - as unique as you

Your investing style – as unique as you

As interest rates start to increase after a lengthy period of historical lows, it’s a good time to think about how your money is working for you and whether your investing style and strategy is still in line with your goals.

Higher interest rates don’t just send a ripple through the economy, aside from the obvious impact on the property market, they often impact stock prices. There are a myriad of other factors that contribute to market movement and portfolio performance and trying to navigate all the things that need to be considered can be challenging but being aware of your preferred investment style and having a considered and appropriate strategy can help.

The benefits of style and strategy

Just as we are all unique individuals, our goals and approach to investing will also be different to our family and friends and it pays to be familiar with your own style and preferences.

It can be common for those new to investing to take the plunge without any real plan, let alone an investment strategy that’s likely to align with their current circumstances, future requirements, and investment goals.

Even those who have been investing for some time can be guilty of a ‘set and forget’ approach that might mean hanging on to a strategy that does not meet their present or future needs.

Having the right investment strategy – the one that’s right for you – improves the likelihood of your investments meeting your goals and allows you to sleep at night.

Your tolerance for risk at the core of your style

While approaches to, and styles of investing are many and varied, your comfort with risk is often the primary driver of any approach you may choose to take. There is of course a trade-off between risk and return that needs to also be considered. Your comfort with risk will determine the right mix of asset classes in your portfolio.

An aggressive investor, commonly someone with higher risk tolerance, is willing to take on greater risk for the possibility of better returns than a conservative investor. This type of investor will be comfortable with a higher proportion of growth assets like shares or listed property that offer higher returns over the long-term that may come at the expense of less stable returns.

A conservative investor will employ a larger proportion of defensive assets in their portfolio to provide long-term stable returns with lower volatility and exposure to risk. Defensive assets are fixed interest investment options including fixed income bonds and cash investment options.

Hands-on vs hands-off approach

Investing strategies can be further separated into two distinct groups: active and passive.
Passive investing, as the name implies, focuses on benefitting from the overall increase in market prices over time. One of the benefits of passive investing is that it minimises the mistakes investors can make when they react emotionally to stock market movement.

Active investing involves a more hands-on approach, with more frequent buying and selling to take advantage of short-term price fluctuations and is generally undertaken by a portfolio manager.

Changing your strategy over time

Most investors find that their investment style shifts as they age. Younger investors have a longer time horizon, so they may feel more comfortable making riskier investments as they have time for the market to recover from market falls. Mature investors may be more focused on preserving their savings for retirement, so they may be more interested in diversification and dollar-cost averaging.

For investors nearing or at retirement, a shift from asset growth and capital gains to a focus on income may be something worth considering and is often desired. The advantage of an income focussed strategy is that investments can produce some of the cash flows needed when you’re no longer working. Dividend stocks are a common way to achieve this goal, with companies showing stable and growing dividends providing the most value.

To ensure you are employing the right strategy to meet your objectives, it pays to be aware of your options and revisit your comfort with risk and your overall investment goals. We can ensure your investment portfolio meets both these elements throughout your various life stages.

If you are interested in exploring the options available to you, please get in touch. We can work closely with you to review your strategy or if you are new to investing, find the right mix for your unique circumstances.

This Newsletter provides general information only. The content does not take into account your personal objectives, financial situation or needs. You should consider taking financial advice tailored to your personal circumstances. We have representatives that are authorised to provide personal financial advice. Please see our website https://superevo.net.au or call 02 9098 5055 for more information on our available services.

Market movements & review video – June 2022

Stay up to date with what’s happened in Australian markets over the past month.

Cost of living pressures, inflation and interest rates were major concerns in the lead-up to the May federal election.

The Reserve Bank of Australia (RBA) lifted the cash rate for the first time in over 11 years from 0.1% to 0.35%, as inflation hit 5.1%.

This followed the US Federal Reserve’s decision to lift rates by 50 basis points, the biggest rate hike in 22 years as inflation hit 8.5%.

Click the video below to view our June update.

Please get in touch if you’d like assistance with your personal financial situation.

This Newsletter provides general information only. The content does not take into account your personal objectives, financial situation or needs. You should consider taking financial advice tailored to your personal circumstances. We have representatives that are authorised to provide personal financial advice. Please see our website https://superevo.net.au or call 02 9098 5055 for more information on our available services.