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.

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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.

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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

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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

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The global economy

During February a growing virus outbreak in China known as the Coronavirus or Covid-19 started to feature as a major concern. As of mid-May, there have been over 4.3 million confirmed cases and over 300,000 deaths globally.

Governments all over the world were compelled to impose lockdown measures that shut down businesses and restricted citizens’ freedom of movement. International travel has almost entirely shutdown as countries have closed their borders. The economic damage caused by these measures has been stark, with millions of United States (US) workers filing for unemployment. Economists now expect a global recession to be caused by this shock. An economic recovery is expected towards the end of 2020. Substantial government spending and monetary policy, for example, interest rate cuts, will help with the economic recovery but it will take time for businesses to restart and jobs to return.

A second shock to the economy has been an oil price war that started in early March. Saudi Arabia sparked this price war by increasing production and discounting prices in a bid to punish Russia and other marginal producers. This was their chosen response when talks between global oil cartel, The Organisation of the Petroleum Exporting Countries (OPEC) and other producers failed after Russia refused to impose additional production cuts to increase oil prices. This, in addition to weak demand due to the global Coronavirus shutdowns, has caused oil prices to crash substantially. This is good for consumers due to cheaper petrol prices. However, for oil producing countries and regions in the US, this is expected to compound the economic damage the Coronavirus shutdowns were already inflicting.

Australia

Australia was not immune to the Coronavirus outbreak. The shutdown efforts appear to have been successful in limiting the human cost. As of late May, there have been a total of 102 deaths with only 948 active cases and over 5,700 people who have recovered. However, the economic cost has been substantial with expectations that the unemployment rate will rise to over 10%. Australia is expected to mark its first recession since the early 1990s over the June 1990 and September 1990 quarters.

This quarter saw the Reserve Bank of Australia (RBA) cut interest rates to a record low of 0.25% and actively buy Government bonds to keep long-term borrowing costs low. The Federal Government also intervened with substantial increases to unemployment benefits, for example the JobSeeker Payment, as well as a wage subsidy program called JobKeeper which aims to help keep businesses connected to their employees through this economic downturn. It is expected that lockdown measures will be gradually lifted during the June 2020 quarter following recent announcements by the Prime Minister. The economic recovery is expected to take some time, particularly as authorities want to limit any chance of a new wave of infections.

Shares

During the March quarter, the Australian share market fell (-23.1%). At a sector level, health care (+1.5%) and consumer staples (-4.3%) were the strongest relative performers but could not offset the negative performance in energy (-48.9%) or the financials (-28.7%) and property sectors (-34.8%).

The energy sector fall was due to two factors. First, the global shutdowns to control Coronavirus cases and second, the oil price war during March. These saw oil prices fall 65.6% during the quarter and had a similar impact on the share prices of companies with energy exposure.

Weakness in the property sector was triggered by the pressure of the shutdown on both retail and commercial tenants with landlords compelled to offer rental relief, which is hurting the earnings of the sector substantially in the short-term.

Fixed income and currencies

Bond prices rose, driving bond yields lower both here and overseas. In Australia, the RBA cut interest rates to a record low of 0.25% by 31 March 2020 and signalled its intervention in the bond market to keep the three-year bond yield at 0.25%. These measures supported bond returns as did rate cuts overseas. However, riskier bonds, such as business debt, lost value as investors were concerned about rising bankruptcies due to the economic impact of the Coronavirus. This saw negative returns for corporate bond investments.

The Australian dollar acted as a buffer for overseas investors, falling 12.7% during the quarter. Investors sold Australiandollars because they expect global economic weakness to reduced demand for commodities. This fall in the Australian dollar helps investors with unhedged overseas investments but raises the cost of imported goods.

Talking to a financial planning professional can help to ensure you’re following a strategy to achieve your financial goals.  Speak with LT to see how we can help, call (02) 4926 2300.

Source: IOOF

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When did the coronavirus outbreak start?

The Chinese Government alerted the World Health Organisation (WHO) of several unusual pneumonia cases in Wuhan on 31 December 2019. In early January, the WHO announced that they had identified a new strain of coronavirus — 2019-nCoV. At the time of this article’s publication, there are over 80,000 confirmed cases and almost 3,000 deaths worldwide.

How do epidemics and pandemics affect industries?

The biggest impact on many industries in an epidemic or pandemic is supply chain delays. Industries rely on specific regions to source parts and products. Using the coronavirus outbreak and assembly lines for technology products, as an example, people in assembly lines typically work in close quarters. To contain the outbreak, factories in China have delayed restarting production after the Lunar New Year break. One smartphone factory, Foxconn, is expecting a 12% decrease in production as a result.

Tourism is another key industry effected by epidemics and pandemics. In Australia, measures to contain coronavirus, including halting incoming flights from China will have significant impacts on the tourism and education industries. An economist at ANZ expects Australia’s economic growth to decline by 0.5% in the first quarter due to fewer tourists visiting Australia and a delayed start to the academic year for international students.

How are individual businesses effected by epidemics and pandemics?

Businesses within the sectors most impacted by epidemics and pandemics experience the effects of an outbreak first. In Australia, for example, travel booking company Webjet experienced a 10% slump in its share price in late-January following the coronavirus outbreak. Other companies such as JB Hi-Fi and Harvey Norman have said their supply of electronics could be disrupted.

Small and medium businesses can often be the hardest hit. Businesses such as restaurants and retailers in tourist hotspots and tourism services companies will be among the hardest hit in Australia over the coming months.

How long does it take for markets to recover after an epidemic?

Market recovery following an epidemic is dependent on a range of factors. Following the SARS outbreak, for example, the Chinese Government deployed fiscal stimulus to aid in economic recovery. At the time of the SARS outbreak (first quarter of 2003), China’s economic growth was 11.1%. By the second quarter, the country’s economic growth fell to 9.1%. As the outbreak was contained, and fiscal stimulus was deployed, China’s economic growth recovered to 10% by the third quarter of 2003. Looking at other markets, the S&P500 posted a gain of 14.59% following the first confirmed case of SARS. The index posted a gain of 20.76% a year after the outbreak.

How will an epidemic or pandemic impact my investments?

The economy has changed since the SARS outbreak. China is now a much larger part of the global economy, accounting for around 17% of global GDP, compared to 4% in 2003, so the economic impacts of coronavirus may be more pronounced. The best thing investors can do right now is exercise caution and make sure their portfolios are defensively positioned.

To discuss how your investments may be impacted by coronavirus speak to your LT financial adviser. Your financial adviser can help you protect your wealth by implementing suitable  strategies to minimise the impacts of these events on your portfolio.

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Each year many of us make a New Year’s resolution to spend less and save more for our future, but without a plan our good intentions may not amount to much.Let’s look at some basic rules for  building and preserving your wealth in  the years ahead.

PAY YOURSELF FlRST

Make sure that you regularly set aside some of your income before you’re tempted to spend it. Before long you’ll have enough to consider a range of investment options.

INVEST FOR GROWTH

Over the longer term, growth investments  such as shares should give you a better overall return than cash-type investments, but of course you have to select good value investments and expect some volatility.

TOO GOOD TO BE TRUE

Steer clear of investments with unrealistically high returns and most of the highly tax driven investments that you may read about as we approach 30 June – they’re often riskier than they appear.

INVEST TAX EFFECTIVELY

Remember money invested in Australian shares or managed share funds can earn you imputation or franking credits. These  effectively reduce your tax payable, leaving you with more after-tax income. With good advice, you could also consider borrowing modestly for investment.

MAKE THE MOST OF SUPER

Superannuation is still the most tax effective form of retirement saving for most people. By being subject to a lower rate of tax, your superannuation investments  generally compound faster than non-super investments.

SPREAD YOUR RISK

Don’t put all your eggs into the one basket – maintain a balanced approach  to investment. It is generally beneficial to be invested across a number of different asset classes such as shares and property. Often if one asset class performs poorly, another may perform strongly. A diversified approach can keep your investments growing steadily.

SEEK PROFESSIONAL ADVICE

Make sure your investment and superannuation strategy is appropriate for the year ahead. 

Speak with one of our Newcastle financial advisors for more money advice or visit our websites

Disclaimer

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The Superannuation Complaints Tribunal's latest annual report shows that more than half of the complaints they received for the 2010-11 year involved superannuation administration issues.

Additionally, 33% involved the distribution of death benefits with a further 13% relating to the payment of disability insurance claims.

Some of the administration issues included:

• delays in the time taken action switches between investment options;
• delays in rolling money over to another superannuation fund;
• insurance premium deductions;
• investment returns;
• delays between the date of resignation or retirement and the rollover or payment of the benefit

"These are all further reasons why self managed super funds are a premium option for consideration" commented  Andrew Frith of the Self-Managed Super Specialists.  "When you are the trustee and the member of your self managed super fund the fund and the funds available for retirement are top of mind, not delegated to some large administration organisation which may or may not even be in Australia."

Speak with our award winning Newcastle financial advisor and self managed super fund expert  Andrew Frith
 

Do you have, a self-managed super fund? or are you thinking about a SMSF?   Leenane Templeton are running a SMSF Trustee Seminar on 17 October 2012.  The SMSF Seminar aims to give the trustees or would be trustees an insight into the issues and strategies available in self-managed or family superannuation funds.  Guest speakers will include Paul Chin – Senior Investment Analyst at Vanguard Investments and Andrew Frith, CEO of The Self Managed Super Specialists.  For more details email events@leenanetempleton.com.au   

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Today the Financial Review Smart Investor congratulated Andrew Frith of Leenane Templeton Wealth Management for his outstanding achievement making the Nations Top 50 Honour roll in the 2012 Masterclass for Financial Planning.  Andrew achieved the top financial planner award through examination and is delighted to be in the Nations top 50 financial planners.  This is the fourth time Andrew has won a position in the top 50.

"This award demonstrates our commitment to continually update our knowledge through training and development in order to provide valuable up to date advice to our clients.  We believe that our clients should benefit from an exceptional service and high professional standards." said Andrew Frith of Leenane Templeton Wealth Management Pty Ltd.

Andrew has been a Chartered Accountant for 15 years with 20 years of experience as a practising accountant. He is also, a Fellow of the Taxation Institute of Australia, a SMSF Specialist Advisor, a Senior Associate of FINSIA and an Affiliate Member of the Financial Planning Association.  He has also been recognised in recent months by the Financial Planning Association as chapter winner of the 2011 Best Practice Awards.

Speak with one of the Nations top financial planners today, email wealth@leenanetempleton.com.au

 One of the Nations Top Financial Planners – Andrew Frith

How does this benefit you?

Choosing a financial planner or advisor can be difficult, particularly when there are thousands to choose from and its a very personal and private business.  How do you know whether you actually have a good financial planner?  The Australian Financial Review Smart Investor Masterclass for Financial Planning award demonstrates that Andrew will deliver high quality advice with an intimate and up-to-date understanding of the rules and regulations that govern our financial affairs.  A list of other top financial planners is available here.

We would be happy to help with your financial planning requirements, whether you are young or old we can help to identify the best financial strategies available to you.  Call our experts today to discuss your current financial situation and your goals. 

Meet top financial planners today

Book an appointment with Andrew today

Also visit:

Self Managed Super Funds Advice

Newcastle Financial Advice

Leenane Templeton Chartered Accountants

Newcastle Business Accountants

Top Financial Planners

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Dealing with changes

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When considering shares to purchase, a company that generates below average earnings, has poor cashflow or a weak balance sheet may be one for you to look at especially carefully before purchasing. Whilst there are other characteristics of weakness to look for, these offer clues that unpleasant issues may be about to surface.

Our Newcastle Financial Advisors are located on King Street, Newcastle, NSW 2300, Australia

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