Innholdsfortegnelse for September 2020 i Money Magazine

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COVID-19 IMPACT Long wait for prices to rise Finder suggests Melbourne homeowners may have to wait two years before the property market turns the corner. Of the 40 economists and experts surveyed, most (75%) are pessimistic about Melbourne prices increasing before April 2021, while a third (29%) expect the market to lag until at least 2022. “Both Melbourne and Sydney experienced double-digit growth throughout most of 2019,” says Graham Cooke, from Finder, a comparison site. “But widespread unemployment, travel bans and a second virus wave have caused a surge in property vacancies throughout both capitals.” Melbourne’s median house price dropped 3.5% to $881,369 between March and June 2020, while Sydney saw a 2% drop during this period. “As Sydney teeters on the edge of a second major outbreak, prospects may…

Derrick has all his eggs in the property basket, so it’s time to … Diversify your assets by investing in shares too Q I am looking to get the most returns out of my assets. I am 52 years old with a partner and three small children. I work in IT with a salary of $105,000 and my partner does not work. I own one property in London worth about $800,000, which receives rent of $550 a week with no mortgage. I also own three properties in Australia: one worth $750,000 ($480pw rent with no mortgage); another worth $450,000 ($350pw rent and a mortgage of $70,000); and my private residence (with no mortgage). I have $100,000 in super and am salary sacrificing up to 15%. There are no credit card…

• Invest time into planning your financial growth strategy. Give yourself the chance to understand your context and make a plan. Create some short-term financial goals and use the achievement of these goals as a marker for reassessing your strategy. • Don’t be seduced by fear, and monitor your investments without getting emotional. Create a rhythm of review that is neither too regular or “set and forget”. Hypervigilance in a long-term game can produce unnecessary panic. In a short-term game you need be vigilant without letting your emotions get the better of you. • Practice makes perfect. Over time you will learn what pain and loss feel like, and become less reactive to them. No investment strategy is without losses. The people who have more experience tend to manage these…

Never try to save on costs by cutting back on landlord insurance. Your insurance covers you should something major happen to the property; it can be used to recoup costs from damage caused by domestic pets or by the tenants; and it can compensate you for loss of rental income if your property is severely damaged. Check with your insurer that you are covered for all items pertaining to investment property. When setting a value on your property for insurance purposes, always include an amount (about $30,000-$50,000) above the rebuild value. This is an allowance for land clearing, should you experience a total loss. Review the level of your property insurance annually to determine that you’re not underinsured as build costs increase. If you own an apartment or townhouse in…

PROS Long-term leases (anywhere between three to 12 years, depending on the type of property), which generally means long-term tenants. Reliable rental income. Rent is paid monthly to the investor in advance. It’s also paid if the property isn’t occupied during the lease term. Property management is mostly taken care of through a DHA care service. For a flat fee of 16.5% (deducted from the rent and 13% if a body corporate is involved) you don’t have to find new tenants; you don’t have to carry out property inspections (you will receive inspection reports); and if the home is unoccupied DHA will maintain the gardens and lawns. DHA will cover the cost of most non-structural repairs. Independent evaluations are undertaken each year by a licensed valuer with a recommendation to…

1. Understand the risks of what you’re investing in. P2P lenders with significant track records have got processes and history, and understand what has to happen in times of crisis. 2. Beware of the difference between pooled and contributory funds. There are advantages to each, but there are also risks. 3. If you don’t understand the P2P arrangement you’re investing in – that is, who’s holding the security, what happens if something goes wrong – then you wouldn’t put your money there. 4. Low loan-to-value ratios provide protection. If you’ve got the choice between two different mortgages, and on the face of it they look about the same except one’s got a lower LVR, choose that one because it reduces risk. 5. High interest rates normally mean high risk. If…

You will need to fork out between $2000 and $5000 if you want a full financial plan or statement of advice. While the top 5%-10% of super savers with more complex portfolios can afford that expense, it’s less manageable for middle income earners. It has prompted the Actuaries Institute to call for a new, more flexible regulatory regime that ensures all retirees can benefit from good, low-cost advice. As the super system matures, more people will have more money in retirement. Andrew Boal, convenor of the institute’s retirement strategy group and chief executive of actuarial firm Rice Warner, says currently 65% of people have less than $250,000 in super when they retire and rely on the full age pension. Over the next 20 years this group is projected to drop…

In pre-Covid times, nothing was considered safer than so-called utility stocks. Once the province of telecommunications, electricity and water – services we can’t easily do without – these companies were the “widows and orphans” stocks: businesses whose share certificates could be left in the bottom drawer in full expectation of conservative balance sheets and regular dividends. In the meantime, the sector has grown meaningfully, thanks to privatisation, the concept of public-private partnerships (PPPs), and the aggressive uptake of financial engineering. Gas pipelines, toll roads and airports, among others, have swelled the ranks of the previously slow, staid and boring utilities sector. But two things have happened since those days. The obvious one is Covid-19, in particular decimating air travel, and curtailing the number of people using toll roads. To wit:…

The tables on these pages contain data and information to help you compare managed funds, which are pooled funds managed professionally by investment experts. Managed funds displayed in these tables are multi-sector or asset class specific. Multi-sector managed funds invest across a diversified mix of asset types spanning equities, property, bonds, cash, infrastructure, private equity and alternatives. Managed funds are normally set up as unit trusts. You may be able to invest in them directly or through a platform. These products may be recommended to you by a financial adviser. The performance results displayed are the annualised investment returns each managed fund has delivered after taking into account taxes paid by the unit trust and investment fees. Research was prepared by Rainmaker Information and for more information see www.rainmaker.com.au The…

MAX RIAZ Max, a director of Banyantree Investment, says: “I have totally moved away from drinking $5 coffee every day and spending $400 a week on restaurant and cafe foods. I am now a self-taught chef, whipping up culinary delights from all over the world inspired by YouTube chefs. The net savings of $18k a year can go a substantial way in paying school fees for my daughter.” SCOTT PHILLIPS Scott is The Motley Fool’s CIO. He says: “A good way to overcome financial risks is to reduce outgoings, spending less on discretionary items. But another, overlooked way is to spend upfront to cut bills. For my family that meant adding more solar panels on our roof. In the sunniest part of the year, we ended up with a credit…

THE BUZZ Bank of Mum and Dad backs health cover too The Bank of Mum and Dad is often only discussed in terms of what it can do for its children looking to buy a home. In fact, Mozo research repeatedly finds the Bank of Mum and Dad to be the fifth largest home lender in Australia. But this bank’s local branch managers will tell you their credit lines run much deeper than a home loan or deposit: education, a car, a wedding, sport or other recreational activities are commonly funded in some way by the Bank of Mum and Dad. Arguably this bank is the most sustainable in our nation’s history. It runs without the need to meet capital requirements of an industry regulator and, by all accounts, is…

Since March this year our incomes have been reduced or, in some cases, have ceased altogether, and investment balances have fallen. The upshot is that Covid-19 has forced us to take a closer look at our finances. Federal government stimulus payments such as JobKeeper and JobSeeker, as well as other emergency payments, have helped. Access to super has eased many of us through, as have the opportunities for payment deferrals to banks and utility providers. What the global pandemic has prompted us to do, though, is to start looking for money in places we might not have considered before. Aside from the stash of cash under the bed, behind cushions in the lounge or in pockets and bags we haven’t used for a while, there are other ways to enhance…

Signing a prenup is motivated by parents and children alike. Malcolm Gittoes-Caesar, principal at Coleman Greig, says there are situations where parents send kids to see him, and then there’s a shift when kids are pushing parents to see him to ensure their inheritance is protected. “If the parent is there under sufferance with an adult child it can be super awkward and we have to be super clear of who we are getting instructions from. Some parents decide they don’t need it and that’s a family drama I can opt out of,” says Gittoes-Caesar. “Generally speaking parents want to make sure kids are looked after and it’s a good way to raise this early on and if people don’t want to do it, it raises a red flag.” People…

Before the coronavirus crisis hit early this year, I had plans to demolish my old home and potentially build two townhouses on the same land. I had already agreed on a timetable with my architect, but then the pandemic hit and scuppered my project. I’m sure many of you are in the same boat in terms of having an investment plan that didn’t factor in this year’s shocking turn of events, and are wondering whether you should proceed with your investments or wait until the crisis is behind us. But with the JobKeeper scheme extended until March 2021, it looks as if most decisions have to be put on ice for at least two years if you want to take a very cautious stance in this recession. I knew my…

Covid-19 has triggered a perfect storm for women’s finances. It has hit their typical work industries – travel, retail and hospitality – particularly hard. The Australian Bureau of Statistics (ABS) has shown that women have suffered a disproportionate loss of jobs, particularly part-time work at large and medium businesses, where 125,000 women lost their jobs compared with 46,000 men from February to June. The ABS found 5.7% of women, compared with 4.7% of men, lost their jobs from February to June across both full-time and part-time employment. Bear in mind these figures are understated due to JobKeeper arrangements. Experts have dubbed these pandemic times a “pink recession” or a “shecession”. Losing your job during Covid-19 calls for urgent action: slashing spending, applying for government benefits, seeking rent or mortgage relief,…

This is an edited extract from Positively Geared: How to build a multi-million dollar property portfolio from a $40K deposit by Lloyd Edge (Wiley, $29.95), available now. For your chance to win one of 10 copies, tell us in 25 words or less how you would begin to build a property portfolio. Enter online at moneymag.com. au/win or send your entry to Money magazine, Level 7, 55 Clarence Street, Sydney, NSW 2000. Entries open August 31, 2020 and close on September 28, 2020.…

I have lived through a number of distressing economic phases, ranging from the Asian debt crisis in the late 1990s, to the dot-com boom and bust of early 2000s, to the GFC of 2008 and now the Covid-19 pandemic. All but the current crisis were financial in nature and central governments and central banks remedied their impact through fiscal and monetary manoeuvres. The jury is still out on whether the fiscal and monetary remedies will be sufficient to neutralise and reboot the economies that currently remain in the unceasing grip of the pandemic. I am hopeful, as are the markets! I am alarmed by the mismanagement of Covid-19, however, by governments all over the world. I am increasingly concerned about how ill-prepared we will be when climate change catastrophes start…

It’s important to get professional help in the lead-up to retirement. Poor decisions can be costly and difficult to recover from once your wages stop. Some financial advisers will charge a straightforward fee; others will charge a percentage of your assets. In between those two ends of the spectrum lie a wide variety of hybrids. “One of the hybrids could be, ‘We’ll charge you a fee for the advice, and then to implement it, we won’t charge a fee for the advice, we’ll just charge you a percentage of assets under management and that includes annual reviews of your portfolio’,” says Daniel Brammall, president of the Profession of Independent Financial Advisers (PIFA). Asset-based fees are charged on a sliding scale, ranging from 1% to 0.5%. “But that’s on top of…

One of my clients retired at 50 to become a full-time trader, hoping he could shrug off the rat race and the typical work-sleep-work life. Fifteen years later he is still “retired” and still trading full time. Now he calls it what it turned out to be: trading not investing. That’s what happens if you do it daily. There is no set and forget – it’s just a series of individual stock-based battles and if that’s investing, so be it, or if that’s trading, so be it. It’s just an endless, but enjoyable (for him) financial survival exercise, in any stock over any time frame. He says long-term investing is mostly born out of denial, a convenient high-brow excuse for doing not a lot of research, doing a moment’s stock…

Still, the question for this column isn’t “Should you buy them?”, but rather “if you buy one, which should it be?” Last year’s winner, Sydney Airport, is largely safer now, with that capital raising having been completed, but we can’t know yet how long that cash will last if travel doesn’t meaningfully restart. Ditto Transurban. Nothing is truly safe from the fluctuations of variable demand. In our case, that means the least susceptible (but not immune) to falling demand, given the size and structure of the balance sheet. That makes this year’s winner the gas pipeline operator APA Group.…

What was your first job? It was working as a labourer at the water board at 16 years old – that was such a good education. I didn’t know how to use a shovel and there were so many things they taught us. One guy gave me a great lesson: “Karl, you’re different from me, all I can ever do is dig ditches, you can do anything you want. Me, I can’t.” I’ve never forgotten that. Always have compassion for people who can’t do what you can do. What’s the best money advice you’ve received? Read the fine print. Try and save a bit. Trying to predict the future is hopeless. I was bemoaning I didn’t buy Bitcoin at 1.25 cents each. Even hedge fund people can’t predict the future.…

I’d always intended to pick up a copy of Money, and I finally did so on my way to the supermarket checkout. I thoroughly enjoyed it and will certainly be a repeat customer. I found Susan Hely’s column (“Secrets that end in tears”, July) relative to my situation. As a 24-year-old male about 16 months into a relationship, I have always found talking about money in relationships to be taboo. Although my partner and I have intentions to buy our first home and put down a deposit, I can’t help but notice her spending habits. There seems to be unnecessary purchases, gifts for others without an occasion and constant eating out. Furthermore, she insisted on completing her own tax return despite me being an accountant. This article gave me the…

A few years ago a social experiment showed that young people couldn’t comprehend the importance of superannuation – money they put away to be untouched for more than 40 years. This was understandable – 40 years away is unimaginable. But the experiment went on to show that when people used an ageing app to visualise how they might look 40 years into the future, they were able to better imagine the idea of themselves getting older and realised there may be a time when their super is important. Visualising tragedy by way of accident or illness is unimaginable for many of us. Only recently I attended a virtual funeral. A friend of mine, just 61, had tripped and fallen, hitting her head, which resulted in massive brain damage. This was…

REPUTATIONS Big banks repair the damage The trust deficit suffered by banks in the wake of the financial royal commission is slowly being clawed back during the Covid-19 pandemic, a survey conducted by research firm Glow finds. The quarterly Trust Index surveyed 1230 Australians and measured their sentiment towards 31 bank brands. It awards a net trust score of between -100 and +100. The latest iteration shows all of the big four banks enjoying increased net trust scores. Westpac was the biggest mover, almost tripling its score from three to eight. However, it still trails the other three banks: Commonwealth Bank is out in front with a score of 11 (up from seven), followed by NAB with 10 (from seven) and ANZ at nine (from six). “It’s pretty remarkable –…

Bronwyn King Radiation oncologist and global anti-tobacco campaigner; age 45; a former competitive swimmer and the reigning Melburnian of the Year. King says Covid-19 has “broken my heart” because a city known for its vibrant festive activities has fallen quiet. She grew up in suburban Camberwell and her first job was as a lifeguard for many years, teaching children to swim. Aspired to be a competitive swimmer, but had a bad shoulder injury at 17. The biggest influence on her life has been former Australian swimming coach Leigh Nugent. She says former First State Super CEO Michael Dwyer taught her about finance, what it takes to create chance and the importance of taking a long-term view. She enjoys bike riding with her family.…

An initiative by First Nations Foundation, launched in 2014, to connect Indigenous Australians with lost super has, since its inception, reunited more than $24 million with 1636 members across 21 communities in six states. Supported by a range of financial institutions, including the Australian Institute of Superannuation Trustees (AIST), AustralianSuper, Rest, Statewide Super, Sunsuper, Telstra Super, Australian Catholic Super, Christian Super, Equipsuper, HESTA, MLC, MTAA Super, Suncorp Super and WA Super, the initiative last year alone reconnected more than 500 people with $9.5 million. It helped one 50-year-old woman find $60,000 of her super; a 60-year-old man, who had never engaged with his super and thought he may have a small amount from a few jobs, found that he had $142,000 across five funds. And a 60-year-old woman who had…

I am a self-confessed cricket nut. I love cricket. Part of the reason is that cricket is as much a game of strategy as it is a game of skill. How the captain plays the game, and the decisions they make on the field, are as important to success as the individual skill of the players. Teams with superstar players are often beaten by teams whose captain plays a better strategic game. The other thing I love about cricket is that I find it is a great analogy to teach people how to think more strategically about their finances. Managing your investments and finances is like being the captain of the fielding team. You look at the context (the batsman, weather conditions, fatigue of your players, etc), make a plan…

Discounting may seem like a good strategy for your small-to-medium enterprise (SME) in these challenging times as it’s a quick fix to nail down some sales and keep cash flow ticking over. Already two in five (42%) Australian businesses have had to access support measures to manage the impacts of the Covid-19 pandemic, according to the latest research from the Australian Bureau of Statistics. For small businesses, however, discounting is a strategy that can backfire in the longer term, especially if your SME is already working with clients doing it tough. More than 70% of businesses in manufacturing (78%), wholesale trade (74%), recreation and personal services (83%), information media and telecommunications (75%), property and business services (74%) and transport, postal and warehousing (72%) have been affected by Covid-19 to some…

“A low loan-to-value ratio provides a considerable margin of safety for investors” In the not too distant past, peer-to-peer (P2P) lending was seen by some investors as a way to fund (and earn interest from) loans at any time, at any size, at any investment grade and at any interest rate. If a borrower was willing to accept or be “matched” with these loan terms, P2P investors felt that if this was a risk each party was prepared to take – end of story. What’s not factored into this scenario is the intermediary, the P2P lending platform, which makes these loans and investment transactions happen. The platform must comply with ASIC’s responsible lending requirements and this means reviewing whether the loan is suitable for the borrower (that is, can they…

1 Australian Ethical Shares Fund Australian Ethical is among the most recognised managers in the ESG (environmental, social and governance) space in Australia and has been investing since 1986. It invests in predominantly ASX-listed companies, which are selected on their financial, social and environmental credentials. The companies in the portfolio have passed the manager’s rigorous positive and negative ethical screening process. 2 BNP Paribas Environmental Equity Trust The trust seeks to achieve sustainable, above-market returns over the longer term by investing globally in companies active in the growing resource efficiency and environmental markets. It is actively managed and the underlying exposure to resource efficiency of each company has been assessed so investors understand the environmental impact of their investment. 3 VanEck Vectors MSCI International Sustainable Equity ETF…

These times of deep uncertainty and high sharemarket volatility will have many investors re-assessing their portfolios. It can be daunting – do you sell, buy, or hold the line? There is no right answer to this, but there are a number of things to consider before you make any changes. First, uncertain times should not be met with equally uncertain responses. “You want to be careful about moving too far away from your normal strategy,” says Stuart Fechner, director of research relationships at Bennelong Funds Management. “If your normal approach is to not move too far away from your long-term asset allocation, think twice about doing it now during this uncertain and volatile environment. If you get it wrong, you’ll do a lot of damage to your longer-term outcome.” It’s…

Victorian Premier Daniel Andrews declared a state of disaster on Sunday, August 2, and imposed stage four restrictions that will run for six weeks (until September 13) as his government tries to contain the second wave of the coronavirus outbreak. This followed the failure of targeted restrictions: the lockdown of certain Victorian postcodes and public housing, stage three restrictions and mandatory wearing of masks. This is because, as Andrews put it, “too many people are not taking this seriously”. Worse, a few even flouted the restrictions, protesting that they infringe on their civil liberties. Now it’s a disaster. A state of disaster, that is. As The Australian Financial Review explains, “under a state of disaster, police have extra powers and various acts of parliament can be suspended”. Andrews said: “There…

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“Dr Karl” has four degrees, has written 46 books and, at 72, is working harder than ever. Previous careers included producing some of the first MTV videos in Australia, setting up the first cable TV channel and being an engineer, roadie and TV weatherman. He spent 28 years in formal education and now works at The University of Sydney in the physics department as a “science populariser”. His latest book, Dr Karl’s Surfing Safari Through Science, is due later this year.…