investment options Archives

Investing for income

31 December, 202421 January, 2025 Updated on21 January, 2025 Education, Investing

Share markets are renowned for taking unexpected downturns and while history shows that markets eventually recover, this rebound in value can occasionally take time. Investors concerned about this risk might consider a stronger focus on income-generating investments. These can range from those that have no potential to lose capital value to ones with a higher risk of capital loss. Outlined below are some options. Investments with no ‘growth’ component The following will give you back what you put in plus interest: Online savings accounts pay a higher rate of interest because there is less cost involved in managing these accounts. The customer “does all the work” meaning the bank doesn’t need to allocate staffing resources. Interest on these accounts can vary substantially between providers and there can be enticing offers of extra or bonus interest for new customers or if you maintain a certain balance. The best advantage of these accounts is that you have access 24/7 to your funds. Cash management trusts are investment products which pool the deposits of other unit holders for investment in cash securities. Interest is calculated daily. There are no entry fees but most charge management fees. They frequently have minimum withdrawal amounts and may require notice to withdraw funds, however the trustee can decide to restrict withdrawals if it deems this is necessary in the best interests of the trust investors. CMTs are good for holding cash that is not needed for everyday living but offer easier access than term deposits. Term deposits can pay a higher interest rate than cash management trusts, although in more recent years, rates on term deposits are close to those offered for online savings accounts. The downside is that your funds are unavailable for the deposit term and penalties apply if you withdraw your money before the term expires. Terms range from three months to several years so you can choose the timing to suit your needs. Income can be paid regularly or at the end of the term. Investments that adjust in value to interest rates in the market: Fixed interest managed funds invest in bonds and bank bills, known as debt securities. Like cash management trusts, they pool investors’ funds to provide access to investments at the big end of the market. These are often used as the fixed interest component in a portfolio. They can have a wide range of fees depending on the underlying investments and may have a small growth component. Convertible notes are offered by companies and unit trusts. They can offer a good interest rate and at the end of the specified term the investor can choose to convert the notes to shares in the company or get their cash back. These are frequently traded on the stock exchange. The sale price depends on the market interest rates and market attitude to the company. Hybrid securities are investments that combine the elements of debt and equity. They are offered by companies that borrow from their investors and pay back the interest. However, if the company disappoints the market the underlying value can reduce. These securities generally have long terms (eg. 50 years) and can only be sold on the stock exchange if there is demand. Investments that have a growth component plus good income potential: Some Australian shares regularly offer fully franked dividends and also give you access to the tax benefits of imputation credits. To get the most from shares they should be held for the long term. Listed and unlisted property trusts are investments that pool investors’ funds to purchase real estate, usually commercial property. Depending on the types of property investments held, they can provide a higher level of income, some of which may be tax-free or tax-deferred. Listed property trusts are traded on the Australia Stock Exchange and provide more liquidity than unlisted trusts. The answer – a balanced portfolio For most investors the best solution is to have a ‘balanced’ portfolio – that is, a selection from each of the different market sectors. This should be tailored to the individual’s needs, providing the level of income required at an appropriate level of risk. To determine what suits your circumstances and needs best, consult with a licensed financial adviser. The information provided in this article is general in nature only and does not constitute personal financial advice. 

Navigating the reality of divorce after 50

17 June, 202418 June, 2024 Updated on18 June, 2024 Budgeting, Education, Retirement

Adjusting to life after divorce, particularly later in life, is akin to navigating through some of life’s most challenging events, psychologists say. It’s a journey comparable to coping with loss, relocation, major illness or injury, or job loss. While these upheavals are often beyond our control, how we choose to manage them greatly impacts our recovery. Is grey divorce on the rise? Unfortunately, yes. Despite overall divorce rates declining since the 1990s, both the age at divorce and the rate of divorces among couples in long-term marriages are on the rise. According to data from Australian Seniors and the ABS, 32% of divorces now occur after the age of 50. What are some of the key financial impacts of divorce? Superannuation is typically regarded as part of the assets in any pre-divorce financial settlement. Understanding that superannuation can be divided without the need for fund withdrawals or meeting specific conditions is crucial if no prior agreement has been reached with your partner. While splitting it isn’t obligatory, ensuring its inclusion in the settlement is vital due to its significant role in overall wealth. However, dividing it can substantially diminish what was once a solid nest egg, potentially impacting retirement plans. Aside from the emotional toll of asset division, the process can be difficult. Factors like investment properties, primary residences, or self-managed super funds (SMSFs) with less liquid assets—such as business holdings, real estate, closed funds, or art—can further complicate matters. Selling assets without proper advice can trigger capital gains, while shifting assets from tax shelters like superannuation or trusts can result in hefty tax liabilities. Centrelink entitlements and thresholds will also alter with your changed circumstances. Seeking the professional advice of more than just a lawyer is the smartest thing to do. Divorce is also expensive Many shared expenses, such as utilities, become the sole responsibility of each party post-divorce. For instance, while the average monthly living expenses for an Australian couple total around $4,118 ($2,059 per person), for a single person living alone, it’s estimated at $2,835. In essence, each individual spends roughly 70% of what a couple would spend. After divorce, with each person potentially having only half of their assets but needing around 70% of their income to cover living expenses, budgets become tight. So, how can you rebuild financial stability post-divorce? In other words, review your financial plan and seek professional advice. A qualified financial adviser can help you learn to take control of your finances and plan your future. Remember, the benefits of compounding mean that the sooner you start, the better off you’ll be! The information provided in this article is general in nature only and does not constitute personal financial advice. 

Unlocking the mysteries of your super statement

8 December, 20211 December, 2021 Updated on1 December, 2021 Superannuation

Superannuation statements. Boring, right? But if, like many people, you toss your annual super statement in a drawer or hit delete, you could be depriving yourself of many thousands of dollars just when you need it. So, it’s worth the small effort to take a closer look at your superannuation statement. A quick check of your statement may reveal some of the common problems that occur with super; and the sooner these are fixed the quicker your savings can increase. What to look for The layouts of statements vary between super funds, but there is standard information that must be provided. Some items may appear in summary form, with a detailed breakdown shown elsewhere. Here are the key things to look for: Contributions or funds in This will cover employer and personal contributions, government contributions and rebates, plus any rollovers. If you’re an employee earning more than $450 per month, your employer should be paying 10% of your ordinary time earnings to your super fund. Payments can be made either quarterly or monthly. Funds out Most commonly this comprises administration and investment management fees, and any insurance premiums. Excessive fees can place a real drag on the performance of your savings, so check that they are competitive with other funds. Investment earnings This covers interest and share dividends, along with any capital growth in the value of your investments. Be aware that depending on your specific investment mix and the performance of markets, this figure may sometimes be negative. Insurance cover Your super fund may provide death and/or disability insurance. If so, check that it is appropriate and adequate for your needs. Maybe you are paying for insurance cover you don’t need or are inadequately insured. Investment options This will show what your money is invested in, and in many cases the performance of each investment. Your investment choices will be one of the main influences on the ultimate value of your retirement savings. Professional advice in this area is strongly recommended. Other things to check Have you provided your tax file number? If not, the fund will be deducting too much tax from your contributions and earnings. Have you made a binding death benefit nomination? This allows you to choose, within applicable rules, who your superannuation is paid to upon your death. Is your name and address up to date? Is it possible you have ‘lost super’? This occurs when a super fund can no longer contact you. The Australian Tax Office can help you find lost super. Start here https://www.ato.gov.au/forms/searching-for-lost-super/ More than one statement? Ideally, you should consolidate all your superannuation into one fund. This will avoid duplication of fees and insurance premiums and make your super much easier to manage. Invaluable advice Super is one area in life where professional advice can really pay off. If you need help with understanding investment options, consolidating multiple super funds, finding lost super, or ensuring you have the right insurance cover, talk to your financial adviser. The sooner you do, the sooner you’ll be on track to growing your super pot of gold. The information provided in this article is general in nature only and does not constitute personal financial advice.

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