Innholdsfortegnelse for November 2020 i Money Magazine

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THE BUZZ Why shoppers still support brands they don’t trust Money has recently received several pieces of research about Australians and their brand awareness during Covid-19. Three studies came to the same conclusion: consumers are more likely to buy products that best serve their needs rather than stick with popular, well-known and/or trusted brands. A March survey of 5000 consumers, by Sydney-based Fifth Dimension Consulting, says people continue to buy from brands they distrust, provided they personally gain from the relationship. Lyndall Spooner, founder and managing director at Fifth Dimension, says brand trust is a poor predictor of consumer behaviour. “You may not trust Google, but you might use Google Home. Most people don’t trust Facebook ... but how many of us have a Facebook page? A lot of people…

Matthew Reilly Action thriller writer; age 46; lived in Sydney’s Mosman and Willoughby before moving in 2015 to Los Angeles. Biggest achievement is “still being around”, writing best-sellers 22 years after his first novel was published. First job was operating a lift at Grace Bros department store; yearned to be an action movie director and built sets using Star Wars figurines. His parents enticed him to save by paying half of the cost of a Millennium Falcon toy. Motivation is to make each novel faster, more relentless and visceral than the last. Best money advice was “cash is king”, especially if computer systems were to crash.…

This is such a sensible question, Deb and Alan, and it should be easy to give you an answer in a few sentences. But the sad reality is that anything to do with super and our tax system is far from simple! Let’s start with what the rules say. When it comes to taking money out of super, we need to satisfy the “conditions of release”. The most common things that let us access our super are that you are: 1. Over the preservation age and retiring. 2. Over the preservation age and starting a transition to retirement income stream. 3. Over 60 and “ceasing an employment arrangement”. 4. Aged 65 or over. 5. Dead. Of these, the last two are pretty easy to understand, with the last condition of…

This is such a challenging issue. Term deposits have been a safe harbour for investors for many decades. Sure, they are still safe, but the returns are getting close to zero. This is a terrible issue for safety-conscious investors and one hard to adapt to. I’ll never forget my Dad calling me in early 1990 to check if we were coping with our mortgage, which had just hit 18.75%. For those of us with mortgages back then, it was our own personal economic depression. Dad had rung to see if we needed help with repayments, which was really kind of him. We had just sold our car, so we were coping okay. But I did have to laugh when he told me he was getting 16% on his term deposits.…

If any section of the superannuation marketplace has had a good Covid-19 crisis, it’s been the ESG (environmental, social and corporate governance) sector. In what has amounted to a de facto real-time grand experiment, ESG investments have shown that not only can they withstand a once-in-a-century market shock, they can come out the other side in better shape. Latest analysis by Rainmaker Information (publisher of Money) confirms that in 2019-20 ESG super funds outperformed regular super funds by almost 2%. Over three years they outperformed by almost 1%. Reinforcing this, three of Australia’s best five MySuper products in 2019-20 and six of the best 10 were ESG products or they were run by super funds heavily committed to ESG investment principles. Over three years, four of the best five were…

Before my career as a behavioural economist, I worked in the arts. We were in the last two weeks of rehearsals for a major theatre production of Romeo and Juliet and a heated argument broke out between three key people about how the director wanted to stage the fight scene between Romeo and Tybalt. Sensing that the argument had descended into emotional reactivity, I pulled each person aside at an appropriate moment and had three different conversations. With one I talked about the true meaning and intent of the original Shakespeare text, and how this directorial decision would stay true to the intended meaning (focusing on ideals). For another, I talked about the impact this would have on all the school kids attending the show and how this would help…

Faced with an economy battered by lockdowns and border closures, the federal government has delivered a big-spending budget, with plenty of the cash splash pitched at small businesses. The government has flipped open its cheque book with a program of spending that will see the nation’s net debt increase to 36% of GDP this year, rising to 54% of GDP by June 2024. But for small to medium enterprises, the budget delivers much-needed financial support. Here’s what’s up for grabs for your small business. Carry-back business losses A key budget platform is a new loss carry-back scheme, allowing businesses to offset losses incurred to June 2022 against prior profits made in or after the 2018-19 financial year. If your business is eligible, the tax refund will be available when you…

We should all aim to have a fully paid off home at retirement. A family home doesn’t just provide shelter, it also gives us options to raise extra cash to live the life we want in our retirement. If you’re a few years away from quitting the workforce and still have a mortgage, you’re likely juggling extra home loan payments with socking away as much as you’re allowed into super. Conventional wisdom dictated we were better paying off our home loans and only then should we turn our attention to building up super. But with interest rates at record lows and many super funds potentially offering a higher rate of return, that may not be the right strategy now. Jenny, for example, is 10 years away from retiring. She earns…

As the investment climate seesaws on a resurgence of Covid-19 cases and unreliable company earnings, investors are favouring active exchange traded funds (ETFs). Active ETF assets grew 46% to reach $4.9 billion in the year to the end of June, according to Rainmaker Information (publisher of Money), compared with a 23% increase in ETFs that use a market-cap index. Active ETFs appeal to investors who believe that fund managers have an ability to outperform the benchmark index by picking shares or fixed-income securities, sectors and weightings. “Active ETFs can be selective about what they invest in, which brings with it the potential to outperform the broader market, as they don’t have to hold every security in the index or market,” says Matt Gaden, head of Australia at Janus Henderson Investors.…

Super members are regularly encouraged to check their fund’s performance and ensure their hard-earned savings are being maximised. If it turns out the fund is a dud, the advice is to switch to a better fund. But for 1 million employees that’s not an option at present. They are locked into a fund chosen by their employer and union as part of an enterprise agreement. This is not the case for all enterprise agreements and industrial awards. Most employees have the right to choose their own fund. If they don’t exercise that choice, their contributions go into their employer’s default fund. The employee is free to remain with it or switch to another fund. Last year the Fair Work Commission threw out Kmart’s union deal, in part because it forced…

1 Franklin Global Growth Fund It aims to achieve long-term capital growth by investing in equity securities of companies in both developed and emerging markets, and across market capitalisation. The fund employs a bottom-up philosophy to build a concentrated portfolio of high-quality growth companies. 2 Ardea Australian Inflation Linked Bond Fund Ardea is a fundamentally driven value investor with a focus on liquidity and diversification. Its approach is driven by fundamental analysis with a focus on disciplined risk management. By utilising multiple and diversified investment strategies, the manager aims to add value over the medium to longer term. 3 Vanguard Australian Inflation-Linked Bond Index Fund The fund aims to track the return of the Bloomberg AusBond Inflation Treasury 1+ Yr Index before expenses. It invests in high-quality,…

The amount of money, in Australian dollar terms, that the federal Treasury is unleashing into the economy comes to $98 billion in “response and recovery support”, including $25 billion under the Covid-19 response package and $74 billion under the JobMaker plan. This is “to responsibly deal with the greatest challenge of our time” and “rebuild our economy and secure Australia’s future … to ensure the Australian economy recovers strongly by targeting additional temporary support measures to boost household incomes, bring forward business and infrastructure investment activity, and drive the unemployment rate back down”. There’s more money for every sector of the economy – well, almost, as “winners and losers” (the mainstay of annual budget reveals) pepper the headlines. Can’t please everyone, hey? Budget 2020-21 winners will be singing hallelujah and…

The table on this page contains data and information to help you compare superannuation funds. It showcases MySuper investment options offered by some of Australia’s biggest super funds. MySuper options are default superannuation products that employees choose or are allocated by their employers. The performance results displayed are the annualised investment returns each MySuper option has delivered after taking account of all taxes and fees. Past performance is no indicator of future performance. The table also lists each fund’s SelectingSuper Fund Quality Rating. Funds that achieve these quality standards are designated AAA. Research was prepared by Rainmaker Information, which publishes Money magazine. For more info, see www.selectingsuper.com.au.…

The article “Safety first for the aged” (October issue, page 49), written by Susan Hely, struck a chord with me. My wife and I are in our 70s, both fit and well, and have a desire to stay in our own home for as long as possible. We live in a medium-sized country town where living costs are quite moderate. Susan’s article is excellent and looks at the options, and time constraints, in accessing government-funded home care. Our situation is different, but I am sure there are many in a similar position, where we are self-funded retirees with a level of assets above the pension limits and, I assume, above any limits with respect to obtaining assisted home-care packages when the time comes. The reason for staying in our present…

MICHELLE BALTAZAR Michelle, Money’s editor-in-chief, says: “I would put $1000 towards a managed fund/ETF for my seven-month-old niece. My plan is to set aside funds for her each year until she turns 18. I’d like her to see compound interest at work and hopefully that would encourage her to invest as soon as she starts earning an income. The rest I would split between my super and an investment in a healthcare stock.” DARREN SNYDER Darren is the managing editor of Money. “As part of my 2020 goals I committed to saving an extra $10,000 and I’ll get there by November. There were several reasons for doing this: I needed to prove that saving was possible on my budget; the mortgage offset needed a boost; and I want to test…

Self-funded retirees are left behind Retirees have been given the short end of the stick in this year’s federal budget, according to the Association of Independent Retirees. “Retirees who partly or fully fund their own retirement have suffered significant income reductions as a result of the adverse economic impact of Covid-19,” says the association’s president, Wayne Strandquist. “These retirees rely on income from investments in the share-market, property and fixed interest either through superannuation or private investment for their living expenses. “They have been overlooked by the government as billions of dollars have been allocated to programs to stimulate employment and the economy.” Retirees lean heavily on fixed interest investments as part of their typically conservative investment strategies. “With official interest rates near 0% as a result of the Reserve…

My husband Alan is a fly in, fly out (FIFO) worker in mining. We have a mortgage of about $459,000. He has about $380,000 in super. I have a casual job and about $100,000 in super. When Alan turns 60 next April (I’m also 60), can he put all of his super into the house mortgage to get rid of most of that debt and still be working for the same company and doing the same job. Or will he have to leave and get some work elsewhere? We’d also like to know about the tax if we were to take out our entire super at 60. Do we get taxed on that? Do we get taxed if we wait till 67 when we take it out?  We want to…

There’s a property boom that most of the media is missing. And it’s not happening despite the pandemic, it’s happening because of the pandemic. Markets around Australia are pumping strongly. But because they’re not in Sydney or Melbourne, we’re not hearing much about them. A number of key trends have emerged, all of them having a positive impact on local real estate. The main ones are: Virus-beating cities are strong Capital cities that got the virus under control early and firmly have solid to strong property markets. Life is relatively normal, businesses are open and consumer confidence is strong. Perth is the best example. The WA economy is rising, helped by an emerging resources boom. Perth housing markets are reacting to low vacancy rates, with upward pressure on rents. First-home…

Also take time to understand whether your fund aligns with your principles. “People are often horrified to find out that they’re accidental investors in companies they wouldn’t otherwise support,” says Kirk McNeill, from Australian Ethical. “But matching your super to a more responsible fund or option is probably the easiest way to amplify your positive impact in the world.” Many funds use ESG (environmental, sustainable and governance) principles when filtering the companies they invest in, while others, such as Australian Ethical, make it the driving focus of their fund. “The first step towards ethical investing is figuring out precisely which causes you are passionate about. It might be easier to start with which causes you want to avoid,” says McNeill. “Once you know where you’re happy for your money to…

Listen. Notice what is a sensitive issue for the other person and ask them why it feels as if there is more energy around that topic. Listen to how they frame their own arguments. Often people speak to you in the language they wish to be spoken to. Listen for them to talk about numbers and statistics, personal stories or how things “should” be done. Practise. Before having a conversation, practise different money languages. Pick a financial decision you need to make together (eg, which streaming service to subscribe to), and ask yourself what decision you would make if you took a pure data perspective, the ‘right thing to do’ perspective, or an ‘impact on people you care’ about perspective. Observe how you feel in each scenario to help you…

While passive ETFs usually have low fees, active ETFs are more expensive. They justify that by pointing out they have teams of researchers to analyse companies and securities as well as the economy. But look carefully at the cost of an active ETF. For example, Magellan charges a fee of 1.35%pa for the Magellan Global Equities ETF (MGE) plus a 10% performance fee above a hurdle. Rainmaker says that total management fees made by Magellan for the global equity ETF reached $21.8 million for the year to June this year, a rise of 21% from the year before. The Magellan High Conviction Trust (MHH) charges 1.5% plus a 10% performance fee. K2 charges 1.3% for its Australian Small Cap Equities Fund (KSM) plus a performance fee of 15.38% if it…

If you are not joining by default, your super fund may require you to go through medical tests to underwrite you for a new insurance product, says Xavier O’Halloran, head of campaigns and advocacy at Super Consumers Australia. “You need to ask about that before switching funds,” he says. Otherwise you risk losing your old insurance only to find you are not eligible for the same type of insurance in the new fund. “The alternative way to do it is to set up a new fund elsewhere and basically maintain two funds: one for the insurance and the other for investments. That’s an option if you can’t get insurance with the new fund.” Once people are out of their 30s, underwriting becomes common, he says. “It’s definitely one to look…

Self-managed super funds (SMSFs) are in some ways the hermits of retirement investing due to their strong preference for staying at home and avoiding the rest of the world. But is all as it seems, and how have they fared during Covid-19? SMSFs are the do-it-yourself alternative to retail and industry funds, a flexible investment structure that allows you to invest in virtually anything, from direct property to collectables, subject to various rules. But their popularity is waning. Only 20,028 SMSFs were set up last year, which may seem like a lot but it’s far less than the 2012 peak of 42,033. Trying to lump them all together is a fool’s errand. “It’s hard to pigeonhole SMSF investors because they’re so diverse in views,” says Jonathan Philpot, from HLB Mann…

Now in its 27th year, Top Stocks is the stock-picking guide every Australian needs. Martin Roth provides the most up-to-date data on public Australian companies to help you determine where to put your money. The book includes company information, latest business results and the outlook. From the All Ordinaries index and beyond, this book cuts through the hype and filters out the noise to show you the best in Australian investing for 2021. To claim your offer, go to educatedinvestor.com.au and click on the Top Stocks 2021 banner. Click “Add to cart”. Enter the coupon code “Money2021”. Click “go”. This will reduce the price of the book by 20%. Shipping will be free for deliveries within Australia. This reader offer expires on December 24, 2020. For more information, email Janene…

This year has been one for the ages, in so many different ways. Far less important than the health and economic shocks, but still notable, it had the fastest bear market in history followed by the fastest recorded exit from a bear market. And yet there’s been a notable difference in performance on different sides of the Pacific. Here in Australia, the All Ords was still down 9.5% (including dividends) for the first three quarters of the year. Across the ocean, though, the S&P 500 was up 5.6%. Yes, up. In the middle of a pandemic – and one that the US, objectively, has done a worse job of dealing with than we have. It is, at least in part, thanks to the sorts of companies that dominate the US…

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 Source:…

Performance after fees: When calculating fees, Rainmaker assumes a member has $50,000 in their account. Strategy: Some MySuper products invest your superannuation based on age and are known as lifecycle funds (marked LC). The table includes the LC option for 40-year-old members. Non lifecycle funds are known as single strategy (S). Rank: Funds are ranked against all MySuper investment options available in Australia. Indices and averages: To produce these indices, Rainmaker analyses the results of more than 3300 investment options.…

The average household wastes about $3800 worth of food a year I’ve just finished reading Ronni Kahn’s memoirs, Repurposed Life, and feel empowered and inspired. Ronni, who was interviewed for our Hot Seat this month (page 90) saw injustice in apartheid-era South Africa, where she was born, experienced socialism while living on a kibbutz in Israel and then put these experiences into tikkun olam – translated from Hebrew as “repairing the world”. Now she is best known for setting up the food rescue charity OzHarvest. More on this later. In last month’s federal budget, the government announced a $25 billion package of Covid-19 relief and recovery measures. Initiatives included a $1 billion fund to support the industries most affected – aviation, tourism, primary production and the arts. But is it…

HOME LOANS First-timers lead the charge The property market is proving remarkably resistant, with home loan demand on an upward trajectory. Owner-occupier home loan commitments hit $16.3 billion in August, the highest month-on-month ri se in the 18-year history of the Australian Bureau of Statistics’ series. “Housing finance approvals came in much higher than expected in August, surging 12.6%, demonstrating the housing market’s resilience to Covid-19,” says Mortgage Choice chief executive Susan Mitchell. She says the demand is being driven by owner-occupiers, in particular first home buyers. “The ABS data revealed that the value and number of housing finance commitments for first home buyers rose by 18.4% and 17.7% respectively over August. In fact, August marks the third consecutive monthly increase in the number of first home buyer commitments,” she…

One of the joys Matthew Reilly gets from writing thrillers is to travel. His research takes him to plenty of exotic places – the pyramids in Egypt, Easter Island and the ancient Mayan city of Chichen Itza in Mexico. No matter what evil is pursuing his heroes – and there is always plenty lurking – his plots captivate the reader’s imagination in part because of their ancient and evocative settings. Right from the opening pages, his latest book, The Two Lost Mountains, dumps readers into a life-and-death fight against evil in a sacrificial ceremonial chamber cut into the Rock of Gibraltar. Before we can draw breath, we’re swept up into a new theatre of action, as the younger brother of the King of the Underworld is rescued from an abandoned…

The year has been nothing short of extraordinary and unprecedented. We started February with optimism as the sharemarket was reaching a new high and the bushfires ravaging Australia were finally under control. With the US presidential election eight months away, most investors were blissfully unaware of any event that could derail markets. Then the one-in-a-100-year event, a global pandemic, led to the sharpest sell-off in all financial markets since 1987. The health response to the virus and global lockdowns brought economic activity to a shuddering halt. It’s no wonder stocks collapsed, but the price falls were probably exacerbated by excessive leverage in the system. The falls were soon reversed with the support of the most aggressive monetary and fiscal stimulus programs the world has ever experienced. The US Federal Reserve…

Given I am a financial adviser, it would come as no surprise that I have a clear plan about where I invest my savings – some invested for retirement, some for nearer-term goals and so on. So, I will assume that this $10,000 is a windfall that I put into my investment portfolio. This portfolio is invested for the long term and mostly diversified across Australian and global share funds and ETFs. I would add it to my investments in an area of good long-term opportunity such as Chinese shares. A China share fund that is designed to capitalise the ongoing growth of China’s middle class is the VanEck Vectors China New Economy ETF (ASX: CNEW). It is a passive fund that is designed to track the CSI MarketGrader China…

Seek legal advice. Knowing your obligations means you are bargaining with knowledge, which helps you negotiate with confidence. Try to remain calm. If you are able to remain calm throughout your meeting, people will hear and understand you better. If you feel your blood pressure rising, you are allowed to ask your mediator for a break to cool off. Stay on track. Now is not the time to shy away from tough topics. When it is your turn to talk, focus on the issues you decided were important when you were preparing for the meeting. Be understanding of your former partner’s feelings. Try to explain things clearly and positively to respect everyone involved. Wait for your turn to talk. The mediator is there to ensure everyone will have a chance…

“From March 2021, applying for a mortgage could be less onerous than it is today” Early last year we wrote about how banks had taken lending rules to the extreme when a Netflix subscription could make or break a loan application. In one case, someone had to re-submit their paperwork after the lender found an expense for a pet when the applicant didn’t have one (he had bought a gift voucher for a friend who had a pet). One lender even queried a fortnightly expense that went towards swimming lessons. The government had good reason to impose responsible lending obligations (RLOs) that required lenders to assess a borrower’s ability to service a loan thoroughly. In 2019, the average Australian had nearly twice as much debt as income. The stricter RLOs…

AAMI AAMI is offering tenant protection, which includes protection against unpaid rent, theft and malicious damage by your tenants and their guests. Allianz The optional rent default and theft by tenant cover is unavailable to new customers until further notice. Allianz is offering help to customers who are struggling to meet financial obligations for premium payments, excess payments, fast-tracking refunds, waiving fees and other support. CGU CGU is not offering cover for rent default and theft by a tenant on new policies at present, so you can’t have it as an optional extra. If you already have a landlord insurance policy that includes this extra, there will be no change to this cover. QBE Landlord insurance currently covers your investment property and, if it’s furnished, your contents. For extra protection…

One of the biggest dilemmas for ETF investors is which active manager to choose. While some active funds have performed strongly in the past, Stock-spot CEO Chris Brycki says you can’t count on that continuing. He says an Australian share index ETF like Vanguard Australian Shares (VAS) beat 80% of active Australian share ETFs, while a global share index ETF like iShares Global 100 (IOO) beat 87% of its active rivals. Active managers often justify their high fees by claiming they can protect investors during market corrections. But he says this is something of a myth. “Morningstar data shows that it’s a flip of a coin whether active managers beat the market index during down markets. Forty-eight percent of active managers were beaten by the market index during the March…

The US Federal Reserve recently pivoted its monetary policy framework in what is viewed as a milestone announcement. In simple terms, it is seeking to push inflation above 2% (read as seeking to accelerate nominal GDP growth) for an undefined period without pre-emptively pulling the handbrake on growth by increasing the official interest rate. The Fed has termed this new policy as average inflation targeting (AIT), which is likely to be the biggest shift in US monetary policy since the introduction of quantitative easing (QE) at the end of the GFC. Our hypothesis is that this change of tack by the Fed will have significant long-term implications for macro-calls and investment asset allocation. When you dig a little deeper into the reasons for this announcement, you will find that the…

As passive investments that represent an underlying index, exchange traded funds (ETFs) are great. Access to the passive replication of something that would be very hard for individual investors to do alone is a real service. Where they go wrong is when an issuer creates an “active” ETF because of some fad-like and often momentary demand for one particular investment theme. The most obvious ones to me are some of the capital-destroying income-focused ETFs that make unrealistic promises about beating the market yield. Many of them add no value to the total return and make up that extra income by effectively returning your capital to you while pretending they have some miraculous income-generating formula that simply doesn’t exist. ETF providers are not shonks and charlatans; in a world of hyper-disclosure,…

I have no beef with some of our more expensive “premium” ASX-listed companies. I’ve recommended some and own others. My argument isn’t that we should abandon our shores for brighter lights elsewhere. Yet, if some of the best US companies traded here, they’d be in almost every single portfolio. With US trading being so accessible today, it makes no sense not to own them – and I’d start with this year’s Best in Breed: the company formerly known as Google and now called Alphabet.…

Performance after investment fees. Investment returns after investment fees annualised to describe each fund’s returns per annum. But if your managed fund achieves a high return and charges you an extra “performance fee”, Rainmaker has not taken this into account. Past performance is not an indicator of future performance. Rank. Funds are ranked against all managed funds in each segment, not just those included in each table. Indices and averages. Arithmetic average investment returns or average fees for all fund investment options within each category, that is, not fund size weighted.…

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