Innholdsfortegnelse for May 2016 i Money Magazine

I’m writing this “hello” as the sharemarket wraps up the best week it has had in the past six months. The S&P/ASX 200 Index finished up about 4.5% to close at 5157.5. The week also saw a big rise in part-time roles, which cut the job-seeking numbers to a 2½- year low. Got to wonder why we’re all so negative. Ah, yes, the sky’s about to fall on the property market. Why go out with a property cover story when this is about to happen? Not too sure about the sky falling but a storm is certainly brewing. The real concern, of course, is oversupply in inner-city apartments in both Melbourne and Sydney. While red lights may be flashing around high-rise units, property is by no means out of favour.…

‘Life insurance’ is a good one – it’s death insurance DESPITE THE FINANCIAL services industry doing its very best to confuse the living daylights out of us, there are really only a few key money rules. Before I move on to that, though, it is worth mentioning just a few of the best efforts to really lead us up the garden path. “Capital stable” is a popular term in the marketing departments of many a fund manager or super fund. We all understand what this is about. Very logically, if we invest in a capital stable fund, our expectations are our capital will be stable. Wrong. In a decent market downturn we discover that it has exposure to growth assets. I appreciate that this is a sensible long-term idea but…

Who doesn’t like a thrilling tale of money and lies, especially if George Clooney is involved? Throw Julia Roberts into the mix and, voilà, you have the recipe for an entertaining thriller. Due for release in Australia in early June, Money Monster is a high-stakes drama starring two of Hollywood’s biggest names. Clooney stars as financial TV host Lee Gates and Roberts plays his ace producer, Patty. Both are put in an explosive situation when an irate investor (Jack O’Connell), who has lost everything, takes over their studio. During a deadly stand-off broadcast to millions, Lee and Patty must work furiously against the clock to uncover the truth behind a tangle of big money lies while also keeping themselves and their crew members alive. Money Monster is directed by Jodie…

Interest rates for aged care loans are generally higher than for average home loans and La Trobe’s fees are on the high side compared with other similar products. Understand how the costs are calculated and watch out for the compounding interest payments, as the debt can rise quickly as the interest builds up over the term of the loan. Consider whether the loan is enough to cover the bond and the daily fees and consider the effect on the age pension. Compare taking out a bond with selling the home outright, which admittedly can be traumatic.…

Expedia and the Priceline Group, the two biggest companies in the hotel booking site game, have come under fire in a report by ABC’s prime-time consumer program The Checkout. It claims hotel booking sites have been increasing commissions, with Expedia raising its cut from 9% to 15% in the past six years. This appears to be pushing up prices for those who book online, as The Checkout found savings of up to 25% by booking directly through a hotel website. While this may be in breach of parity clauses hotels have to sign with online sites, you can always try calling a hotel directly before you book online and see if it will beat the price. If you’re a frequent traveller, hotel loyalty clubs can provide exclusive discounts and extras.…

NAME: Danielle Gowan STATUS: 24, with a portfolio of four investment properties QUESTIONS: Should I diversify away from property? Should I hold my property in a special structure such as a self-managed super fund or family trust or company? What are the benefits and disadvantages of each one compared with holding the portfolio in my own name? SOLUTIONS: Your rental income needs to double in the next six years for you to live off that cash flow. One way is to buy more properties in western Sydney, close to good transport and amenities, for capital growth rather than buying in regional areas. Invest in shares for diversification. Keep the properties in your own name at the moment as the law prohibits you from moving them into an SMSF. You don’t…

Q I am 42 and my wife is 36. I earn $120,000 a year; my wife is not working as she looks after our three young children. Our house is paid off and we have three investment properties. One of the properties costs us about $40 a week while the others are either at par or have positive cash flow. I have saved $50,000 which we were looking to invest but due to market uncertainty we thought about putting it into an offset account against the investment property loan costing us money. We thought this offset will bring the loan interest down and will reduce the cost. We can use the money from the offset account when we see a good opportunity. Would this be a good idea for saving…

The Hesketh family has gained a serious toehold in the market for quaffing wines in a few short years. Senior winemaker Phil Lehmann shows his versatility by providing continuity with the iconic Parker reds from Coonawarra as well as crafting a raft of splendid value-for-money South Australian wines. Look for the Mezzo and Hesketh labels and take your choice. For example, you can have an intense, vibrant Hesketh Adelaide Hills Sauvignon Blanc for $20 or this budget-priced 'Bright Young Things' at an everyday price: refreshingly clean, bright and easily gulpable, a tropical, fruity edge and lively, crisp acidity to finish.…

I am 43 and recently married for the first time. My wife, Julie, is 10 years my junior and we are both schoolteachers in the public system. Our combined income is around $170,000 a year. Before I got married, I bought the unit I was renting for about $300,000 and this is where we reside. We try to put around $4000 towards the mortgage every month but still owe about $115,000. We have around $50,000 in our offset account. We are in the market for a bigger home as we plan to start a family soon. We have looked at many houses in our area and have seen several that appeal to us in the mid-$500,000 range. Is this beyond our means? Is it a good time to buy or…

If you are keen to get into the property market on a shoestring, investing in a strata car parking space is worth investigating. And it will look terrific on the surface: high gross returns, low maintenance, virtually no refurbishment costs and, if leased to a car park operator, regular rental growth. But there are some other expenses you should be aware of – more about this later. It’s not easy to find car spaces to buy, as they are pretty tightly held, partly due to a shortage in our major cities. For example, Sydney, on a global comparison, has one of the lowest CBD parking space to employee ratios – 12.2 spaces for every 100 workers – according to a 2015 report on car parking from Colliers International. And this…

IS IT OK TO GIVE OUT BSB AND account numbers for a deposit? I asked myself this very question not so long ago. You would think my answer would have been a resounding “yes!” After all, I’ve given my bank details to just about everyone and anyone who wanted money from me or owed me money and I’ve had no problems whatsoever. But when I was asked for my bank account details on Gumtree by a potential buyer, I hesitated. There’s a reason Gumtree prefers all transactions to take place locally and in person – there are shady characters online. Within half an hour of posting my son’s bed I got a message from “Anita” asking if it was still available and, if so, could I contact her via email.…

IS THAT EVEN POSSIBLE, I HEAR MANY of you ask? Wouldn’t that mean we’d be paying the bank to look after our deposits? What sort of fool would do that? But that’s exactly what has been happening in Europe where the European Central Bank has been “charging” commercial banks to hold their deposits since mid-2014. Negative interest rates have also been introduced in Japan, Sweden, Switzerland and Denmark. WHY WOULD THEY DO THAT? In a weak economy, negative interest rates can be seen as a way to discourage people from hoarding their money. If they have to pay for the privilege of holding cash in a bank, the theory goes, they’d be better off spending or investing instead. Or, in the case of banks, they’d be better off lending the…

If your plan lapses and you don’t do anything, it’s guaranteed you will pay a premium WHEN YOU’RE TRYING to cut energy costs, there is much you can do yourself, such as turning on the dishwasher and washing machine as soon as you’ve ticked over to an off-peak tariff or filling your freezer to capacity, making it more energy efficient. And now that LED lighting has come down in price, consider swapping the halogen downlights for LEDs. That’s easy. The hardest part is reviewing your plan and finding a better deal. But it could save you hundreds of dollars, especially going into winter when heating bills soar. How do you get started? First, grab your last bill and a highlighter and look at your current plan to identify how much…

All property owners hope their assets will gain in value over time. While Sydney and Melbourne home owners would have been pleased with their surging markets over the past couple of years, data from CoreLogic shows that the gains in the capital cities are starting to level out. Capital city markets have been losing momentum since July 2015, when overall median values were increasing at an annual rate of 11.1%. The slowing has been particularly significant for Sydney, with the growth rate more than halving to 7.4%pa in March from 18.4%pa in July last year. Overall, prices rebounded modestly at the beginning of this year, taking the annual rate across the capitals to 6.4% over the 12 months to the end of March. CoreLogic reminds home owners and investors to…

The new, smaller two-bedder can produce the same rent for less capital outlay THE ONE-BEDROOM apartment has played an important role in our bigger cities. Whether it’s rented by a struggling artist or occupied by a couple of young professionals, the one-bedder has provided an affordable living arrangement for a variety of lifestyles. But rumour has it that its days are numbered. Real estate services company Colliers International says the one-bedroom unit is slowly being squeezed out by the growing popularity with developers of a smaller version of the two-bedder. Since the minimum-size standards for new apartments in the two biggest states, NSW and Victoria, were changed last year, developers have started building smaller two-bedroom places. Curtis Field, from Colliers, says the new smaller two-bedroom unit is about 72sqm to…

A portfolio is only as healthy as its individual assets, and if some of your assets are potentially “toxic” you may need to reconsider their place in your long-term strategy. AMP Capital says Australia needs to decrease its greenhouse emissions by more than 90% to comply with last December’s Global Climate Change Conference agreement to limit global warming to less than 2°C by 2050. The investment house says such a requirement could have a significant impact on many of our listed companies and advises investors to analyse their portfolio’s carbon footprint. Companies fall into three carbon-emission “scopes”. Scope 1 companies have direct emissions from substances owned or controlled by them; scope 2 involves indirect emissions from energy generation purchased by companies; and scope 3, various sources, e.g. from distribution, logistics…

BY THE TIME YOU NEED ESTATE planning tools it’s probably already too late. But, with a little forethought, you should set yourself up to weather every storm life can throw at you. As well as life and income protection insurance, a solid estate plan that meets your needs and objectives, constructed by an expert legal professional, is paramount to ensure protection and family wealth longevity. A plan can make all the difference to how your assets are managed and distributed to beneficiaries if you are incapacitated or pass away. I specify “expert legal professional” as an average suburban lawyer will probably give average results. An I-love-you will may be fine if your situation is straightforward but simplicity is now a rarity. An I-love-you will is a circumstance where the husband…

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For the first time in four years, small-cap shares have outperformed the S&P/ASX 200 Index, according to Lonsec research. The S&P/ASX Small Ordinaries Index returned 10.2% in 2015, compared with the 2.6% return of the ASX 200. “Finally, after a series of negative returns, local small caps have turned the market on its head,” says Peter Green, Lonsec general manager of equities. Green says small caps have been lifted by key high-growth consumer shares, outweighing the losses from mining and materials. “There has been very significant price-earnings expansion across a number of shares, which have benefited from the Chinese consumption boom. Recent IPOs such as A2 Milk, Costa Group and Vitaco have experienced a lot of growth over a short period of time.” Lonsec says that, despite the supposed higher…

FROM CORNER CONVENIENCE stores and small cafes to tourism and big-box hardware, automotive and supermarket chains, there are almost 140,000 retail businesses in Australia. Collectively they account for more than 4% of gross domestic product and just over 10% of employment. Challenges constantly beset the sector and online disruption is but the latest in a long line of developments which have included the emergence of department stores; electronic payments; obligations surrounding product safety and warranty; and the emergence of global bricks-and-mortar players. There has also been government intervention, regulation and oversight – over everything from mergers and acquisitions to accounting and pricing. Retailers operate under a number of regulatory regimes – from zoning to trading hours and workplace relations – which restrict their competitiveness and ability to innovate. Investors should…

Your guide to the super data Australians have two main investments – their home and their superannuation. Super may not be as riveting a topic but it’s just as important for your financial security. SuperRatings is a totally independent Australian superannuation research company. It is the leading source of superannuation information to the Australian media and is renowned for its timely commentary and opinions on the various superannuation funds available. Calculators, fund comparisons, fund ratings, news and expert opinion can be found at www.superratings.com.au. The data in these tables compares some of the most popular super funds. They are a mix of industry funds, master trusts and government funds. Industry funds are set up by employer associations and unions; many are offered publicly, some have restricted membership (NP). Master trusts…

Retirees pay their dues Thank you Ross Greenwood for your recent article. The government has lost itself. It needs to stop targeting those soon-to-be retirees and the already retired. There are a lot of aged workers who would rather retire than work but can’t stop because of a lack of finance. These are my suggestions: • Every person who reaches the age of 60 and retires from the workforce should get the aged pension. • Those who have gone without over their working life to save money (either via super or personal assets) so they could have a more comfortable retirement should not be penalised by the government, expecting them to use those savings to live on. I saved so that when I retire I can do all the things…

Since the beginning of the year, we have seen more than 20 mortgage lenders discreetly increase their home loan rates. While some lenders have increased only their investment loan interest rates, others have increased the rates across their entire suite of home loan products. With wholesale funding costs increasing and new prudential rules forcing Australia’s lenders to hold greater capital, it is likely that the recent spate of rate rises is merely the start of things to come. As such, we may see a greater number of lenders changing their product pricing out of cycle with the Reserve Bank of Australia (RBA). Looking at the RBA, it would appear as though there is room for it to cut the official cash rate at least once more before the end of…

Coming up with a bond for a parent to move into aged care often means selling the family home, unless you are lucky enough to have spare cash or investments. Refundable accommodation bonds (RABs) are typically more than $500,000 and then there are daily accommodation fees on top. La Trobe Financial is offering an aged care loan that uses the equity in the parent’s home as security and lends up to 50% of the value of the property (maximum $750,000) to pay the bond. The loan can also be for repairs or paying off the mortgage. The interest compounds and is added to the loan balance. Interest repayments are due when the total loan balance increases to 140% of the amount borrowed. For example, if you borrow $250,000, you will…

The end of the financial year is approaching fast and your thoughts may well be turning to your tax return. If you lodge your own return rather than use an agent, there is a key change to the services offered by the tax office. E-tax is being retired after many years of service. Now you’ll need to use the more modern myTax. Since it was introduced a couple of years ago, myTax has increased in sophistication and this year will have all the functionality that was previously accessible only through e-tax. Because myTax is an online cloud-based service, rather than a program downloaded onto your computer, as e-tax was, it allows instant transmission of data to and from the ATO. Before you can use myTax, however, you’ll first need to…

It’s always great to see young people doing so well so early in their investing lifetime – and I am the first to encourage this go-getter attitude. However, it’s a really good time to sit down and think about a couple of important things before going any further. First, there is nothing wrong with being a renter yourself (or staying with mum and dad if they’ll have you) and investing in property elsewhere. You can live where you want to, in areas where you may not be able to afford to buy, but still build a portfolio, as you are doing. In terms of property investing, having a positive cash flow is really important but I want you also to have your eye on the capital growth prize as well.…

Q I’m 56 and my wife is 57. I am self-employed and earn $75,000 net after expenses; my wife earns $50,000 gross. We own our home worth $650,000 and have $700,000 and $100,000 respectively in AustralianSuper’s balanced option. We have an apartment worth $300,000 (bad investment), which is currently tenanted at $1200 a month, and 11,000 Telstra shares against an investment loan of $380,000. The plan is to downsize our home, sell the apartment and be debt free in three to four years and transition to retirement or retire completely on an allocated pension. I contribute $35,000 into super each year and my wife has employer contributions. Based on these figures, what do you think we can draw from an allocated pension? Is this a sound strategy or are there…

Q My wife and I are investing in stock exchange securities for our young daughters, in order that they are able to live off the distributions in 30 to 50-plus years’ time, without ever having to sell the securities. This is a long-term buy-and-hold strategy, through reinvestment and compound interest. Exchange traded funds (ETFs) appear the obvious choice to set the foundation of these investments. How can we be sure the ETF provider will be around for the long term, though? Should we reconsider using ETFs and instead invest directly in blue-chip companies, which have longevity and history on their side despite the reduced diversification compared with ETFs? A Hi Chris, what a perfect question to follow Chua’s (previous page). Your young daughters will be very happy in several decades.…

In the years since selling Petaluma, Brian Croser has reinvented himself and established a now-flourishing family business that makes a range of excellent wines: chardonnay from the Tiers Vineyard in the Piccadilly Valley, classy reds from the mature Whalebone vineyard at Wrattonbully and seductive pinots from a cool site on the previously unfancied Fleurieu Peninsula. With more than a decade of vine age, the Foggy Hill vineyard is showing consistency with its pinots: from the warm 2014 vintage there’s a supple, fleshy yet structured pinot that has delicate, spicy florals, wonderful concentration of redcurrant and blackberry brambles, and an elegant finish that lingers.…

What is it? solo2 wireless, Beats by Dre How much? RRP $399.95 Info: With a built-in microphone, Beats by Dre’s headphones double as a hands-free communication device. Pivoting ear cups (also foldable) make for a stylish and natural fit. It is compatible with Bluetooth devices and has a battery life of 12 hours. What is it? Soundlink on-ear Bluetooth headphones, Bose How much? RRP: $349 Info: Bose’s headphones are also a wireless hands-free headset for your phone. Known for its innovative sound technology, Bose uses its patented TriPort technology with active equalisation to deliver crisp sound. The battery lasts for up to 15 hours.…

“You could be fined heavily for sending unsolicited direct marketing material” BUILDING UP A GOOD CUSTOMER database and email list can be crucial for the success of your small business’s marketing campaigns. If you’re new to business and don’t have a customer list, buying access to a database or email list is your only option. It could also be the right choice if your current database lacks the depth to generate decent activity for your business. Buying access to lists and databases typically involves dealing with a third-party list broker. List brokers specialise in the sourcing of existing lists or the creation of new lists tailored to your particular business needs. Creating a list from scratch can take a while so, if you want a bespoke list, factor that into…

IF YOU’RE THINKING ABOUT applying for a loan or credit card it can be a good idea to find out your credit score before starting an application. “Your credit score and credit history will play a big role in whether or not your finance is approved,” says Mortgage Choice CEO John Flavell. While the method your chosen lender employs to work out your credit score may differ from the methodology used by credit score websites, these websites will give you a good idea of what your credit score is and whether or not it will be possible for you to obtain finance, says Flavell. There are two websites that let you get your credit score free of charge. One is getcreditscore.com.au, which is backed by peer-to-peer lender SocietyOne and uses…

How can you make sure you get the price you want when selling your home? A Finder.com.au survey has revealed that the condition of the front yard and the facade can really influence potential buyers. On average they will offer 13% less than the asking price if they’re dissatisfied with the property from the outside. And 8% would offer up to 25% less due to the poor street appeal. The survey shows Queensland has the most demanding buyers – they discount their offers by 15% on average. So it pays for sellers to create a good first impression. This can be done without spending a lot of money. Finder suggests building a new fence, repainting the facade, installing a modern door or sprucing up the garden. A separate Finder survey…

Africa is fast becoming an important profit driver for some of the largest multinational consumer companies. The sheer growth of its population and spending habits of its fast-growing middle class means Africa is one of the few areas of growth in a low-growth world. By 2050, Nigeria’s population will exceed that of the US and it will be the third-largest populated country by the end of this century. Investors will soon talk about Africa as they used to talk about Asia and Latin America. Already companies such as Coca-Cola and food company Danone anticipate further penetration of their brands as per capita income rises. For example, Danone’s African sales continue to accelerate beyond its 2014 results, which were six times 2008 figures, generating more than €1 billion ($1.5 billion) in…

One boom ends, another starts some place else I HAVE SAID IT BEFORE, AND I WILL SAY it again: if you have a business – or some specific skill – then buy yourself an airline ticket to Shanghai, Beijing, Guangzhou, Chengdu, Wuzhen, Shenyang, Xiamen, Hangzhou or any of a dozen other large Chinese cities and start exploring. There is no doubt there are enormous opportunities for Australians from the free trade agreement – that will only dawn on many people when someone else has taken full advantage of them. The trick is to move early, learn early and gain contacts and knowledge. All you have to do is put your backside into an airline seat. And there are plenty of them on offer. Seven airlines now fly to and from…

MICHAEL MCCARTHY Chief market strategist, CMC Markets Periods of extreme swings, followed by calmer times, then more violent movement: that’s what traders anticipate, until at least year’s end. As volatility increases, so do opportunities but traders must use disciplines such as stop-loss orders to ensure a losing trade doesn’t become a disaster. Many traders are focused on the US dollar as their top pick for 2016. Anticipation of higher US interest rates saw the $US Index appreciate almost 25% last year. January started a run of softer US data and falls in the $US against many currencies. So many traders are waiting for a sign that $US strength is about to resume. Some traders anticipate a fall in the euro/$US (a rising $US) to parity from current levels closer to…

Contact us To send a letter to the editor, write to Money, GPO Box 4088, Sydney NSW 2001 or email money@bauer-media.com.au For all inquiries and letters, please include name, address and phone details. Letters may be edited for clarity or space. Because of the high number of letters received, no personal replies are possible. How to get Money 1 Subscribe to Money: Phone: 136 116 Online: magshop.com.au 2 Subscribe to the Money digital edition for your iPad at magshop.com.au/digital/subscribe/moneydigital 3 Visit our website moneymag.com.au and sign up for our free weekly newsletter. You’ll get our top money stories plus exclusive finance tips. Follow Money on facebook.com/ moneymagaus @moneymagAUS…

The depressed resources sector recovered in the first quarter of 2016. Fading concerns about a hard landing in China pushed commodities higher, with the S&P/ASX 300 Metals and Mining Index rising by 5.3%. But the sector is still down 28% over the year to the end of March. Commodities that rose included zinc (13.5%), copper (3.7%) and aluminium (0.7%) while nickel (-3.8%) and lead (-5.6%) declined. Brent oil rose 8.3% to $US38.72 a barrel. Iron ore surged in early March to $US63.74 a tonne but fell back to $US53.75, to finish the quarter up 23.4%. SUSAN HELY…

IT USED TO BE THAT A 5% DROP IN a bank stock over a year triggered widespread trepidation among the hundreds of thousands of pension-phase investors. They rely on the banks and Telstra for income and collect fully franked dividends in a zero-tax environment so franking can be claimed back as cash. But nowadays 5% movements are commonplace in these massive stocks. In March ANZ Banking Group fell 8.62% in two days; two weeks before that it rose 10.35% in three days. It is becoming quite apparent that short-term pricing is no longer a reflection of fundamentally based, research-driven investors making informed decisions about stocks over the long term. There is something else going on and sentiment is taking a much bigger role. The media, stockbrokers, clients and commentators are…

I read with interest Ross Greenwood’s article “Super caught in a class war” (April). If I understand you correctly, you think the family home shouldn’t be used to assess eligibility for an aged pension. [The Centre for Independent Studies and the chairman of the Productivity Commission, Peter Harris, have recently recommended that it should be.] Can I therefore infer that you would suggest my husband and I upgrade our house to a better one, thereby reducing remaining assets below the threshold, and live on the aged pension, plus benefits, and leave an appreciating asset (the house) tax free to our children? Silly me! I thought we would save for our retirement and not be a burden on the next generation of taxpayers.…

Nominating a beneficiary allows the trustee of your superannuation fund to know where to pay your super death benefit when you die. Ideally you would make a nomination to guide the trustee. However, in the event that no beneficiary is nominated or if your nominations are non-binding, the trustee can choose to pay your death benefit to any of the eligible persons, including: your spouse (including a de facto); your child or children; your estate; and a person with whom you are in a relationship of interdependency or who is financially dependent on you. If you make no nomination, the trustee will typically write to your executor and your spouse and children, asking if they wish to make a claim for the death benefit, and asking who else might be…

Yes, there will be changes to the way parental income affects Youth Allowance, Abstudy and Assistance for Isolated Children payments. Currently, only dependent siblings aged 16 to 21 are included in the parental income test. This will be expanded to include all siblings in your “family pool”. So you may see changes to your payment rate. If you or a dependent child have previously claimed one of these payments and your claim was rejected due to parental income, you may now qualify if you have younger siblings. In most cases, the change will apply automatically. If we do need more information, you will have received a letter in April. You can quickly and easily check the current details of your family pool online. If you have a Centrelink online account,…

As a share investor, how often do you attend annual general meetings? When you have decent-sized portfolio it can be hard to keep track of what’s going on in a particular company, especially if you devote a great deal of time to tracking the market. With Omni Market Tide’s new app, you can stay up to date easily. You can check Australian share prices, save and share company announcements and know the issues on various AGM agendas. The app also allows you to live-stream the proceedings of AGMs and vote in real time. The app is great for investor productivity, allowing you get up to scratch on all your investments through one convenient platform.…

“Having money is a bit like having a Christmas present ... the best part is before you open it” AS A CEO, IT’S ADAM Schwab’s job to concern himself with money. He controls lots of it, invests it and on the side – as a sometime business journalist – he writes about it. He’s reported to be worth tens of millions. He just doesn’t pay himself a lot of it and he’s reluctant to spend, especially on himself. Schwab is co-founder of Lux Group (formerly AussieCommerce), with a staff of 400 and some 6 million members. It’s a sort of online retailer for those who want what Schwab describes as “exceptional experiences” at flash-sale bargain prices, which his group aims to provide via 15 brands associated with travel, the home…

Shares can provide tax-effective income and capital growth While property has traditionally been considered a “safe” asset class, the world has changed and I do have concerns about your exposure to interest rate movements and property prices in the current market. Your loans are a heavy burden on your salary. Your strategy of looking for properties that provide a high rental yield is a solid one. However, what would happen if one or more of the properties was vacant for a time? You have some funds accumulated in offset accounts that provide a buffer – but for how long? Further, interest rates are very low right now. At some point they may start moving upwards. Can you afford to continue to service those loans? Your loan-to-value ratio (LVR) is more…

Q I am a 32-year-old professional male earning $120,000pa, with about $100,000 in superannuation. My home is valued at around $380,000, with a mortgage of $225,000 still owing. I have an investment property worth $175,000 and a mortgage of $159,000 owing. I also half-own two other investment properties: an apartment worth around $450,000 with a mortgage of $328,000 and a commercial property worth around $500,000 with an outstanding mortgage of $323,000. I have $30,000 invested in exchange traded funds (ETFs) and about $80,000 in cash offsetting my home mortgage. What should my plan be from here? Should I utilise the cash available to purchase additional investment properties? A Alex, the world of investment is your oyster. As I said to Alana (previous page), I think the real decision is about…

What is it? Ever wanted to take a leap of faith? Abseil down Melbourne’s iconic St James building to help Anglicare Victoria raise funds for children in need. Anyone over 16 can take part, either as an individual or team. The event will take place on May 27-28. It costs $150 to register, and you must raise at least $850 to secure your place at the top of the 113-metre skyscraper. Registered climbers will be guided through the abseil by the event partner, Zenith, which specialises in adventure-based experiences. Where your money goes: All funds help Anglicare support Australian foster children. The charity houses over 400 children each night, and provides training and support for foster carers. It also runs programs to help foster children catch up to their peers…

Existing mortgage holders have benefited from low interest rates in the past two decades. But for newcomers, loan repayments are taking up a big slice of their income despite the low rates, because of soaring property prices. Reserve Bank data shows that in the mid-1990s, mortgage rates fell below 10% and have stayed there, encouraging households to take on more debt. Although households are heavily indebted, particularly for housing, the value of their assets is significantly greater. The current ratio of housing debt to housing assets is 28.4%, up from about 12% over the past 27 years. But CoreLogic warns that if interest rates rise substantially and unemployment increases, there could be a dramatic deterioration in the value of assets, which would be devastating for new home owners.…

MY ELDER DAUGHTER IS ABOUT to finish university. But, like so many young Australians, she faces an uphill battle to find work. A university graduate takes four years and eight months, on average, to make the leap from full-time study to a full-time job, reports the Foundation for Young Australians (FYA). Thirty per cent of young Australians are either unemployed or under-employed and unpaid internships are replacing entry-level jobs. Certain industries, such as media, are shedding large numbers of professionals and 25% of young graduates do not use their university degrees in the workplace, says FYA’s report, The New Work Order. “Young Australians are facing much more insecure labour markets,” says Jan Owen, the head of FYA, which has a partnership with the Business Council of Australia (BCA). She says…

Expect a property correction, not a crash. And after a 30% gain in capital city property prices over the past four years – mainly due to Sydney and Melbourne – a slowdown and correction are likely. This may be already under way, with slower lending to investors, out-of-cycle interest rate hikes and poor affordability driving a loss of momentum in Sydney and Melbourne. We expect those two markets to see a 5% to 10% fall in prices around 2017-18. A downturn in the property cycle will be a dampener on the economy because it will go hand-in-hand with slowing housing construction and, as property accounts for about 65% of household wealth, negative wealth effects will dampen consumer spending. All of which will pose a challenge to the economy, which is…

SHOULD YOU BUY AN ESTABLISHED home or build a new one? This is a question faced by all residential property buyers regardless of whether you are a first-home buyer, an upgrader, a downsizer or an investor. Certainly there are more incentives for buyers of new homes – especially, but not only, for first-timers. For a start you will pay less in stamp duty, which, depending on which state you are buying in, ranges from $27,000 to $41,000 on a $750,000 established house. But with a house-and-land package you will pay the stamp duty only on the land, not the house. So, for example, if the land component of your $750,000 house is $300,000 you will save between $20,000 and $27,000. Some states, most notably NSW, also provide incentives for people…

I'd invest $5000 in a diversified portfolio of low-cost index funds. Research consistently shows the way to maximise long-run returns (adjusted for risk) is to create a diversified portfolio of low-cost index funds in a variety of asset classes. They should be rebalanced periodically to maintain your risk-return profile. Rebalancing is a disciplined way to keep your portfolio in line with your strategy and to avoid simply chasing assets performing well at the time. Every dollar of fees comes off your return, so minimise them for the index funds that best represent sectors you want in your portfolio.…

IT CAN BE DAUNTING MOVING FROM super’s accumulation phase to pension phase. Instead of money going into your account, it’s going out. With this in mind, it’s important to check whether your existing fund still serves you well. For starters, you have different needs in the pension phase. You will want easy and reliable access to your money, especially in an emergency. So even if your fund’s returns and fees are OK, how responsive is it? And does it have the investment options to put your strategies in place? “Look for a fund with a trusted brand because you want them to be around for a long time,” says Alex Dunnin, executive director of research at Rainmaker SelectingSuper. “You also want a fund that is easy to transact with. Is…

You will have plenty of time later to play it safe THE ABSOLUTE LAST THING ON MY mind is how my life will be when I’m 70. Just like most people of my generation, I’m more concerned about the “here and now” – all the tangible things I can see in front of me. That said, there comes a time, once a year, when I get a magical email that reminds me how important my retirement really is. Once you put a dollar figure on it, it immediately becomes more relevant. When you’re in your 20s, you don’t have to go overboard with devising a strategy for retirement. Save the extra super contributions for a time when you’re further ahead on your finances. If you have a first home on…

GOLD IS BACK ON investors’ radar after staging a spectacular 18% rally this year in US dollar terms and 11% in Australia dollars. It reached $US1262 ($1653) a troy ounce, its best gain in over three decades. Why has it shot up? Investors are nervous about the downturn in emerging markets and China. Also they have the jitters about negative interest rates in Japan and Europe and the US Federal Reserve’s decision to keep interest rates on hold. Gold is regarded as a safe haven in times of turmoil and goldminers have cut production, so supply is not keeping pace with demand. It is not only investors who are stocking up. Big central banks are diversifying their reserves – they bought more than 336 tonnes in the second half of…

The disruptive nature of the technology boom has transformed outdoor media. Everywhere you look, outdoor advertising is changing; billboards are now digitalised and street furniture is interactive. Revenue of these marketing channels grew 24% year-on-year to February 2016 and growth is accelerating. Growth in out-of-home advertising is perhaps the only good news story for the industry. Figures for February 2016 show a $15 million (5.8%) year-on-year decline in monthly Standard Media Index TV advertising spend, painting a rather dark picture. As television viewing patterns change and the growth of outdoor advertising increases, the decline in TV ad spend is expected to continue. The UBS Australian small cap team sees outdoor advertising as a very prospective medium- to long-term investment. The team has arrived at this conclusion by analysing forecast cash…

MARKETS WERE ALL OVER THE place in the first months of 2016. At times it was quite scary. The Australian dollar plunged and then rose. Sharemarkets also took part in the global bungy jump. Are we heading for a midyear repeat performance and, if so, what will the triggers be? The early slide was created by a confluence of fears. The US was lifting rates, the Chinese were devaluing their currency, the North Koreans were exploding nuclear devices, the Japanese introduced negative interest rates and locally we were contemplating broad changes to the tax system. Will we get an encore in May or June? We can rule out broad changes to the tax system. Someone got cold feet. China appears content with its currency settings and I doubt the North…

NOT THAT LONG AGO, LOOSE change was collected in a jar or bucket and periodically taken to the bank to deposit. Not that the banks were happy about taking time to count dozens of coins – it detracted from product sale time. Now, as with just about every other service – booking cabs, flights and holidays, paying bills, finding locations, checking the weather or a list of bestsellers – there are apps on our smartphones that can perform these functions with a swipe or a tap. Now plastic is used for most transactions, an app can replace the coin jar. Appropriately, it’s called Acorns and enables you to save and invest virtual spare change automatically – and almost without a thought – when you use your plastic to buy coffee,…