Investing 101

You might think that only importers and exporters pay attention to the value of the Aussie dollar, but movements in the exchange rate affect us all. After peaking at US$0.81 in late January 2018 the Australian dollar fell as low as US$0.70 in October. It also fell against a number of other currencies. A falling Aussie dollar makes it more costly to travel overseas and increases the local cost of imported goods. On the upside, it makes many of our exports less expensive for foreign buyers, giving a boost to our farmers and other exporters. The reverse applies in the case of a rising dollar, but movements in exchange rates don’t just influence our living costs. Most people with superannuation will have a portion invested in overseas assets, and changes in currency values can also influence the performance of retirement savings – a lower dollar boosts the local value of our overseas investments while a higher dollar has the reverse effect. So what are the main influences on exchange rates? Ultimately it comes down to supply and demand, and that can be determined by a number of things: Interest rates. Imagine an Australian investor earning 1% interest on her money. She looks across the Pacific and sees that she can earn 2% in the USA. Here’s an opportunity to double her income! To do so she needs to buy US dollars, increasing demand for the greenback and thus increasing its value against the Australian dollar. Exchange rates respond very quickly to both actual changes in official interest rates, and to expectations of where interest rates in different countries are heading. Commodity prices. From wheat and wool, to iron ore and natural gas, Australia produces a wealth of commodities. When demand for materials falls, less money flows into Australia, and with decreased demand our dollar falls in value. The economy. If the economy is doing it tough the Reserve Bank of Australia may drop interest rates to encourage borrowing and stimulate investment. This takes us back to item 1. A weak economy relative to other countries attracts less overseas investment, causing the local currency to fall. Politics. Elections and referenda can create a climate of economic uncertainty that investors, on the whole, don’t like. However, if the market thinks that a more business-friendly government is likely to be elected, this could boost the value of our dollar. Fear. In times of market volatility and global political upheaval, investors flock to the US dollar as a ‘safe haven’ currency. Most other currencies, including ours, usually fall relative to the US currency. But it’s not that simple Other things can influence currency values, such as speculation or central bank intervention. There’s also a lot of interaction between the influences outlined above. For example, strong commodity prices may give a boost to the economy, which leads to higher interest rates. Throw in some political uncertainty add a touch of speculation and things quickly become very complicated. So, will the Aussie dollar rise or continue to fall? History suggests flipping a coin may provide as useful an answer as following the opinions of ‘experts’.   Does the value of the Aussie dollar affect you? 18/11/2018 This is general information only

Financial planning is about establishing a long-term strategy to secure your financial future with the lifestyle and living standards you desire. ‘Value’ often goes beyond dollars and cents. It can be the peace of mind and security that comes with being better prepared for the future. Once you’ve begun a relationship with a licensed adviser you will quickly see that he or she adds value to your circumstances by helping you in a number of ways. How can a financial planner help? Setting goalsThis process helps you decide where you want to go in life. A skilled financial planner can assist you to identify your financial goals, prioritise them and understand the steps required to turn your vision into reality. By knowing your goals and timeframes, it’s easier to see where to concentrate your efforts. You’ll also quickly spot the distractions that would otherwise blow you off course. Getting a financial plan startedDeveloping a written plan with a clear emphasis is critical to achieving your financial objectives. Your planner can provide budgeting and debt management advice to help you start creating wealth. Protecting your future dreams with appropriate insurance is another key aspect your planner will manage. Maintaining a diversified portfolioEvery financial planner is required by law to take a client’s risk tolerance into account as part of their personalised financial plan. Diversification is another important tool for managing risk. This means that the advice given and any investments recommended as part of that process are suited to your specific needs and risk level. And these will change to meet your circumstances as they vary throughout life. Being there over the long termGoing your own way is rarely the best option. Most people don’t have the background knowledge to feel confident about making investment decisions that will have a large bearing on their financial future. Keeping up with all of the legislative changes and new investment offers is also an onerous task. Your planner will be there to steer you on your path to financial independence and ensure your plan remains relevant and on track. While investment magazines and online subscription services can provide very useful information, they are often written by journalists with a general grounding in financial concepts but who are not looking at the complete picture. A financial planner is trained to take into account all legislative and strategic implications to ensure you receive the best advice possible… and this training is ongoing. Your financial plan is not a one-off, set-and-forget arrangement. Just as life has its many twists and turns your plan must be flexible and appropriate to your needs at any point in life. Working together with a qualified, experienced and licensed financial planner will help you develop a plan that is tailored to you and your life goals. The opportunity to invest tax-effectively using some of these methods will vary from one person to the next. Make sure you seek advice about how they relate to your own situation. Contact us today to get started!   This is general information only  

Most people view share market downturns as unequivocally bad events. Suddenly, hard earned savings aren’t worth as much as they were yesterday. It seems as if our money is evaporating, and in the heat of the moment selling up can look like the best course of action. The alternative view But on the opposite side of each share sale is a buyer who thinks that they are getting a bargain. Instead of getting 10 shares to the dollar yesterday, they might pick up 12 or 15 to the dollar today. When the market recovers, the bargain hunters can book a tidy profit. So why do share markets experience downturns, and what are the upsides? A range of natural and manmade events can trigger market selloffs: Terrorist attacks Infectious disease outbreaks such as SARS and COVID-19 Wars, the possibility of war, and geopolitical issues such as threats to oil supplies Economic upheavals, the bursting of speculative investment bubbles, and market ‘corrections’ In short, anything that is likely to reduce the ability of a broad range of companies to make money is likely to trigger a market sell off. The common thread that runs through the causes of downturns is uncertainty. In the immediate aftermath of the 9/11 attacks nobody knew what the size of the threat was, and markets dropped. As the fear of further attacks receded, markets soon recovered. However, the initial drop in market value occurred quite rapidly. By the time many investors got out of the market the damage was already done. Paper losses were converted to real losses, and spooked investors were no longer in a position to benefit from the upswing. After the initial sell off it took the ASX200 Accumulation Index just 36 days to completely recover from 9/11. Other downturns and recoveries take longer. The Global Financial Crisis began in October 2007, and it wasn’t until nearly six years later that the ASX200 Accumulation Index recovered its lost ground. This caused real pain to investors who bought into the market at its pre-crash peak, but for anyone with cash to invest after the fall, this prolonged recovery represented years of bargain hunting opportunities. If? Or when? Of course, much hinges on whether or not markets recover. While history isn’t always a reliable guide to the future it does reveal that, given time, major share market indices in stable countries usually do recover. It’s also important to remember that shares generally produce both capital returns and dividend income. Reinvesting dividends back into a recovering market can be an effective way of boosting returns. Seek advice Of course, it’s only natural for investors to be concerned about market downturns, but it’s crucial not to panic and sell at the worst possible time. The fact is that downturns are a regular feature of share markets. However, they are unpredictable, so it’s a good idea to keep some cash in reserve, to be able to make the most of the opportunities that arise whenever the share market does go on sale. For advice on how to avoid the pitfalls and reap the benefits offered by market selloffs, speak to us today.   This is general information only