The Finance Blog

Feb 1, Money Converter for currencies and investments - Baulkham Hills, Sydney

Wed, 01 Feb 2012 03:58:19 GMT

Use Money Converter to convert your money into different currencies or find out how to convert money into investments. - Baulkham Hills, Sydney

Jan 30, How to invest in 2012

Mon, 30 Jan 2012 02:20:10 GMT

The IMF is talking about financial Armageddon and the World Economic Forum in Davos is not producing any more useful insights to assist the global economic recovery. Yet, the Australian stock exchange has made positive advances since the start of the new year.

Is the market trying to tell us something?

There is plenty of additional bad news out there that can hit the headlines again in the next few months. It is fair to say that investors must remain cautious and not get ahead of themselves. This raises the all important question of how to invest in 2012.

Early February, the RBA is considering dropping the cash rate further to try and counter negative offshore developments early. There is plenty of room to move more aggressively if needed later too.

If you had invested in fixed interest in 2011 you would have done well with double digit returns over the calendar year. Now, bonds are outright expensive and you probably wouldn't want to go there.

In addition, forward price earnings on the ASX 200 around 11 to 12 make Australian equities quite attractive with many major blue chip companies paying double digit dividends. Australian shares seem excellent value with high reward for risk.

If only we had more certainty in the world then we could move into shares aggressively.

What's a better approach to investing?

Investors want to make money but want to remain safe too. These days the average investor must be able to rely on a sound approach to creating wealth in difficult times.

One of these key approaches of investing successfully is the diversification of investments. Whilst this looks like a broken record for many it still works well. Many pre-retirees lost value over last few years because they disregarded proper diversification especially in their super funds.

If you want to invest and navigate increasingly difficult financial markets it is imperative to get diversification right. Diversification can be achieved across:

assets (fixed interest, equities, property, alternatives etc.)
investment styles (active vs. passive); and
investment managers (several single managers and/or multi-managers)

This approach can yield superior and more stable, i.e. less risky returns than trying to pick the next big thing and getting it wrong.

Diversified investments is part of the toolkit Financial Planners are using. They know how to build diversified portfolios that match an investors risk preparedness.

If you haven't spoken to a Financial Planner for a while this is your chance to find out what you could improve in your investment portfolio. Markets in 2012 will provide returns to investors who become smart about their investing principles.

Attached is fact sheet about Diversifying your investments for a smoother ride from our investment partners, Russell Investments.

Jan 17, How might the carbon tax affect your investments?

Tue, 17 Jan 2012 23:38:04 GMT

Now is the time to review how your investment portfolio might be affected in a carbon-constrained economy.

There'll be winners and losers among businesses as they adapt to a cleaner energy world. While the net effect of the Federal Government's carbon tax is relatively muted, it is expected to be noticed on the balance sheets of many companies.

Check your portfolio

It's important you discuss with your financial adviser how investments in your portfolio are affected by the carbon tax. Around 500 companies will have to pay for the pollution they emit while others may be indirectly affected.

You could check news reports, company annual reports and their press releases to learn if the companies have embarked on energy efficient measures to reduce the carbon footprint of their products and services.

Look for opportunities

Investing in the renewable energy sector may seem like an obvious strategy with the carbon tax designed to shift us towards a cleaner, greener economy but investment in many of the alternative energy companies remain speculative and trying to pick winners can be a high-risk activity. Investors should avoid 'gambling' on companies that haven't reached a mature stage yet.

Weighing up the tax

The income tax reform measures that form part of the carbon tax compensation scheme also need to be considered carefully.

The income tax changes are designed to benefit people on low incomes. They include a jump in the tax-free threshold from $6000 to $19,400 by 2015, a lowering of the low income tax offset and an increase in marginal tax rates.

Carbon tax at a glance

Starts 1 July 2012. Start of a transition to an emissions trading scheme from 1 July 2015.
Once-off rise of 0.7 % in the CPI expected, resulting in average $9.90 per week increase in household costs.
Revenue from carbon tax used to compensate households by an average $10.10 per week through tax cuts and increases in Centrelink and family assistance payments.
Some emission intensive industries receive government assistance to cover the costs of the tax but will be phased out over the years.

It is not a tax on households or small businesses. Around 500 large polluters will be required to pay for their pollution under the carbon pricing mechanism. They account for around 60 per cent of our carbon pollution.
(Source: www.cleanenergyfuture.gov.au)

	2011-12 (Current)		2015-16
	Threshold ($)	Marginal Rate	Threshold ($)	Marginal
1st Rate	6,001	15%	19,401	19%
2nd Rate	37,001	30%	37,001	33%
3rd Rate	80,001	37%	80,001	37%
4th Rate	180,001	45%	180,001	45%

Source: Australian Government, Household assistance - tax reform, Clean energy future fact sheet, 10/07/11 / Shortened extracts from Asgard Activate 07/12/11.

Jan 16, Five New Year Resolutions

Mon, 16 Jan 2012 02:35:17 GMT

The new year has well and truly started. The uncertainty in the economy and world markets, however, hasn't faded away just because we have turned the page.

What can we do to feel better financially?

There are quite a few things that are in our own control that we can do to improve our financial wellbeing without being too much dependent on external factors.

Our friends at MLC have summed up in the attached flyer these feel better options for the new year 2012.

review your investment strategy
pay off your credit card
review your insurances
consolidate your superannuation
pay less tax

Use the link below to read the Five New Year Resolutions (pdf, 192 KB).

Jan 16, Wanted: Your Business In Sydney

Mon, 16 Jan 2012 00:34:41 GMT

Equity Resource is partnering with Your Australian Business to open up opportunities for businesses from Europe and the UK to set up a base here in Australia.

If you're looking for markets outside your own such as Asia, Asia-Pacific and Australia there is now a hassle free way to find out how to set up a base in Australia and grow your business from there. You may be looking to extend your business network or simply relocate and emigrate so you can start afresh.

Your Australian Business provides an exclusive Test The Water package for business owners and associates to explore Sydney in New South Wales and discover what Australia, one of the strongest world economies, has to offer.

Australia is open for business - Your business!

The Test The Water package is an ideal way of finding out what Sydney can offer for business. You get the chance to meet with business owners and discuss your individual needs.

The inclusions are:

property tour
virtual office demo
business briefing
planning sessions
business park tour
business chamber networking event
meeting with the Virtual Board
plus lifestyle and gala events

Equity Resource is one of the support partners assisting new businesses with the financial essentials.

Our directors experienced the process of emigrating to Australia and setting up business first hand.

Equity Resource offers access for new business ownerss to loan and mortgage facilities, superannuation and life insurance solutions for owners, directors and employees. We also provide financial as well as property investment opportunities.

See the below link to the Test The Water brochure (pdf, 869 KB).

Jan 7, Super Property - Discover how to use super to buy property? - Baulkham Hills

Sat, 07 Jan 2012 03:22:37 GMT

Super Property - The Facts About Using My Super As A Deposit To Buy Property. First hand know how for everyday Australians. - Sydney, Baulkham Hills

Dec 14, Contact Discover Financial Freedom - Baulkham Hills, Sydney, Australia

Wed, 14 Dec 2011 10:21:33 GMT

Contact Discover Financial Freedom to find your local one stop shop for Financial Planning, Mortgages and Investment Properties in Sydney

Dec 14, Superannuation Changes from the Government's Mini Budget

Wed, 14 Dec 2011 00:26:38 GMT

On Tuesday 29th November 2011, the Treasurer released what was effectively a Mini Budget which included a number of important new saving measures with the intention of keeping the Budget on track for a surplus by 2013/14.

Normally, the Australian Government would give an update in the Mid Year Economic and Fiscal Outlook (MYEFO) on how things are travelling rather than introducing new measures.

We've summarised some of the most important outcomes below.

Reduced minimum pension drawdown rate to continue to 2012/13

The current 25% reduction in the standard minimum pension drawdown rate will be extended for another year as a consequence of the unsettled investment climate. The drawdown rates will return to the standard rates by 2013/14.

$25,000 concessional contributions cap to continue another year

The Government will delay indexation of the $25,000 concessional contribution cap until 2014/15 where it is expected it will increase to $30,000.

Government co-contribution to reduce by 50%

The matching co-contribution from the Government will be reduced from 1 July 2012 to 50% of the personal contribution (up to a maximum co-contribution of $500). The maximum co-contribution reduces for incomes over $31,920 until it ceases when income reaches $46,920.

New low income superannuation contribution

The Government will make a contribution (up to a maximum of $500) to low income earners' superannuation to compensate for 15% contributions tax paid on concessional contributions from 1 July 2012.

A person must have an adjusted taxable income of less than $37,000 and business/employment income of at least 10% of total income.

The Bill introducing this has been passed by the House of Representatives and is now with the Senate.

Super Guarantee (SG) age limit to be removed from 1 July 2013

The Government removed the age limit altogether after an increase to 75 was discussed initially.

This Bill has already passed through the House of Representatives and will be debated in the Senate next year with the increase to the SG to 12% and other parts of the Minerals Resources Tax package.

New personal marginal tax rates and thresholds

The Clean Energy (carbon tax) bills passed through Parliament in the spring sittings and will soon receive Royal Assent. The package includes changes to the personal marginal tax rates and thresholds from 1 July 2012.

The tax free threshold will increase from 1 July 2012 from $6,000 to $18,200.
The second tier marginal rate will increase from 15% to 19% and the third tier to 32.5%.
The Low Income Tax Offset will reduce from $1,500 to $445 (as it will be largely incorporated into the new tax free threshold).
The Pensioner Tax Offset will be rolled into the Senior Australians Tax Offset (SATO) from 1 July 2012. The new offset will be called the Seniors and Pensioner Tax Offset (SAPTO).

Dec 12, European Debt Crisis and Investing in 2012

Mon, 12 Dec 2011 03:56:58 GMT

The uncertainty for investors continues with another European summit behind us. For many it seems too little too late and many questions of how problems will be addressed remain unanswered. Investors would have liked to see more liquidity injected into markets but this has been pushed back for now.

Nevertheless, it was a milestone summit with the intent to strengthen the financial control among the EU members in the future so that a debt crisis cannot be repeated. A new treaty among the member states was agreed to and will be drafted over the next 3 months. All but the UK are in accord, however, each individual country must still confirm this at home.

This new proposed treaty demonstrates the willingness of its members to solve their issues with fiscal co-ordination which has been lacking badly. Now, the implementation of the agreed steps has to follow and everything will depend on a swift resolution whilst damage control elsewhere such as in Greece continues.

What's been achieved?

EU members agreed to a new treaty for better fiscal control planned to be available by March 2012.

This will include an automatic correction mechanism for countries that break the rules.
Member states will have to report their budgets to the European Commission for review which may impose sanctions.
Countries will have to report their borrowing plans in advance.

EU leaders agreed to lend up to 200 billion Euros to the IMF.
The start date of the European Stability Mechanism (ESM) has been brought forward to mid-2012.

What lies ahead?

Many countries in distress will be required to refinance their debt in the first half of 2012. Italy has about 150 billion Euros falling due between now and April. In total, up to 1 trillion Euros may have to be re-financed.

Investors around the world won't see more certainty in the near future. Europe's resolutions to address their problems will be a continuing uphill battle. The only certainty that investors will have is continued volatility with occasional mini shocks and relief rallies depending on the news of the day out of Europe throughout 2012.

Dec 1, How does the European Debt Crisis affect us in Australia?

Thu, 01 Dec 2011 06:04:38 GMT

Ever thought about what the European debacle got to do with you?

We've come across a report from Commsec Research that nicely puts one and one together.

In summary:

We could end up with GFC2 if banks stop lending to each other again only because investors are too worried they won't get their money back from government bonds (formerly known as risk-free investments).
Australian banks would have to pay more to get money from overseas and this cost is passed on to you and I, the home loan and business owner, who will have to pay more interest on our loans.
This then goes into a vicious circle. If money is harder to get for banks here and in other countries, investors are worried that less borrowing will lead to less spending and slow the economy in the respective countries. Again, this is bad news for share markets and economic growth.

It is most important that highly indebted countries attempt to reduce their debts to manageable levels so that confidence can be restored in world markets.

The key to successfully getting out of these financial problems is nothing more than confidence. If confidence returns markets and economies will stabilise.

Nov 7, Compulsory Super to increase to 12%

Mon, 07 Nov 2011 02:10:12 GMT

Last week, the Assistant Treasurer and Minister for Superannuation Bill Shorten introduced legislation to raise the Superannuation Guarantee contribution from the current 9% to 12% on an incremental basis from 1 July 2012.

1 July 2013	9.25%
1 July 2014	9.50%
1 July 2015	10.00%
1 July 2016	10.50%
1 July 2017	11.00%
1 July 2018	11.50%
1 July 2019	12.00%

In addition, the age up to which Superannuation Guarantee contributions can be made will also be lifted from age 70 to 75 commencing on 1 July 2013.

The amendments to the Superannuation Guarantee (Administration) Act were introduced along with a package of bills that also introduced the Minerals Resources Rent Tax (MRRT).

The changes to the superannuation guarantee are contingent on the passing of the MRRT bills.

Nov 3, Self Managed Super - What does it cost? - Baulkham Hills, Sydney

Thu, 03 Nov 2011 04:26:42 GMT

Self managed super set up and ongoing costs with fully integrated online administration and reporting facility. - Sydney, Australia

Oct 24, Property Seminar - How to invest in property? - Sydney, Baulkham Hills

Mon, 24 Oct 2011 06:26:03 GMT

Property Seminar - The facts about investing in property and how to use super as a deposit. First hand know how for everyday Australians. - Sydney, Baulkham Hills

Oct 21, Quarterly Economic Update - October 2011

Fri, 21 Oct 2011 03:55:35 GMT

Financial market sentiment deteriorated significantly over the past quarter on developments in the Euro zone sovereign debt crisis, although it partly recovered in the past few weeks. The deterioration was reflected in heightened market volatility. The trigger for the marked deterioration in sentiment was a sovereign ratings downgrade of the US by Standard & Poor's in early August. Concerns about the global economic growth outlook also intensified - the IMF downgraded its global growth forecasts and cited heightened downside risks.
As the Euro zone sovereign debt woes deepened, the risks of contagion to other troubled European economies and the banking sector escalated. A default by Greece is looking increasingly more likely – a major concern lies in managing the fall out. A plan in July to expand the European Financial Stability Fund (EFSF) is an important step, but more needs to be done. Markets are hopeful for a solution and await the EU summit on 23 October and a G20 leaders' summit on 3 November for details on a comprehensive strategy.
The RBA kept rates on hold as expected in October, but is progressively becoming more dovish in tone. The RBA has now hinted at the possibility of cutting rates if needed. Our view for rates to be on hold for the rest of the year remains intact, however, we do not completely rule out a rate cut before the end of this year.
The US Federal Reserve announced it would sell short-term bonds and use the proceeds to purchase longterm bonds ("Operation Twist"). Its effectiveness is, however, limited given demand for borrowing remains low while there is still reluctance to lend.
Economic growth in Australia rebounded in Q2, recovering after the natural disasters earlier in the year. However, coal exports have not yet recovered fully from the disasters. The multi-speed nature of the economy continues to be reflected in the economic data. Business investment is booming but some other sectors are being weighed down by consumer caution and the strong Aussie dollar.
The deterioration in financial sentiment saw bond yields, stock markets and commodity prices fall sharply on concerns about the Euro zone sovereign debt crisis and the outlook for global economic growth. Even gold's safe haven status diminished as investors sought cash. Markets were however extremely volatile given uncertainty about the response to European sovereign debt problems.
The Aussie dollar came under pressure over the quarter, falling below US$0.9400, the lowest in over a year, but has since bounced back to above parity as risk sentiment improved. The deteriorating outlook for global growth was a major factor in its decline, but it has been extremely volatile, moving with changing risk appetites. Adding to selling pressure was the fading prospect of rate hikes from RBA.

Patron

Oct 13, Stronger Super announcement

Thu, 13 Oct 2011 01:42:06 GMT

On 21 September 2011, the Australian Government announced more details about the Stronger Super reform. These reforms will generally improve the outcome for superannuation account holders and the wider super industry.

The key measures that were announced are:

MySuper accounts for employees who haven't made a choice of fund election (from 1 Oct 2013) offering a single investment strategy only. It provides for standard fees and will compulsorily offer a standard level of default death/TPD insurance.
Insurance in Super with opt out death and TPD cover will be mandatory for super funds. If opt out insurance is not available at a reasonable cost, the trustee must offer:
- compulsory insurance for MySuper products
- either compulsory or no insurance at all for choice products
Insurance that does not match the super condition of release will no longer be allowed across all super funds (including SMSFs).
Super account consolidation
- From 1 July 2012, super funds will be required to consolidate super accounts within the fund.
- From 1 January 2014, the ATO will facilitate auto consolidation of lost/inactive accounts less than $1,000. The Government plans to extend this auto-consolidation to threshold to $10,000 in late 2014 subject to a review.
- New employees will be encouraged to consolidate their accounts using the ATO's online list of super accounts from 1 July 2014.
Superstream
- Employer contributions must be reported on payslips (from 1 July 2012).
- Super funds will be required to provide 6 monthly statements to members (from 1 July 2013) or provide an e-report of contributions received.
- If a member does not provide a TFN, contributions will be forwarded to the ATO as unclaimed moneys (from 1 July 2013).
- Super funds can commence using electronic data standards for processing rollovers and contributions from early 2012 until made mandatory from July 2013.
Stronger Super and SMSFs - The Stronger Super announcements included two main areas for SMSFs:
- more reliable rules around auditor independence and registration
- the banning of off market transfers with related parties

Draft legislation is being worked on and the new legislation will be tabled in Parliament in a series of tranches later this year and through to mid 2012.

Oct 13, Self Managed Super Funds - key vehicle for retirement - Baulkham Hills, Sydney

Thu, 13 Oct 2011 00:50:52 GMT

Discover the secrets of using Self Managed Super Funds to achieve financial freedom. Keep up-to-date with the rules and regulations of Australian superannuation. - Baulkham Hills, Sydney

Sep 30, The Fixed Rate Home Loan Battle Is Now On

Fri, 30 Sep 2011 00:34:22 GMT

If you're worried about future rising interest rates, then a fixed rate home loan may be the solution. One year fixed home loan rates have now fallen below 6% and you can get 3 year fixed home loan rates for as low as 6.39%. Last November the Reserve Bank of Australia increased the official interest rate to 4.75% and three-year fixed rate home loans were about 0.5% higher than most variable rates.

During the early months of the Global Financial Crisis (GFC) they were almost two per cent higher, which highlights the extraordinary position the market is in right now. Home loan providers are offering fixed rate mortgages as much as 1.5% below standard variable rates

Benefits

Stability - fixed repayments allow you to plan your finances and stick to your budget, even in times of economic uncertainty
Cost - when interest rates rise, repayments won't increase

Financial markets believe the next move in official interest rates could be down due to a volatile international economic climate and sluggish domestic consumer confidence.

At a glance

Monthly repayments provide certainty by remaining the same during the fixed term
The interest rate fixed at the loan initiation will remain the same for the full fixed term selected
As mentioned previously, lenders charge hefty exit fees (called break Costs) if you exit the loan before the end of the fixed term agreed upon
Most lenders have less flexible features in the way of limited extra repayments and redraw, no offset account etc.

Knowing when to fix and when to remain variable is not easy. Even the best economists can't predict with absolute certainty when interest rates will rise or fall. Many people take the split rate loan option, where they fix a percentage of their loan and leave the remainder on a variable rate.You should carefully calculate what's best for yourself in the way of what percentage split will suit you the best. By having part of the loan still on variable it allows you to have those flexible convenient banking features that can greatly assist in paying your home loan off faster.

Sep 22, Navigating through volatile times

Thu, 22 Sep 2011 05:35:45 GMT

At Patron Financial Advice, we maintain a well diversified investment portfolio that is completely reviewed every quarter. This model portfolio follows the traditional investment principles of long term investing and the Hold philosophy.

The strict application of proven investment principles, the focus on fundamental facts rather than emotions and media hype has been the foundation for successful investing by our clients.

This is an update about the current state of markets and what to do as a Patron client and investor.

What's happened in financial markets?
The impact on Patron's model portfolio
Our view going forward
Investor psychology
What should you do?

Click on the Permalink below this news item to read the full update.

Any investors who feel unsettled by the current volatile times in financial and economic markets can ask themselves where they stand with regard to their risk profiles. This might be a good time to review your profile with your financial planner.

Remember, another word for 'Risk' is 'Chance' or 'Opportunity'. If you want to find out where your opportunities are in the current circumstances please contact your adviser.

PFA, HT

Aug 12, Global Equity Markets: Don't Panic!

Fri, 12 Aug 2011 06:30:45 GMT

With high volatility, uncertainty, and social and geopolitical turmoil, investors are advised to focus more on longer term strategies and less on the current short term market volatility.

Latest developments

A few days can sometimes feel like a lifetime in financial markets. This week many significant events occurred, with the three major events being:

the release of US Non-Farm Payrolls figures last Friday night which were higher than expected
the S&P downgrading US debt to AA+ over the weekend, and
the Federal Open Market Committee (FOMC) pledging to hold short term interest rates steady to mid-2013 and leaving the door open for more quantitative easing.

Since last week, markets shifted wildly with wild swings in investor's emotions. The announcement of the S&P downgrade wiped about $55 billion off the share market in one day's trading as panic selling took hold.

On Tuesday, the Australian market bucked this trend and started to reverse around midday, with the market anticipating a further easing from the FOMC. The market subsequently rallied to finish the day in positive territory.

Are we there yet?

The past few days have highlighted the fragility of confidence in the market.

It was a crisis of confidence in our leaders and political systems to handle the current economic problems that many countries face that has fuelled market volatility. We expect this volatility to remain for some time.

The downgrade of US debt by one of the three nationally recognised rating organisations suggests sovereign debt concerns will continue to be an issue for the global economy for years to come.

On a more positive note, the downgrade hasn't resulted in any forced selling of US Treasury bonds. In fact the result has been an increase in buying of Treasury Bonds as the market still treats it as a safe haven.

The downgrade may be a catalyst that forces US policy makers to address the medium term problem of excess debt; a move which would be beneficial over the longer term.

The announcement by the FOMC last night was well received by the market and represents the biggest effort since November to spark the US economy and revive confidence.

In summary

While we believe there are reasons to be cautious, as we consider risks to weaker economic growth have increased, the magnitude of the recent falls in share markets worldwide seems unjustified.

We are not in the same situation as in 2008. Many companies are in much better shape than they were three years ago. We continue to see weakness in share markets as opportunities in the medium term.

As unnerving as it may be, investment decisions should be made with an explicit time horizon in place, which for most will mean a long term strategy that meets long term goals.

In times like these it is important to remember the benefits of portfolio diversification and sticking to your investment and asset allocation strategy.

PFA

Aug 7, Market Volatility - Are we there yet?

Sun, 07 Aug 2011 23:42:40 GMT

Last Friday, global equity markets saw their largest one-day decline since the financial crisis, as global investors shunned risk after central bankers failed to stem fears of rapidly slowing growth. The sovereign debt issues in Europe and recent poor economic data out of the United States have led to considerable market volatility.

Despite all the doom and gloom, fund managers are responding rationally to changes to these short term movements in equity and other financial markets. With a continued environment of high volatility, uncertainty, and social and geopolitical turmoil, investors are advised to apply longer term strategies to contend and manage this.

Manager responses to the Sell Off have highlighted the caution required in these uncertain times, however they stressed the opportunities lower share prices present:

In international shares, Magellan Asset Management feel "it is unlikely that these liquidity issues (in Europe) will result in financial Armageddon scenario and that correct policies will eventually be pursued." They "remain realistic and relaxed about the difficulties faced by the US economy.
One of our Australian equity managers, Tribeca Alpha Plus believes: "Market valuations relative to bonds are approaching the extremes of the Global Financial Crises and short term momentum indicators have fallen through the floor. The (Equity) market has priced in a large amount of risk around earnings fundamentals, so it is really sentiment driving things at the moment. This does eventually reverse and generally when it looks the worst."
Schroder Australian equities team's take on the recent share price falls: "As prices fall, as they have recently, we will become more optimistic, not less. The price which we pay for the cashflows of a company is likely to remain a very significant determinant of future returns. The lower it is, the happier we are. Additionally, tougher environments, such as that experienced globally in recent years, and beginning to be felt in Australia, are those in which companies address inefficiencies accumulated in good times, and they will always act more quickly than governments. Our summary take out is that we believe portfolio diversification and a cautious approach to financial leverage remain the best way to deal with the current environment."

The key question: are we heading into recession? and What will the US Federal Reserve (Fed) say? - It will all depend on better news from economic indicators. Note that the Fed meets this upcoming Tuesday, August 9. Bernanke's famous Jackson Hole speech comes later this month on August 26.

Summary

The significant deterioration in market confidence has led to growth assets being sold off. As already seen in Japan and Switzerland, there is further potential for a response from central banks, especially the US Fed to stabilise the environment and restore confidence. We continue to see any weakness as a potential buying opportunity of growth assets as our longer term outlook remains.

Patron Financial Advice

Jul 20, Life insurance - everyday insurance for everyday Australians

Wed, 20 Jul 2011 03:05:41 GMT

Life insurance that covers essential needs for everyday Australians. Types of life insurance to protect your life, lifestyle and financial assets - Sydney, Baulkham Hills

Jul 20, Private wealth - How to build wealth? - Sydney, Baulkham Hills

Wed, 20 Jul 2011 02:43:14 GMT

Private wealth - The Ezine with tips about how to build wealth explaining strategies and solutions, financial news, views, updates and other money matters. - Sydney, Baulkham Hills

Jul 11, Government announces Australian Carbon Tax

Mon, 11 Jul 2011 03:00:05 GMT

Over the last weekend, the Australian Government has released its plan on carbon tax. After long hours of debate, Australia is one of the first countries to proactively tackle climate change and secure a clean future by taxing the major polluters.

This will affect about 500 entities such as the big miners or building materials companies. Private households will get tax cuts and pension increases to compensate for price increases on their bills.

This is the carbon tax in a nutshell and thus far:

Start date for the carbon tax is 1 July 2012.
The Government fixed the carbon tax price at $23 a tonne for the first 3 years.
After the first 3 years the pricing will be exposed to the markets.
The big polluters will pay extra and in turn we can expect them to increase prices.
Private households will get tax cuts (at least $300 pa if income less than $80,000) and pension increases to tackle higher prices.
Household expenses are estimated to increase about $9.90 per week on average.
The Government's compensation package, however, should give households $10.10 per week in return and as a result leave them 20 cents better off.
An estimated 1 million individuals will no longer need to file a tax return.

The adjusting in the market has begun. Companies have started issuing media releases on how this new carbon tax is going to impact their business, its customers and the market in general.

Airfares are quoted of going higher, electricity companies have found new reasons to increase our electricity bills, mining companies are warning on profit impact and so on ....

It's early days and time will tell if Australia is going too fast too soon in the global fight against climate change.

Jul 1, Super and Insurance Tax Changes 2011/2012

Fri, 01 Jul 2011 01:51:24 GMT

The ATO finalised the new super contribution caps and tax thresholds for the new financial year and has made changes to the tax treatment of Total and Permanent Disability (TPD) premiums in superannuation.

Here's a brief summary of the most important tax issues for the new year.

Super Tax Thresholds 2011/12

Concessional contributions cap (CC) - under age 50	$25,000
Concessional contributions cap (CC) - age 50 or over (more restrictive rules proposed from 1/7/12)	$50,000
Non-concessional contributions cap (NCC)	$150,000
Superannuation Guarantee contribution rate - gradual increase to 12% planned from 1/7/13	9%
Tax-free redundancy amount - base limit - for each completed year of service	$8,435 $4,218
CGT cap for business owners - lifetime	$1,205,000
Low rate cap - for lump sums paid from taxed super schemes	$165,000

Many of the previous caps and thresholds have been maintained at 2010/11 levels.

TPD insurance premiums only partially tax deductible going forward

From 1 July, TPD policies in super that have an Own Occupation definition will no longer be fully tax deductible.

Policies with an Any Occupation definition should largely satisfy the requirements for tax deductibility. The Income Tax Assessment Act (ITAA) 1997 defines that only where there is a liability to provide a disability superannuation benefit premiums for TPD insurance are fully tax deductible.

The more beneficial Own Occupation definition and other benefits such as loss of limb do not qualify for a tax deduction making it more expensive for superannuation funds to hold insurance.

Insurance providers will have to provide a break down of the proportion of premiums that will remain tax deductible. Superannuation trustees must make sure to check all their life policies and account for deductible and non-deductible premiums accordingly.

Jun 28, Greece - The Moment of Truth

Tue, 28 Jun 2011 02:41:04 GMT

All eyes are on the Greek parliament this week. They will vote on their package of highly unpopular austerity measures. Only if accepted Greece will have secured their latest bailout from the EU and IMF. They desperately need financial aid immediately to avoid bankruptcy and additional funds could reach up to 100 billion Euros.

Accepting the austerity package means further tax rises, deep spending cuts and a major sell-off of state assets. Considering that the population is already upset, doesn't trust the government and calls for elections makes it worse. It is only a matter of time until life support is not enough to avoid the unavoidable.

Although Greece's GDP seems insignificant on a world scale (less than half a percent of global output), the fate of the country is symbolic and substantially significant for Europe and the bigger world. Europe was not designed to break up and therefore exit strategies do not exist. If Greece is forced to exit by its own making many think that Portugal and Ireland will follow suit soon thereafter and pull the EU into a prolonged crisis. The plan for now is to delay the downfall of Greece for as long as possible with the hope that Portugal and Ireland can mend their affairs and stave off a similar fate.

What's next?

If the austerity package is accepted later this week and a few other conditional political and policy events are implemented by Greece the European Ministers will consider additional financial support for the country early to mid July. However, this will only buy time. From now on, the Greek must meet all conditions and demands or default on debt will be a fact soon.

What to do as an investor?

Greece has a history of defaults and in the big scheme of history this will come and go.

Long term investors should not make irrational decisions solely based on the Greek crisis. Investors are highly sceptical and do not want to let bad news from Greece affect their portfolios. A short term investor typically would wait on the sidelines to see how things pan out over the next few weeks.

In addition, there are other more significant storm clouds forming on the horizon. There is slowing growth in many countries around the world and the end of Quantitative Easing in the US coincides with the latest chapter in Greece. The outcome of both will define short term events.

Professional and institutional investors have huge amounts of cash waiting on the sidelines that will eventually find their way into financial markets at some point in time. Once there is more clarity over the coming weeks the tides of cash will move. - It's darkest just before dawn.

May 19, Superannuation Australia - Better, simpler, stronger superannuation for Australi

Thu, 19 May 2011 03:26:25 GMT

Find out about Superannuation Australia - What is it? - Who are they? - What's good for you? - Baulkham Hills, Sydney

May 12, Summary of the Federal Budget 2011

Thu, 12 May 2011 02:27:54 GMT

On Tuesday this week, the Federal Budget was delivered by the Treasurer Wayne Swan. He communicated a tough Budget in the lead up to the announcement with a view to make sure Australia can return to a GDP surplus as soon as possible.

However and compared to previous years, the 2011 Budget is a rather mild Budget with few surprises or major changes from a personal finance perspective.

The toughness may rather be with the current minority government. The Gillard Government might find it more difficult than usual to get some of the suggested Budget measures through both Houses of Parliament.

Here is a list of announced key measures that may be relevant for you:

Unlike in previous years there have been no changes made to the personal tax thresholds or rates.
Those who exceed their concessional contribution caps for the first time by less than $10,000 will be able to avoid paying excess contributions tax.
People aged 50 and over with less than $500,000 in super will be able to contribute an extra $25,000 in pre-tax dollars each year.
The 50% pension minimum drawdown relief will be reduced to 25% in 2011/12 and will return to normal levels from 1 July 2013.
People under 18 will no longer be able to access the low income tax offset to reduce tax payable on unearned income such as dividends, interest and rent.
Lower income earners will receive a greater proportion of the low income tax offset through their pay packets.
Fringe benefits tax on salary packaged cars will be simplified to a single rate of 20%.

For a full summary and how the Federal Budget may affect you from a personal wealth perspective click through to our 2011 Federal Budget Summary report.

May 5, Australian superannuation among global top four

Thu, 05 May 2011 01:46:02 GMT

Australia's pension fund asset pool has been climbing through the ranks from seventh (10 years ago) to fourth largest in the world in 2011 according to a study regularly conducted by Towers Watson. Australia's pool is almost US$1.3 trillion now.

The top four countries are:

Country	Share of global pension fund assets
US	58%
Japan	13%
UK	9%
Australia	4.8%

The study noted that no other country in the top 13 has experienced a larger rise in total pension assets, or a greater rise through the ranks than Australia.

May 3, The best mortgage rates deal?

Tue, 03 May 2011 05:31:06 GMT

Show me 'The Best Mortgage Rates' Deal!

Apr 29, Future of Financial Advice

Fri, 29 Apr 2011 05:22:29 GMT

Yesterday, Bill Shorten, the Assistant Treasurer and Minister for Financial Services and Superannuation has released the information pack about the Future of Financial Advice.

This is the Government's response to the parliamentary inquiry into financial products and services in the wake of prominent collapses of financial services firms such as Opes Prime and Storm Financial.

The Minister presented the following reforms:

Ban on conflicted remuneration structures for insurance inside superannuation - Upfront and trailing commissions and like payments are fully banned, prospective from 1 July 2013, however this DOES NOT affect insurance outside of superannuation.
Requirement for advisers to obtain client agreement to ongoing advice fees every two years - Advisers will have to ask their clients to agree to their fees on a two yearly basis, prospective from 1 July 2012.
Ban on volume payments - Any form of payment relating to volume or sales targets are banned completely, from 1 July 2012.
Ban on soft dollar benefits - Benefits worth $300 or more per benefit are banned. This does not apply to benefits provided for the personal development and administrative IT services if certain criteria are met.
Statutory best interest duty - Financial advisers now have to act in the best interest of clients, above their own interest.
Expansion of limited advice with scaled advice - Scaled advice is aimed at providing advice only in one area of a client's needs, e.g. insurance. This can be given by a range of providers potentially including accountants.
Accountants' licensing exemption - Accountants will be able to consider a broad range of issues when advising clients even though they are not financial advisers.
Restricted use of the term financial planner / financial adviser - Treasury will recommend as to whether the term 'financial adviser' or 'financial planner' shall be defined by the Corporations Act and its use hence be restricted.

These reforms will make sure that Australians receive the best possible financial advice without advisers being motivated to provide their services based on incentives and commissions offered.

However, whilst the intention is for the good of all Australians it puts a lot of red tape on financial advisers and in turn may make access to good advice only more expensive. The reforms, in fact, may even contribute more to an already bad under-insurance problem in Australia.

There will be draft legislation and further debate. One would hope that the overall meaningful reforms will be designed so that in their detail they will become more reasonable and common sense will prevail.

Read this Summary of the Future of Financial Advice from IOOF for more details.

Apr 13, Double Your Investment - how long does it take?

Wed, 13 Apr 2011 01:31:48 GMT

Investing is all about producing a return. Once you have chosen a suitable investment you probably know the expected return.

For example, if you had invested in property you know that you'd want say 4% to 5% in value appreciation as a minimum and 6% to 8% ideally, if possible. These returns are expressed for a period of 12 months.

Assuming you'll be making 8% per year, how long would it actually take until you have doubled your initial investment value? - Or, applied to the example above, how long would it actually take until your property has doubled in value?

The Rule of 72

There is a simple rule of thumb that can help you easily determine the time required for doubling your investment dollars. It is called The Rule of 72 which works like this:

72 divided by the return you're expecting (e.g. 8%):

72 / 8 = 9 (years)

The result is 9 which means it will take 9 years at 8% per year to double your initial investment amount. Note that it doesn't matter what the initial property purchase price was.

How much return do I need?

Similarly, the same rule of thumb can be used if you know how many years you have available to invest. Say, for example, you have 12 years to retirement and want to invest now with the goal of selling when you retire.

As you know the investment time period but not the return you can now calculate:

72 divided by the number of years available (e.g. 12 years):

72 / 12 = 6 (%)

The result is 6 which means you'd want to find an investment that is giving you an average return of 6% per year over a 12 year period.

The Rule of 72 is simple and can be applied quickly when researching investment opportunities. It's also been used for loan repayments and how fast you can pay down your mortgage but that's for another time.

Currently, we have protected income investments (as opposed to volatile growth investments) that produce a steady 12% to 15% per year with income paid on a monthly basis. Try the rule of 72 on these.

We're happy to give you more info on these income investments if you like. Just drop us a note or give us a call.

Mar 2, Another way to boost your super balance

Wed, 02 Mar 2011 01:32:18 GMT

What's next?

What to do as an investor?

Greece has a history of defaults and in the big scheme of history this will come and go.

Feb 18, How much do you need for retirement?

Fri, 18 Feb 2011 03:56:49 GMT

The Westpac ASFA Retirement Standard analyses how much Australians need in retirement reflecting ongoing changes in living standards and spending patterns of retirees on a quarterly basis.

Expenditure such as communications, private health insurance, energy, clothing, household goods and services, recreation and transport have been taken into account when updating the required annual budget for retirees.

The Westpac ASFA Retirement Standard differentiates between budgets for a moderate or comfortable retirement lifestyle for singles or couples.

Accordingly, the figures for these households and living standards are (ASFA, September Quarter 2010):

Modest Lifestyle - Single	$21,132 per year
Comfortable Lifestyle - Single	$39,302 per year

Modest Lifestyle - Couple	$30,557 per year
Comfortable Lifestyle - Couple	$53,729 per year

A modest retirement lifestyle is defined as better than age pension but still only for basic needs.

A comfortable retirement lifestyle helps retirees stay involved, have a good living standard including a car with domestic and occasional international travel.

Is your super on track to achieve the comfortable budget benchmark?

The Westpac ASFA Retirement Standards is a useful tool for pre-retirees and financial planners to ascertain how and when to transition into retirement.

Read the full details on ASFA's website or let us know if you need a hand on how to best transition into retirement.

Jan 21, Australian Floods, the Economy and the Investor

Fri, 21 Jan 2011 00:20:04 GMT

The past has shown that natural disasters like floods have a severe short term impact due to disruptions of the economy. However, longer term the impact is a positive one that will exceed costs from these short term disruptions.

Economists are expecting a GDP impact of around 0.5% and the Reserve Bank of Australia is expected to hold their fire from increasing cash rates in the short term.

Food inflation could be as high as 5% in 2011 with 13% of fruit and vegetables and 17% of livestock supply sourced from Queensland. Plantings for tomatoes, broccoli, pineapples and grapes are currently most affected.

Industry sectors which have been hit hard by the recent floods in Queensland are resources, construction, mining, insurers, transport, retail and agriculture.

Companies in each of these sectors have been hit to varying degrees. For example, QR National owns most of Queensland's rail tracks and is operating major coal and freight rail systems. They estimate to be back to normal by the end of January.

Needless to mention that the majority of coal miners won't have immediate access to their production. Most will have to pump out water from their mines and make sure it meets standards before released into surrounding river systems. It comes as no surprise that commodity prices have surged, e.g. coaking coal has risen up to US$350/tonne. The biggest miners have been hit hardest due to their large volumes. However, being diversified across commodities and locations, e.g. Xstrata, it shouldn't translate into a substantial shocks on earnings.

Looking beyond the immediate hardship and the mess that the flood waters left behind, it is clear that people and businesses will rebuild and therefore stimulate trade and consumerism. Demand for white goods, furniture, building materials and services, food and other everyday supplies will increase. Many companies whose operations stopped during the floods will increase if not exceed revenues substantially in the months ahead.

Remedial work must be done. - Let's hope that insurers come to the party for those people who had flood protection in their policies without their lawyers playing hard ball. Insurance claims paid will also contribute to increased demand.

Investors and fund managers are able to get set on investments with affected companies at better prices in the short term translating into good long term value appreciation.

As for the weather? - Move over La Nina, we have a job to be done.

Jan 19, Super Secret - Superannuation deposit to buy property? - Sydney, Baulkham Hills

Wed, 19 Jan 2011 22:42:56 GMT

Super Secret - Discover the secret of using super as a deposit to buy property. - Sydney, Baulkham Hills

Jan 13, Acquiring Property in Self Managed Super Funds

Thu, 13 Jan 2011 23:58:46 GMT

Acquiring property in Self Managed Super Funds (SMSFs) requires specialist knowledge.

On the one hand, the trustees must understand the characteristics of investment property. - This should be the easy part for Australians due to their ongoing love affair with property.

On the other hand, Self Managed Super Funds often do not have the full purchase price available to acquire a property and the trustees resort to SMSF loans through instalment warrant arrangements. This is an evolving area and complex because required standards change as we get drip fed by the Government and the Australian Taxation Office on how these non-traditional arrangements shall be treated.

Superannuation funds including Self Managed Super Funds are not allowed to borrow. - Only by exemption as in subsection 67(4A) of the Superannuation Industry (Supervision) Act 1993 (SIS Act) or in few limited circumstances a borrowing may be permitted.

Trustees are obviously attracted by the fact that SMSFs have the ability to invest in assets such as property, artwork, collectibles and exotic assets that otherwise wouldn't be possible in industry or retail funds.

When using instalment warrants for a super investment in property, trustees must make sure they follow the correct steps and processes so that they fully comply with the prevailing borrowing rules.

This includes the checking of:

the seller of the property which must be a permitted party
the trust deed to see if the use of instalment warrants is permitted
the SIS Act to find out if the investment is permitted
the investment strategy for amendments that may be necessary
requirements for loan arrangements imposed by the lender

In addition, it is important to get the sequence of implementing the paperwork right otherwise Self Managed Super Funds can end up in non-compliant territory.

For example, it is imperative that the entity of the Self Managed Super Fund and the Holding Trust including their respective trustees (personal or corporate) are established and exist before any deposits are made, contracts are signed or SMSF loan applications are submitted.

The sequence of events for establishing instalment warrant trusts for investing in property is crucial. Furthermore, every step needs to be documented with trustee minutes showing correct amounts for the initial instalment paid, the total SMSF loan balance, ownership names, dates, signatures and so on.

If you find yourself in the middle of such a situation make sure you educate yourself to cope with the requirements. Alternatively, you can also let us know and we'll lend you a hand.

Dec 23, Seasons Greetings

Thu, 23 Dec 2010 01:18:45 GMT

The staff at our office wish you and your families a Merry Christmas, safe holiday and a Happy New Year 2011.

Please note that our office in Baulkham Hills will be closed from 24th December 2010 until and including the 4th January 2011.

For any urgent matters you can call Dave on 0408 677 196.

Dec 15, Investment Tips for 2011

Wed, 15 Dec 2010 23:13:26 GMT

UBS investment bank's target for the S&P/ASX 200 index is 5,600 points by the end of 2011, up more than 20 per cent from today. CommSec tip the All Ords/ASX 200 to be at 5,400 over the same period.

So what are economists from major financial institutions in Australia telling us?

Looking at recent data we can find that many positive developments in financial markets hinge on the sustainability of a recovery in the US and Europe. There are some big issues that need addressing in 2011, as we will see below:

While the US recovery is improving we'll need to see confirmation such as significant improvements in e.g. employment figures.
Equity markets react to growth and the Fed wants US growth to accelerate above average and in turn lower the unemployment rate.
Australian markets are attractively valued with a current P/E ratio around 12.7 against a long term ratio of 14 times and valuations of stocks remain compelling.
This suggests some catch up in earnings growth in 2011 and hence the higher 2011 estimates for indices by economists.
Consumer savings and spending will be key. Only an economy with confident spenders will help the recovery and ensure continued growth.
The Chinese industrialisation will continue and its demand on resources will remain huge by any measure.
Due to this the Australian dollar might remain strong even if the US dollar decides to reverse its trend.
Expect another sequel to the European debt crisis. The European short term bailouts of Greece and Ireland may not be the last.

While the world economies are in constant change it's sometimes difficult to see through the incessant deluge of statistical data and indicators. Today's analysts and economists agree that the global recovery is happening. However, it is not happening everywhere at the same pace and it sometimes is in specific regions or industries only. As Australians, we should know this because we are right in the middle of one such situation.

There is a push for earnings growth, stimulus for growth in the US is huge and demand from China is unmatched. Although there may be hiccups along the path of global recovery it seems clear to me that with a strong Aussie dollar, undervalued domestic equities and suppressed equity markets overseas that the old wisdom of

Time in the market - not timing of the market

will hold true again which might live up to our expectations sooner than we think. Remember stock markets are leading indicators and will run ahead of time at least 6 to 12 months.

Exposure to equity markets here and overseas, of course, should only be considered after appropriate detailed investment research and risk profiling is done by every individual investor. The financial services sector has had ample opportunity to innovate since the GFC and investment solutions exist nowadays that can give you the exposure to sharemarkets you seek with partial or full protection of your investment dollars.

Dec 7, How To Use Your Super To Invest In Property

Tue, 07 Dec 2010 06:08:01 GMT

A case study for small business owners.

Using superannuation to invest in property is fast becoming one of the favourite investment strategies in Australia. This is not surprising given the fact that the Government has made superannuation our very own tax haven. Here is a simplified example how it could work:

Jane & Joe are 50 years of age, self-employed and successfully running an incorporated recruitment business. They have been renting their office for $28,000 p.a. and are now thinking about moving into a better location. They wanted to know how they could use their super to buy the new office costing $390,000.

Jane has $75,000 in super while Joe's balance is $105,000. They pay themselves a salary of $75,000 each and 9% is going into super, i.e. $6,750 p.a. each.

A possible solution is to pool Jane's and Joe's superannuation into a Self Managed Super Fund (SMSF) totalling $180,000. The SMSF then acquires the new office through a holding trust by using a SMSF loan from one of the major lenders.

Example:

	Assets	Liabilities
Cash reserve	$30,000
Purchase Price	$390,000
SMSF loan		$240,000
Net Wealth		$180,000

Cash inflows consist of 2 x $6,750 from contributions and $29,250 (assume 7.5% gross return on office) totalling $42,750.

Outflows have to cover loan interest and repayments plus ongoing costs for the property, administration of the SMSF and a low 15% income and contributions tax. If we deduct principal and interest payments of $21,659 (variable rate of 7.7% over a 25 year term) this leaves a comfortable $21,091 to cover other costs. The balance can be used to build up net wealth faster.

B E F O R E	A F T E R
Super and investments controlled by third party Rent paid to someone else Super balance accumulates slowly Returns are made on $180,000 only No super loan Office belongs to somebody else	Super and investments controlled by you Rental income is paid to your SMSF Super balance accumulates faster Returns are based on $390,000, i.e. leveraged Loan with down payments on fast track Office owned by your super

Variations of this strategy are whereby the business would loan money to the super fund subject to capital being available. This way it could capture interest as income to the business from regular loan payments made by the SMSF. There are also very beneficial super and tax concessions on retirement of a business owner when an existing business property is transferred into the SMSF.

These are powerful win-win strategies for small business and should seriously be considered to fast track your super.

Nov 10, Investing for Dummies - Beginner and not so Beginner Investing - Baulkham Hills

Wed, 10 Nov 2010 00:27:09 GMT

Investing for Dummies looks at the fundamental elements that are involved in investing. These are the building blocks of all other investments out there and often get overlooked even by professionals.

Oct 26, SMSF investment for the future

Tue, 26 Oct 2010 03:58:33 GMT

My wife and I set up our SMSF back in 2007 just before the GFC hit. Not that we were able to avoid the disaster that followed but partially we escaped

Oct 26, Private Wealth Ezine

Tue, 26 Oct 2010 03:19:20 GMT

Patron Money Matter$

Save for set goals

Your money behaviour

The debt crisis

Private Wealth -- Save and succeed

Private Wealth Ezine brings you the quarterly Patron Money Matter$ for clients and subscribers.

This edition looks at creating a savings plan, your attitude towards financial success and elaborates on the government debt plague in Europe. You will find practical step-by-step savings tips and a guide to avoiding the money traps.

In this issue ...

Save for set goals -- While the idea of setting aside a portion of your income for a rainy day is an appealing idea in theory, in reality most people find it hard to develop and stick with a responsible savings plan. ...
Read the full story
Your money behaviour - avoiding the traps -- Managing your money behaviour, and avoiding common behavioural traps, can help you put the right foot forward when it comes to long-term success iwth money. ...
Read the full story
The sovereign debt crisis -- Remember the carefree days of 2007, before the GFC hit? Back then, all that investors had to worry about was the risk of companies going bust. Then the GFC came along, ...
Read the full story

HAPPY READING ...

Cheers

Herbert Tomaschett
Adv Dip FS (FP)
Financial Planner

If you would like to subscribe to our regular Private Wealth Ezine please use the link provided below.

Oct 25, China and its decoupling from the financial world

Mon, 25 Oct 2010 04:16:48 GMT

Haven't we heard it before that China will part from other large world economies and financial markets such as the US?

If you're still waiting for this to happen you may have missed it already. Urban fixed asset investment growth in the Chinese economy has been going from strength to strength and performed above average for at least the last 15 years. In fact that also holds true for economic growth as a whole. The decoupling of China has been happening for many years and in turn drives the demand for steel and coal shipped from Australia.

You may have heard the anecdotal story about the City of Ordos in Mongolia which was built for 1 million people and it's sitting there completely empty.

This China bubble will clearly bust very soon! Or, will it ... ?

We couldn't imagine having a city like that in Australia, especially not because we only have 5 cities with a population bigger than 1 million people. However, that is really the key in understanding what's going on in China because they have many more cities of incomprehensible proportions than Australia. Their main infrastructure growth is focused along the country's coastline where these bigger cities are located. It will take a little while until inland China, and for that purpose Mongolia's Ordos, catch up with the rest of the domestic boom.

Compared to Australia, a city like Ordos would be the equivalent of the NSW town of Taree with an estimated population of about 45,000 people. In contrast, China has over 160 cities with a population larger than 1 million people.

After putting that into perspective, do you really think if Taree was completely empty (no offence!) that would matter for the Australian economy?

Obviously, the China story goes on and there is a huge potential to participate in economic growth and financial markets. Therefore, investment portfolios today, should consider a reasonable share of international exposure to China and Asia on a broader scale.

Sep 21, Investment Strategies for the new Normal

Tue, 21 Sep 2010 06:29:51 GMT

Double dip recession or prolonged recovery with financial markets treading water? What can we do about it?

The latest in investment portfolio strategies is the Core Satellite approach and the increasingly popular use of Structured Products. It's official that managed funds are not the investment of choice. While it is still prevalent in large superannuation funds the majority of trustees of Self Managed Super Funds do not use them.

Then there is the Modern Portfolio Theory which was first articulated in the 1950s. It is coming of age and its assumption that a diversified portfolio across traditional asset classes will provide the optimum balance between risk and return may not apply in markets we are currently experiencing.

In comparison, Core Satellite Portfolios are designed to generate general market returns also known as beta returns in the finance industry. This is based on the assumption that only few investment manager are able to beat the general market and its difficult to continuously pick them. Hence, the Core consists of something like index funds with low turn over of its parts that result in greater tax concessions and lower fee structures.

In the Satellite component, investments with good opportunity to outperform general markets are selected, this is known as alpha returns. A core, for example can be a blue chip share portfolio and the satellites consist of other investments in more aggressive and growth driven opportunities. A Core Satellite portfolio can also be built with property and shares investments respectively. The design of a Core Satellite approach is dependent on the investor's preferences and risk attitude.

This approach can also be combined with the use of Structured Products. These are investment products that provide a defined financial outcome, meaning that its behaviour can be predicted from the start and the return of the investment is possible within defined boundaries. In practice, one can invest $1 in a basket of shares and make a preset income return of 15% over, say, 15 months. If the investment fails it will still give you $1 back at the end as this amount is protected.

Structured Products are innovative financial investments that combine different features to make investing as hassle free as possible. In addition, they provide protection of your investment dollars to give you peace of mind. No surprise these investments are gaining in popularity with Self Managed Super Funds. ASX listed instalments in various Australian companies are such products. Others include the option of investing in a portfolio of shares or managed funds with CPPI protection (constant proportion portfolio insurance) dependent on volatility. Protection and returns of your investment will depend on the volatility of markets rather than return rates of particular asset classes. In effect, these also to make returns in any market even if things are tracking sideways.

Opportunities are out there even in today's market. If you're unsure about where financial markets are going in the future, have a good look at Core Satellite portfolio construction combined with Structured Products.

Aug 23, Super Law Changes to affect SMSF Borrowings

Mon, 23 Aug 2010 05:46:39 GMT

In time for the start of a new financial year, superannuation laws were amended effective from 7 July 2010. These amendments were inserted in sections 67A and 67B of the Superannuation Industry (Supervision) Act 1993 and provide some clarity to existing rules and answers about superannuation borrowing so far known as instalment warrant arrangements.

The ATO has summed it up on their website as follows:

super fund assets are better protected in the event of a default on a borrowing
the asset within the arrangement can only be replaced by a different asset in very limited circumstances specified in the law
super fund trustees cannot borrow to improve an asset (for example, real property)
the borrowing is permitted only over a single asset or a collection of identical assets that have the same market value
the asset within the arrangement is not subjected to a charge other than to the lender in respect of the borrowing by the super fund trustee

Limited recourse borrowing arrangements or LRBAs, as they are called now, have been confirmed and are here to stay. The Cooper Review confirmed that today only a small number superannuation funds make use of the borrowing provisions and they did not see any concern in the near term although they suggested a review by the Government down the track.

Generally, the new rules are tighter than the old rules, specifically with regard to what assets can be acquired (acquirable asset), what can be included in the loan amount, potential replacement of assets and guarantees given to lenders.

It is an absolute must for SMSF Trustees to familiarise themselves with the latest changes on the ATO website to make sure they understand their obligations before entering into a LRBA. For example, in the case of property investments through super there are additional requirements in terms of maintenance, repairs and capital improvements that must also be considered carefully.

Jul 13, Fast Mortgage Reduction strategies for fast debt relief. Baulkham Hills, Sydney

Tue, 13 Jul 2010 01:32:08 GMT

Use Fast Mortgage Reduction free techniques to take years off your mortgage and improve the quality of life for you and your family. - Baulkham Hills, Sydney

Jul 13, What's in store for 2010/2011

Tue, 13 Jul 2010 00:14:14 GMT

Fear is still very abundant in world economies and financial markets. The last few weeks have demonstrated that fundamental reasons and facts do little against fear and negative sentiment in share markets around the world.

Let's face our fears:

The US must be able to sustain a successful economic recovery.
Global economies depend on a strongly growing China which in turn might run the risk of overheating.
European economies must reduce their debt and prop up exports to fix their problems.

In Australia we're exposed to international market forces and will remain the play ball of international and institutional investors.

On the home front, an imminent Federal election, the potential for strong commodity prices, jobs and housing market developments will give us some guidance. Normal interest rate levels combined with improving profit results of Corporate Australia could well translate into a rebound of our stock market once fear abates.

The Asian region and Australia show resilience that first must be rediscovered.

What to do?

It is prudent to stay alert, review investment portfolios regularly, seek diversification options and avoid fear-driven exposures to problem markets.

In comparison to other historical falls in Australian equity markets such as in 1987, 1973 or 1929 we're about half way through a recovery. There are also voices out there that want to make us believe that we haven't seen the worst yet.

As an optimist and with the whole world pulling in the same direction of a necessary recovery I believe we'll have a bumpy road ahead but will be trending to better levels.

Jun 28, What's in the Population Growth Figures?

Mon, 28 Jun 2010 04:48:54 GMT

The Australian Bureau of Statistics (ABS) released the latest population growth figures last week with the following key finding:

Australia's population reached 22.2 million by the end of 2009, growing by 432,600 people over the year.

This equates to a slowed growth rate of 2% over 2009 compared to 2.2% over 2008. 64% of that figure was due to overseas migration and 36% due to domestic natural increase.

Although they point out that this is a slowing rate of population growth the figure still stands at 40-year highs. Over the last 20 years the annual rate of population growth was in a more normal range of between 1% to 1.5%. Thus we're still sitting at a very strong rate for 2009.

Population growth, of course, is one of the major driving forces for economic growth. With additional people we need more housing, services, infrastructure and everyone needs to be fed too.

Adding to this the latest news from the HIA today, saying that we need an extra 420,000 dwellings built in Australia over the next ten years, it's not difficult to see where the opportunities are. However, first, the housing starts figure they expect to drop significantly down to 3% growth for 2011. This is seen as a result of the Government stimulus fading which in turn makes it more difficult for first home buyers to enter the market and renters to sign affordable leases.

Property investors sit tight or get set.

Jun 24, Point of View: Flight to Safety

Thu, 24 Jun 2010 04:26:17 GMT

Where would you invest your money to keep it safe?

The renewed volatility in financial markets locally and internationally has made investors nervous again. In Australia, we've sort of survived the GFC and sort of jumped back on the investment bandwagon only to realize that uncertainty is following us and scaring investors from one side to the other.

Traditionally in a crisis, investment dollars flew to strong currencies such as the US Dollar, Euro, UK pound or maybe the Swiss Franc. Traditionally, safe harbours were the fixed interest markets and gold.

In today's world, however, we've learnt from the GFC that all asset classes can retreat together although they're supposed to balance each other out. Furthermore, the above stronghold currencies got hammered too.

So what's troubling us? - to name a few:

The ongoing debt problems of European countries;
Political issues in the UK;
A potential housing bubble in China;
The stalling of the US housing market recovery;
The resources super profits tax at home; plus
an incessant flow of bad media news about volcano ash clouds, oil spills, Goldman Sachs prosecution and more...

Trying to keep the big picture here, we also know that historically all market hiccups have recovered to new highs over time. The recovery from the low points can take 4 to 6 years to get back on track and we're nowhere near that yet. Naturally, during that period of time everything is questioned, investors are scared and behave like sheep.

Okay, to be safe let's sell out and put everything into the gold market. Right? - The fact is, however, that the gold market is at a level of all time highs. If advancing further we might end up in a gold bubble and all bubbles must burst. It we compare the volatility of the gold price with the ASX 200 Index we also realize that gold in fact is more volatile than shares; add to this the currency risk when buying gold in US dollars.

What about bonds then? Government and corporate bonds certainly give us stability and can preserve capital. However, being driven by scare, these bond prices are high and income returns low. Fleeing into expensive bonds might give you a double whammy when other asset classes recover and bond prices dive.

Assuming for a moment that the whole world is desperately trying to get things right and avoid major disasters on all continents it is hard to see equity markets not recovering over the next few years. Especially, if global growth is steaming ahead as it currently is.

What can we do? - Protect our investments, spread the risks and diversify into quality, avoid running with the herd and rather think as contrarians.

After all, it doesn't hurt to stick with good quality investments in shares or property in the right locations.

It is quality that will produce successful returns in these uncertain times.

Herbert Tomaschett

Jun 18, Property Prices & Rent Returns Will Go Up
and Interest Rates Could Come Down

Fri, 18 Jun 2010 01:22:11 GMT

Investors Paradise is here! Are you waiting for the property bubble to burst before you make that leap of faith into the property market?

Are you waiting for the Government to sweeten the pot and come in with another stimulus package? Then, you might want to go back to sleep and enjoy that dream; because in the real world the cold hard truth is:

It just ain't going to happen!

You're currently living through a major property boom, possibly when it's over it will be the largest Australia has ever seen.

Capital Growth rates last year

(Source: Residex)

Melbourne 22.46%
Sydney 17%
Brisbane 4.87%
Adelaide 7.52%

There is no better time than right now to start building a real estate portfolio and here's why. Australia is now entering into a strong period of growth and success. Australia will go through an amazing property boom for 3 powerful reasons:

economic growth,
population growth;
and a continually growing housing shortage.

How bad is the housing shortage?

It's really bad. The following shows the number of houses each state will require just to fill the immediate shortage. With ongoing record population growth you can be assured these numbers are not going to get better, in fact, they'll get worse.

Shortfall of houses by state:

VIC - 22,700
NSW - 57,600
QLD - 56,100
WA - 30,200
SA - 100

How High Will Property Prices Go?

Gauge for yourself from the following historical table:

Median House Values (houses only) to March 2010:

	1980	1990	2000	2010
Melbourne	$40,616	$140,979	$203,287	$580,500
Sydney	$62,246	$178,818	$336,031	$651,500
Darwin	NA	NA	$170,840	$513,500
Perth	NA	$88,234	$158,436	$483,500
Adelaide	NA	NA	$148,395	$406,000
Brisbane	$37,490	$103,713	$153,674	$464,000

Interest Rates Coming Down

Don't laugh, it just may happen as the Sydney Morning Herald recently reported that consumer confidence is plummeting, with the latest slide - the third in three months - blamed in part on the budget and the proposed resources super profits tax.

Sevanth Sebastian, the Commsec economist said "We are now barely more confident than a year ago and the slide in the share market hasn't helped."

Against that trend though, investment loans have been climbing and are now 26 per cent higher than they were a year ago.

This may suggest that you should be putting your money where the smart money is - property.

David Fleming

The Finance Blog

Feb 1, Money Converter for currencies and investments - Baulkham Hills, Sydney

Jan 30, How to invest in 2012

What's a better approach to investing?

Jan 17, How might the carbon tax affect your investments?

Check your portfolio

Look for opportunities

Weighing up the tax

Carbon tax at a glance

Jan 16, Five New Year Resolutions

Jan 16, Wanted: Your Business In Sydney

Australia is open for business - Your business!

Jan 7, Super Property - Discover how to use super to buy property? - Baulkham Hills

Dec 14, Contact Discover Financial Freedom - Baulkham Hills, Sydney, Australia

Dec 14, Superannuation Changes from the Government's Mini Budget

Reduced minimum pension drawdown rate to continue to 2012/13

$25,000 concessional contributions cap to continue another year

Government co-contribution to reduce by 50%

New low income superannuation contribution

Super Guarantee (SG) age limit to be removed from 1 July 2013

New personal marginal tax rates and thresholds

Dec 12, European Debt Crisis and Investing in 2012

What's been achieved?

What lies ahead?

Dec 1, How does the European Debt Crisis affect us in Australia?

Nov 7, Compulsory Super to increase to 12%

Nov 3, Self Managed Super - What does it cost? - Baulkham Hills, Sydney

Oct 24, Property Seminar - How to invest in property? - Sydney, Baulkham Hills

Oct 21, Quarterly Economic Update - October 2011

Oct 13, Stronger Super announcement

Oct 13, Self Managed Super Funds - key vehicle for retirement - Baulkham Hills, Sydney

Sep 30, The Fixed Rate Home Loan Battle Is Now On

Benefits

At a glance

Sep 22, Navigating through volatile times

Aug 12, Global Equity Markets: Don't Panic!

Latest developments

Are we there yet?

In summary

Aug 7, Market Volatility - Are we there yet?

Jul 20, Life insurance - everyday insurance for everyday Australians

Jul 20, Private wealth - How to build wealth? - Sydney, Baulkham Hills

Jul 11, Government announces Australian Carbon Tax

Jul 1, Super and Insurance Tax Changes 2011/2012

Super Tax Thresholds 2011/12

TPD insurance premiums only partially tax deductible going forward

Jun 28, Greece - The Moment of Truth

What's next?

What to do as an investor?

May 19, Superannuation Australia - Better, simpler, stronger superannuation for Australi

May 12, Summary of the Federal Budget 2011

May 5, Australian superannuation among global top four

May 3, The best mortgage rates deal?

Apr 29, Future of Financial Advice

Apr 13, Double Your Investment - how long does it take?

Mar 2, Another way to boost your super balance

What's next?

What to do as an investor?

Feb 18, How much do you need for retirement?

Jan 21, Australian Floods, the Economy and the Investor

Jan 19, Super Secret - Superannuation deposit to buy property? - Sydney, Baulkham Hills

Jan 13, Acquiring Property in Self Managed Super Funds

Dec 23, Seasons Greetings

Dec 15, Investment Tips for 2011

Dec 7, How To Use Your Super To Invest In Property

Nov 10, Investing for Dummies - Beginner and not so Beginner Investing - Baulkham Hills

Oct 26, SMSF investment for the future

Oct 26, Private Wealth Ezine

Oct 25, China and its decoupling from the financial world

Sep 21, Investment Strategies for the new Normal

Aug 23, Super Law Changes to affect SMSF Borrowings

Jul 13, Fast Mortgage Reduction strategies for fast debt relief. Baulkham Hills, Sydney

Jul 13, What's in store for 2010/2011

What to do?

Jun 28, What's in the Population Growth Figures?

Jun 24, Point of View: Flight to Safety

Jun 18, Property Prices & Rent Returns Will Go Up and Interest Rates Could Come Down

Capital Growth rates last year

How bad is the housing shortage?

How High Will Property Prices Go?

Jun 18, Property Prices & Rent Returns Will Go Up
and Interest Rates Could Come Down