Category — General
Do you have confidence in your current superannuation manager? If not, do you have confidence in your own ability to administer your retirement capital?
If so, are you confident of not falling prey to a con(fidence) artist, such as property spruikers, quick buck merchants et al.?
Do you trust yourself to manage your superannuation money? If so, you’ll need your own Trust Deed.
Do you trust the Government to not change the legislation governing SMSFs?
These are tricky questions to answer.
On a number of levels, confidence and trust are synonymous with Self Managed Superannuation Funds (SMSF).
If the burgeoning numbers of SMSFs are any indication, then clearly confidence and trust (on all levels) are in abundant supply. But it wasn’t always so.
There was a time when personal superannuation funds were in decline.
The resurgence in confidence and trust started on 1 July 1994 – the day the Superannuation Industry Supervision Act 1993 (SISA) came into effect.
Prior to SISA, small personal super funds were lumped in with industry, employer and commercial funds for prudential regulation. The onerous administration demands made it uneconomical for small funds to justify their existence. Accountants had long been recommending their clients wind up the personal super funds and rollover the proceeds to retail superannuation funds.
Oh how the investment institutions would love for this to be the case today. [Read more →]
November 1, 2013 Comments Off
Today is day three of ‘Retirement Week’.
For the first two days we’ve focused on the risks.
You may think it’s weird to focus on the negative aspect of investing first. But the truth is unless you understand risk you’ve got no business investing in the first place.
But assuming you understand risk we can now look at the next step of your retirement plan.
This is where the fun begins…
It may seem surprising, but many people don’t know how to save.
Why is that? Part of the reason is temptation.
With the easy availability of credit many people prefer instant gratification. So they buy something on credit rather than saving for the item.
That’s OK with big-ticket items such as a house (within reason). It’s even OK to buy a car on credit (although when you get to a certain stage of life you really should look at paying cash).
But what about ‘small-ticket’ items such as furniture and appliances? In most cases, but not all, buying on credit is inexcusable. Most of the time you should save for it rather than buy on credit.
That’s easy to say. But it can be hard to save if you’re not used to it. [Read more →]
October 31, 2013 Comments Off
Originally, when I published the first issue of The Money for Life Letter, the plan was to focus on being an ‘income newsletter’ which mainly recommended dividend stocks. But, quite frankly, I thought such a one-dimensional focus would get a little boring. You can only point out so many times how superior dividends are to capital gains.
Not that it stops me.
So my publisher and I decided to broaden the scope and launch a newsletter about alternative retirement strategies, income investing being just one feature. Retirement advice in Australia lacks any sort of innovative thinking these days.
People pay financial advisors big bucks to receive much the same financial advice as everyone else in the waiting room, regardless of their individual situation.
Given my dividend focused origins, what do I think about dividend paying stocks right now?
Shares are overpriced right now. Just like you wouldn’t buy a $5 coffee, I don’t think you should buy an overpriced stock. What you’re getting is not worth the price.
This can go against common dividend investing wisdom. The price shouldn’t matter much if you’re investing for dividends, as it’s the dividend return that’s crucial. What does it matter if the price falls, so long as you still get your dividend cheques?
Well, the simple truth is that price matters in two different ways when it comes to dividend investing. In more normal times, neither of these reasons matter much because share prices only fluctuate a little. But we don’t live in normal times. Big price moves are on the cards in a world of financial crises, bear markets like the current one, and government shutdowns.
The first reason the stock price matters in dividend investing is straightforward. A higher stock price reduces your dividend yield. A $1 dividend on a $10 stock is a 10% return. The same $1 dividend on a $5 stock is a 20% return. You want to buy into the same dividend stream at the lowest possible price.
Which means, if there is a stock market crash, that’s an enormous opportunity you should take advantage of as a dividend investor. Keeping ‘powder dry’ for such a moment is an important part of investing these days. [Read more →]
October 31, 2013 Comments Off
What have we been telling you for the past year? Buy stocks. Hopefully you already have and so today you can focus on day two of ‘Retirement Week’ rather than worrying about whether to buy into this rally.
Yesterday we left you in no doubt about your options for saving for retirement.
If you missed yesterday’s Money Morning we’ll give you the five-second version of our thoughts on risk-taking: You don’t really have a choice. You have to take risks.
Although as Nick Hubble showed subscribers of his Money for Life Letter this month, there is one way to kick risk to the kerb.
But for the most part you can’t avoid taking risks. That’s why we say you should acknowledge it, plan for it, and then do something about it. Here’s how…
For two years we’ve recommended a fairly simple approach to risk taking and investing.
In fact it’s so simple some have said it’s simplistic (childish even) and obvious. Saying that, whenever we’ve asked those people how they approach risk taking and investing we get little more than a few ‘ums’ and ‘ahs’.
It seems our approach is so obvious either they hadn’t thought of it or if they had, they haven’t done anything about it. We don’t know what kind of investor that makes them – not very good investors, we guess. [Read more →]
October 30, 2013 Comments Off
Hardly a day goes by without SMSFs being implicated in the Sydney & Melbourne property bubble.
It’s also an issue causing some of my Gowdie Family Wealth members concern as well. Here is an email I received from George T.
‘Like you I have three daughters, two of whom are trying to get into their own homes. As is the norm these days, they are looking to borrow $300,000 to $400,000. Even with deposits of their own savings of $100,000 plus, in Melbourne, this puts them in the ‘first home-buyers’ end of the market.
‘Last year as executor for a deceased estate, the residential property I had to sell was purchased by a SMSF. Today I read about the concerns of some authority (forget who) suggesting that this SMSF market is well and truly into the property market utilizing the gearing strategy opened up by the government a few years ago.
‘So, apart from the issues as to whether SMSF’s should be allowed to ‘gear’, the issue concerning me is that the young new generation, trying to get their first home, have a fresh, access to funds, new competitor, in their market.
‘Apart from the potential social issues (between the haves and the have not’s) and the dangers that this new market player is adding financial fuel to the housing pricing bubble, my personal question is: What is the right advice to give to my two daughter’s? Enter this potentially overheated market or stay renting, stay cashed up and stay saving??
‘Life was not meant to be easy. I would very much appreciate your thoughts and input.
Before addressing George’s concerns, here’s a general overview of borrowing to invest within a SMSF… [Read more →]
October 30, 2013 Comments Off
Each day we’ll present advice and insight on planning and saving for retirement. This will include actionable information for anyone, regardless of age, proximity to retirement or current financial position.
The highlight will be a genuine live conference call on Thursday afternoon hosted by your editor, featuring Greg Canavan and Vern Gowdie. The conference call is now fully booked. But based on the amount of interest, we’re certain we’ll organise another event like this soon.
But so you don’t miss out we’ll do our best to offer you the next best thing in this week’s Money Morning. So today we’ll give you our take on the single biggest problem you face as you head towards retirement…
Saving for retirement is a big deal. Although it really shouldn’t be.
After all, it’s not as though you’ve only got one crack at it ‘a minute before midnight’.
If you’re like most people, you have (or had) 40-45 years to plan for retirement. Of course, the longer it takes you to get your plan right the less time you’ve got to benefit from it.
The last thing you want is to get to retirement age only to realise you need to keep working. Or worse, that you’ll need to rely on the government to provide you with a retirement income. [Read more →]
October 29, 2013 Comments Off
Actually, it’s about the absence of price risk, or getting rid of it. But you need to understand what it is before you can get rid of it. Otherwise you won’t know it’s gone…
Price risk is what financial advisors call the risk of an investment’s price fluctuating. Your shares have price risk, because their price goes up and down.
Property does too. You might think all investments have price risk, but dividends and annuities don’t, for example. Wine can have price risk if you plan on selling it, but it doesn’t if you are happy to drink it instead if the price falls.
It might seem odd to have a name for such an obvious concept. The point is to separate a particular type of risk out from the others so you can discuss it in isolation. For example, price risk is a different type of risk to the risk of a broker committing fraud, or governments like Greece defaulting on their bonds.
But the problem with price risk is that it creates uncertainty.
An investment might be worth $100, but because of price risk it can be priced at $50 one day and $150 the next. That uncertainty is a retiree’s biggest enemy because your income is reliant on fluctuating investments while your living expenses are fairly steady and unavoidable. If the price of an investment falls, you have to sell more of it to cover the same amount of living expenses. That leaves you with fewer assets when prices go up again.
October 29, 2013 Comments Off
The argument is that they’re making the same mistakes now that they made during the 2000s leading up to the meltdown.
Of course, that’s not true. The bankers have learned their lesson. They’ve learned they can take as many risks as they like, because governments and central banks will ultimately bail them out of any problems.
And besides, let’s not just blame the bankers. They are after all just responding to investor demands in a low interest rate environment. In order to give investors bigger returns the bankers have to create riskier and more complex investment products.
So it shouldn’t surprise you to hear that after nearly six years of record low interest rates, risky investments are making a comeback…
Now, if you’re looking for us to tell you not to invest in risky investments, you’re out of luck.
Remember that aside from penning these notes to you each day, our full time job is seeking out some of the riskiest investments on the market – tech stocks and small-cap stocks.
So the last thing you’ll hear from us is the idea that you shouldn’t take risks. [Read more →]
October 28, 2013 Comments Off
For nearly a year we’ve trumpeted the idea that Australian stocks could hit 7,000 points in 2015.
But 2015 still seems so far away. So a few weeks ago we gave you another target: that the Australian index would hit 6,000 points by early next year.
So far things are going to plan.
But now we’ve got some company in our once-lonely bullish position…
The thing about being a contrarian investor is that we’re often a lone or minority voice when it comes to picking an investment trend.
When most folks hoot and holler about a raging bull market, we don’t mind tagging along, but we also play with a cautious hand.
And when others run scared, fearing the worst, screaming that the market is crashing, we take note…and then start hunting around for cheap stock opportunities.
That’s when we hoot and holler to buy stocks.
It’s also why we’ve backed stocks for the past 18 months and why we’ve picked the market to keep going higher.
But as we say, others are now starting to follow our lead. [Read more →]
October 28, 2013 Comments Off
Yesterday’s line up was a good mix of companies. We popped in to see those that interested us the most.
During the rest of the time we caught up with the market action. We also put together the weekly update for Revolutionary Tech Investor.
Oh, and we chewed through a few pages of Richard Clarke’s book on cyber security, Cyber War: The Next Threat to National Security.
Don’t worry, we weren’t slacking off. Cyber security, cyber terrorism, and cyber warfare were all the subject of the latest issue of Revolutionary Tech Investor.
And based on what we’ve learnt on the subject in recent weeks, if we thought cyber security wasn’t such a big deal before, we sure as heck get it now…
We’ll be honest, when our in-house technology analyst, Sam Volkering, suggested a few months ago that we cover cyber security in an issue of Revolutionary Tech Investor, we almost brushed it off.
The first thought that came to mind was, ‘What? You want us to tip an anti-virus software company? That’s hardly revolutionary.’ [Read more →]
October 25, 2013 Comments Off