Being actively involved in how and where your super is invested, could make a real difference to your retirement savings over the long-term.

If you are considering going down this route, there are some factors to think about such as your retirement goals, how long you have until you retire and the amount of risk you’re comfortable taking on.

For instance, if you’re close to retiring, you may want to avoid putting your super somewhere that’s too risky. Riskier investments tend to experience more ups and downs so time may help to ride them out.

This article considers four examples of investment strategies for your super.

The importance of diversification

Before we discuss the various investment strategies, it’s important to highlight the significance of diversification. Like any type of investment, spreading your super across different types of investment options, can help to build a strong portfolio and manage risk.

Why?

Because if you were to invest all of your super into one asset class such as property, your investment may suffer a loss if the property market was to fall in value. However, if you spread your money across multiple assets, you may have a different result.

Investment strategy type 1: Growth

If you don’t think you’ll be accessing your super for at least 10 years or more, a growth strategy may work for you as a longer timeframe may help an investment portfolio withstand volatility while aiming for returns.

A growth strategy that follows a higher risk, higher return approach tends to have a larger focus on assets that are exposed to capital appreciation. That is, investing in assets which are expected to grow at a higher rate than the industry or overall market.

For instance, this may involve an investment of around 70-85 per cent in shares or property with the rest in fixed interest and cash-based investments.

Historically, over any 20-year period, a growth strategy has delivered better returns than more conservative portfolios which would mainly be invested in fixed interest and cash. However, over a short-term period, you may experience significant losses as a result of market volatility.

Another key benefit of a growth strategy is that by making greater returns on your investment, your savings are more likely to keep up with the rising cost of living. This is arguably important because over time inflation may reduce the value of your retirement savings, which could make it difficult to maintain your standard of living when you’re retired.
Investment strategies for your super

Investment strategy type 2: Balanced

Similar to a growth strategy, if you aren’t planning to access your super anytime soon, opting for a balanced investment portfolio may be another option.

This strategy is aimed at balancing risk and return so your portfolio has enough risk to provide reasonable returns, but not enough to cause significant losses.

A balanced strategy typically involves investing around 60-70 per cent in shares or property, with the rest in fixed interest and cash-based investments.

Investment strategy type 3: Conservative

You may be considering how you could protect your capital if you want to access your super within 3-5 years.

A safe or conservative strategy follows a lower risk, lower return approach so it’s really about preserving the value of your investment portfolio. While there may be less risk of losing money, a downside could be that your returns may not
keep up with inflation.

For example, this could involve investing around 20-30 per cent of your super in shares and property, with the rest in fixed interest and cash-based investments.

Investment strategy type 4: Ethical and sustainable

You may choose not to invest in certain companies based on ethical grounds. For example, taking a stance against investing in firearms. This approach is called ethical or socially responsible investing.

There is also sustainable investing which goes beyond incorporating just ethical and social factors. That is, it approaches investing from an environmental and governance lens too. Some super funds now offer this, so if these factors are important to you, speak to your super fund for more details.

If you’re a self managed super fund (SMSF) trustee, there are a range of sustainable managed funds which you can tap into.

Review your investment approach

You may want to review your current investment approach with your super fund or SMSF to consider how it aligns with your goals and risk comfort.

For example, if you are looking to take an active role by directly investing your super in shares, exchange traded funds and managed funds, there are super products and platforms which enable you to do this.

Alternatively, a SMSF is an option that enables you to have more control over how your super is invested with the added bonus of being able to access more investment options such as direct property and commodities. You also have the ability to borrow within your super fund for investment. There are a
number of administration requirements however, as well as legislative requirements to adhere to.

You may want to consider speaking to a financial expert when determining which super product may be best for you.

This article was prepared by BT, a part of Westpac Banking Corporation ABN 33 007 457 141, AFSL and Australian Credit Licence 233714. This information is current as at 22 May 2019.

——————-

This article provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. It does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to these factors before acting on it. This information may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, no company in the Westpac Group accepts any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. BT cannot give tax advice. Any tax considerations outlined in this article are general statements, based on an interpretation of the current tax law, and do not constitute tax advice. The tax implications of investing in property, shares or superannuation can impact individual situations differently and you should seek specific advice from a registered tax agent or registered tax (financial adviser).

Superannuation is a means of saving for retirement, which is, in part, compulsory. The government has placed restrictions on when you can access your investment held in superannuation. The Government has set caps on the amount of money that you can add to superannuation each year on both a concessional and non-concessional tax basis. There will be tax consequences if you breach these caps. For more detail, speak with a financial adviser or visit the ATO website.

The post Investment Strategies For Your Super appeared first on Newcastle Financial Planners & Financial Advisors.

What are ethical investments?

Ethical investments provide exposure to companies with strong environmental, social and corporate governance (ESG) structures and practices. The Responsible Investment Association of Australia estimates there is almost $1 trillion invested in ethical companies and strategies across the country, equating to 44 per cent of the entire $2.24 trillion managed by professional investors in Australia.

Depending on your risk appetite, there are a range of ways you can invest ethically. You can put capital into an actively or passively managed fund with a focus on ethical investments. Your super fund may also offer investment options that focus on ethical leadership and business practices.

How to pick stocks in ethical companies

The research and analysis process for buying stock in ethical companies is broadly no different from regular stock picking. Analysing the typical indicators of financial strength is essential, including earnings per share, the price-to-earnings ratio and dividend yield. You will, however, need to weigh up whether a company’s approach to ESG aligns with your beliefs around important issues. These issues are typically environmental, societal, and political.

How to get into ethical investing

To get into ethical investing, you may place some of your capital into a responsible investment fund which uses ESG and ethics criteria, along with financial performance, to determine which companies are invested into. It’s important to note that the screening criteria for responsible investing are different from those used in strict ethical funds. As a comparison, strict ethical funds screen out specific industries such as energy, mining, gambling, pornography and narcotics as a default. ESG investment funds differ by focusing on stakeholder engagement and shareholder activism to influence change in companies instead of simply divesting or eliminating the option of investing in particular organisations in the first instance.

Whether you put your money in a fund or decide to pick individual stocks to get started in ethical investing, you need to determine what you’ll look for in potential investments. You may look for companies that are carbon neutral, or those that have initiatives such as planting a certain number of trees each year. There are also more detailed criteria such as the company’s approach to manufacturing which you may assess in your research. You may also choose to invest in funds that are financial vehicles and loan money to, or invest in, ethical businesses.

Do your research to diversify your investments

Similar to diversifying your portfolio with a range of asset classes, you also need to do your research and thoroughly analyse any potential investments that will provide exposure to ethical companies. To ensure you balance risk effectively, speak to your financial adviser to assess the specific ethical investments that are suitable for your unique situation.

 To discuss your investment strategy speak with one of our LT financial advisors. 

Contact us

The post The rise of ethical investments appeared first on Newcastle Financial Planners & Financial Advisors.

Financial stress can be a major trigger for a lot of people, it is a big burden to carry around, but not one you need to carry alone. Speaking to a professional Financial Adviser can set your mind at ease once you have a plan in place and a financial goal to build towards.

Financial stress
In a report conducted by ME Bank in 2018, they found that many Australian households struggled to afford the basics:

• 17% of households could not pay utilities on time
• 19% surveyed had turned to family or friends for help
• 15% surveyed had resorted to selling items to buy necessities
• 45% of households were digging into more than 30% of their disposable income to pay off the mortgage.

The value of financial advice can take many forms. It could be the knowledge a professional is looking at your situation objectively, the peace of mind you get when you have a plan in place, or it could be the financial benefits you gain.

A study by CoreData for Fidelity in 2019 revealed that 88.5% of Australians receiving advice believe it gave them
greater peace of mind, financially, and 86.2% of Australians receiving advice believe it gave them greater control over their financial situation.

Research by the Financial Services Council showed that people who received financial advice were almost $100,000 better off at retirement. That’s a big financial gain achieved by working with someone who provided advice and guidance around a retirement goal.

Many Financial Advisers will often tell you that it is not their clients with the highest income that are the wealthiest. The clients who get advice early in their life, work at it, and take a sensible approach are usually the wealthy – and happy – ones.

Don’t let a past mistake deter you from a future goal

You don’t need to be wealthy or privileged to receive financial advice. It is accessible to every day Australians who are motivated to get ahead. Leave your mistake in the past and talk to an adviser about your future today. Call LT today to meet with one of our financial advisors.

Sources: The ‘Better off with savings advice’, 16 February 2011, research shows that a 30 year old would save an additional $91,000, a 45 year old would save an additional $80,000 and a 60 year old would save $29,000 more than those without a financial adviser.
https://www.fidelity.com.au/insights/investment-articles/the-value-of-advice/
https://www.fasea.gov.au/continuingprofessional-development
https://www.abc.net.au/news/2018-08-06/tipping-point-as-mo

The post What financial mistakes have you made? appeared first on Newcastle Financial Planners & Financial Advisors.

During market crashes or downturns we often hear of share markets ‘losing’ billions of dollars. But what happens to all that money and where does it go? In fact, the answer is that it is purely a book figure – a ‘paper loss’. There is no magical drain other than the metaphorical one to explain this economic concept.

To put it ‘simply’ – imagine a real estate agent estimated the value of your home as $450,000. Next week a second agent estimates it would sell for $400,000. Have you lost $50,000? No, even though no money has changed hands, you may feel poorer. This is the difference between value (what someone may be prepared to pay) and the price at which a sale actually happened.

It’s the same with the share market. When there are more buyers than sellers, the price of a share increases and holders of that share feel richer. Conversely, when there are more sellers than buyers, share prices fall. The holder of devalued shares has not actually lost any money – unless they sell the shares and realise the loss.

Share speculators get burnt by rapid changes in value because they want to realise short-term profits. Investors hold on to the shares in quality companies through the price fluctuations because they believe in the future of the business and the flow of future dividends. We hope that better explains where the money goes!

For more information, contact us at Leenane Tempelton on 02 4926 2300 or email success@leenanetempleton.com.au

The post Where does the money go? appeared first on Newcastle Financial Planners & Financial Advisors.

If you’re the eldest sibling in the family, or deemed to be the “most responsible”; if you’re seen to be a good friend by someone; or a fine upstanding citizen by others, chances are you will be asked to be an executor for someone’s will.

After you’ve enjoyed the warm feeling of being wanted, just pause for a moment and take stock of what it really means to assume this most important role.

You need to be aware that when the person dies, you will be required to spend a significant amount of time executing your responsibilities – and these can be onerous.

The actual functions will vary from one situation to another and, to some extent, depend on the surviving family members. However, the legally defined duties of the executor include:

• Arranging the funeral;
• Determining the assets and liabilities of the estate;
• Applying to the court for probate, if required;
• Determining what assets may need to be sold to pay outstanding debts – this may be defined in the will or by established legal definitions;
• Arranging the sale of all assets which are not to be directly transferred to the beneficiaries – including the home, investments, business interests and personal chattels;
• Lodging tax returns for the estate and the deceased;
• Paying the debts;
• Publishing a notice that you intend to distribute the remaining assets to the beneficiaries;
• Distributing the remaining assets to the beneficiaries according to the terms of the will.

For all this you may find yourself in the middle of family disputes and even subject to legal action from a dissatisfied beneficiary or creditor. If placed in this position, the executor needs to be able to manage their responsibilities as impartially as possible.

The executor can be held personally liable if a beneficiary suffers financial loss as a result of the executor’s actions or inaction, and in some instances, be legally liable for any losses incurred.

If, after considering all of this, you don’t think you can honour the person’s request and fulfill the executor’s role appropriately, it might be best to decline the offer.

If you’re feeling bad about not accepting, you could suggest your friend or relative engages a professional executor in the form of a Trustee Company or firm of solicitors. This will also ensure the executor outlives the person making the will.

For more information, contact us at Leenane Tempelton on 02 4926 2300 or email success@leenanetempleton.com.au

The post Responsibilities of an executor appeared first on Newcastle Financial Planners & Financial Advisors.

Continued growth in the US, with some headwinds

The Fed commenced the normalisation of interest rates in December as the US economy continues to perform well in the face of growing headwinds. Unemployment is down to 5 per cent and US households are in a relatively strong position following substantial deleveraging. A strengthening labour market and rising household incomes will provide support to the corporate sector through greater consumption.

Key headwinds facing the US economy include the ongoing strength of the US dollar and further declines in energy prices, which collectively impact trade-exposed industries and those reliant on oil and gas investment. However, most of these headwinds are likely to be transitory, and in the case of energy prices will be offset by material benefits for consumers.

Several transitory factors have been keeping US inflation below the Fed’s 2 per cent target. However, as the oil price bottoms out, the US dollar stabilises, and the labour market recovery continues, wage growth and inflation pressures are likely to normalise. This may force the Fed to increase interest rates faster and commence QT sooner than markets are expecting.

China’s bricks and mortar problem

As the world’s second largest economy, contributing around a quarter of world economic growth, China is key to the global outlook. However, China’s rapid growth has become unsustainable and the economy faces serious short to medium term risks, principally in the property market and the shadow banking system.

Since the global financial crisis (GFC), credit in China has grown by the equivalent of the entire US banking system. Almost half of this credit growth has gone towards property market activity, and a large share of the loans have been made through non-bank or “shadow” lenders. China has now accumulated three to four years of excess housing supply and real estate and related industries account for 20-25 per cent of China’s gross domestic product (GDP). As the property market contracts and the economy deals with an excess credit problem, a recession in China cannot be ruled out. However, the Chinese authorities have a number of policy tools at their disposal and appear to be taking steps to slow credit growth and manage the housing market correction.

Muddling through in Europe

Eurozone growth is likely to remain modest for the foreseeable future. The combined effects of high government debt and unfavourable demographics are likely to present ongoing headwinds for growth, while political impediments are holding back much needed economic reforms. The Eurozone remains vulnerable to major shocks, such as an escalation of the Russia/Ukraine crisis, the election of Eurosceptic parties or a disorderly unwinding of quantitative easing (QE) in the US. Each of these scenarios could trigger a dramatic uplift in periphery Eurozone sovereign bond yields and would heavily test the resolve and mandate of the European Central Bank.

Implications for Australia

Australia’s economy faces a number of global and domestic challenges, with China’s economy slowing, Australia’s biggest mining boom since the 1850s ending, and the Fed entering an interest rate hiking cycle. Mining boom conditions and low interest rates have encouraged households to accumulate large debts, fuelling speculative activity in the housing market which is now likely in excess supply. A contraction in mining and construction sectors could tip the economy into recession over the next few years, while scope for countercyclical monetary and fiscal policy response may be limited. Current macro risks facing Australia emphasise the need for diversified portfolios with exposure to offshore revenue sources across a broad array of sectors.

Concluding comments

It is prudent for investors to be cautious in the current macro environment. The normalisation of interest rates by the Fed and the shift to QT could lead to rising risk premia and the repricing of credit and share markets. Meanwhile China’s slowing growth makes linked asset markets vulnerable, particularly those in the commodities and emerging markets spaces. Despite the risks, in our view opportunities remain for investors to achieve attractive returns over the investment cycle, by focusing on high quality businesses with exposure to the growing US economy.

For more financial advice, speak to us at Leenane Templeton on 02 4926 2300

Source: Magellan

The post Macro risks elevated in 2016 appeared first on Newcastle Financial Planners & Financial Advisors.

Debt recycling is the process of replacing mortgage debt, or bad debt, with investment debt, which is known as good debt. 

This strategy enables investors to start building wealth while they’re still paying off their home. As equity is built up in their home, funds are re-drawn and invested. Income from these investments can be used to further reduce the mortgage balance, while the growth component contributes to wealth accumulation.

This is how debt recycling worked for one couple.

Mark and Jane have built up considerable equity in their home, and upon advice from their financial planner decided to make that equity work harder for them. The couple currently owes $240,000 on their home, which is valued at $400,000. Their licensed planner recommends Mark and Jane implement a debt recycling strategy, refinancing their current loan to give them a $300,000 loan limit. This releases $60,000 of available equity for investment.  

Mark and Jane’s planner recommends they invest their $60,000 equity into a portfolio of managed investments specifically chosen for income potential. After one year, their portfolio has grown in value to $65,000, and yielded an income of $4,000 which is used to reduce their mortgage further. After regular loan repayments, their mortgage balance is $230,000 after the first year. The couple then draw the extra $10,000 in equity to make an additional contribution to their investment portfolio. This process is repeated each year until their mortgage is extinguished.

Debt recycling can benefit investors prepared to invest not just funds, but also time and patience. To learn if it would be appropriate for you, contact your licensed financial planner.

To discuss debt recycling in action call (02) 4926 2300 or email us. 

The post Debt recycling in action appeared first on Newcastle Financial Planners & Financial Advisors.

Buying a house is probably the biggest financial commitment we make in our lives, so it's not a decision to be taken lightly. 

Most people need to borrow money to buy a house. Although this is obviously important, there is more to buying a house than just money. There are personal and lifestyle goals to consider.

Renting means you only have a week-to-week financial commitment and the flexibility to move with little cost. On the other hand, owning your home can give you security, ownership of an appreciating asset and potential tax-free capital gains when you eventually sell. This is definitely a personal decision nobody can make but you.

Here are some thoughts to help you weigh up what’s best for you.

How long do you plan to live in the house?

Depending on your circumstance, it might not make much sense to go through the hassles and set-up costs of buying a house if you are only going to live there a short while. This is unless you have done sound research and plan to renovate extensively to sell at a much higher price. When you buy and sell within a short timeframe, you can run the risk of a financial loss, especially when you factor in costs like stamp duty.

What is your comfort zone?

Can you really afford the repayments on the loan? Just because you can borrow the money doesn't mean you have to. Can you live the lifestyle you want and afford the repayments? If travelling, starting a family or other lifestyle commitments are important to you, then maybe you should consider a less expensive house and smaller loan. The mortgage is just part of your own financial puzzle – it shouldn't take over your life.

How do I get a loan?

Applying for a loan can be a harrowing experience. You'll be asked all sorts of nosey questions – income and savings (or lack thereof), debts (like credit cards) as well as other assets (shares, managed funds, cars, boats, etc). Be prepared to disclose all, and always tell the truth.

Ideally you need a deposit of a least 20% of the value of the house to avoid mortgage insurance (an extra charge to protect the lender, not you, if you default on the loan). Lenders will be more impressed if you saved the deposit because that shows you have financial discipline. 

Lenders want to see that you can repay the loan and will look at how much of your income it will take up. They will also be interested in your credit rating – your track record of paying bills on time. 

Your house will become collateral for the loan. If you fall too far behind on the repayments, the lender can repossess the house and sell it. They will take this step only as a last resort but it means you are out on the street. And even worse, it will be very hard to ever borrow money again.

Where do you go to find the best loan? 

If you decide to buy, this is probably the most confusing question. Talk to a mortgage professional about the options currently available to you. Weigh up the pros and cons and make your decision wisely.

Call (02) 4926 2300 or email us. 
To discuss buying v renting call the team at Leenane Templeton, we are here to help. 

The post buying v renting appeared first on Newcastle Financial Planners & Financial Advisors.

While interest rates remain at historically low levels in many parts of the world, including Australia, thousands of mortgage holders have enjoyed lower repayments; but interest rate movements mean different things to different people.

Aside from mortgages, low interest rates have a much broader application—they also flow through into personal and investment loans, credit cards and various types of business financing. On the flip side, investors have seen returns on interest-bearing bank accounts and term deposits follow suit and understandably do not celebrate with every rate cut.

Across the economy generally, a low interest rate environment often goes hand-in-hand with slower economic growth, uncertain job prospects and lower asset prices.

So, depending on which category you fit into, here are a few implications worth considering in your approach to dealing with interest rates:

• Homeowners: With variable rates remaining low do you use this as an opportunity to build a buffer against rates when they eventually turn around? Or are there other more pressing items that your spare cash could be directed towards, such as credit cards or a car loan? Another issue to consider is your future housing preference. If you would like to renovate or upgrade your home, is now a good time to do this with prices generally stable and tradesmen more likely to return your phone calls? 
• Investors: Whether your preference is shares, property or another asset class, this may be a good time to consider starting a long-term growth strategy. Given that dividend yields and rents may have changed in the past couple of years, it's worth another look to determine if potential investments are likely to be positively or negatively geared.
• Business owners: Overdrafts, car leasing and other business loans may need a good review. In particular, any strategy to reduce your debt should be revisited. You could take advantage of lower interest offers with another lender, but make sure you balance the potential savings against any costs associated with moving your business to a new bank.
• Deposit holders: Dwindling returns on cash may make you feel like there would be little difference if you put it under the mattress. There's bound to be plenty of apparent alternatives to give your returns a boost but it's critical to read the fine print and understand what you're investing in. The adage of higher returns meaning higher risk holds true, so first make sure your ability to manage that risk is properly addressed.

Interest rates will not stay this low forever – and this will be good for some and not others. Now is a great time to think about how you can use the current situation to your advantage. 
Call (02) 4926 2300 or email us. 

To discuss current interest rates and you can take advantage of the current low rates, please call our team of accountants and financial planners at Leenane Templeton. 

The post Interest rates affect everyone differently appeared first on Newcastle Financial Planners & Financial Advisors.

When it comes to helping your children or grandchildren get a financial headstart in life there are so many options available however your generosity could create tax issues down the track. Here we explore this topic from a few different angles, depending on how you wish to help them.

Education

If you want to guarantee that money invested for a specific purpose in your child’s life is used for that intention, there are a number of ways to make sure this happens.

If you look around, there are plenty of investment products aimed squarely at helping parents save for education. They are often referred to as “Education Savings Plans” or similar. The savings plans can be set up to transfer to the child’s name at an age specified by you. Many of these funds charge minimal fees and the funds can be used for paying for books and uniforms, repaying HECS debts, and even to purchase musical instruments and lessons. 

Home ownership    

Due to the increasing difficulty faced by many young Australians in saving for their first home, assistance from family members is likely to become more common. A facility is available which enables parents to help with the purchase at no direct cost to themselves. The “family guarantee” loan allows parents, or another family member, to use their own home as security on their child’s mortgage. If you choose to act as a guarantor for your child’s mortgage, be aware of the implications. As guarantor, you are responsible for the entire loan if your child cannot meet repayments. 

Another option that places less risk on your assets is to lend your child money to make or increase their home deposit. Combining a parent loan with the first homeowner grant can make a substantial impact on the life of the mortgage. 

If you would prefer to give the gift of knowledge, make sure your offspring are aware of other opportunities such as First Home Buyer Savings Accounts whereby they can save their own deposit faster by receiving higher interest and paying the lower tax rate of 15% on those earnings.

Accessing tax breaks

Parents may be well aware of the value that spreading income across family members can have when it comes to tax time. But beware. The Australian Tax Office ensures money is not placed in children’s names purely to give Mum and Dad a tax break. For this reason, it can apply more aggressive tax rates for passive income invested in the name of a person under age 18.  So when setting up any investment in this way, make sure you check with your adviser first.

The key to giving your kids a leg-up is to have a clear objective before you start. With so many options available it can get confusing so be sure to ask your financial adviser for professional advice.

Call (02) 4926 2300 or email us. 

To discuss some of the opportunities parents have when it comes to helping their children financially please contact the team at Leenane Templeton. 

The post Giving your kids a headstart appeared first on Newcastle Financial Planners & Financial Advisors.