Investing

The female investor

6 July, 202229 June, 2022 Updated on29 June, 2022 Investing

Investment and portfolio building has traditionally been a male-dominated world, but these days more women are trading on the market – and they’re good at it! According to an ASX Australian Investor Study completed in 2020, female investors make up 42% of Australian investors, yet 45% of those only began investing in the year prior to 2020.

It’s intriguing that younger women – known as Next Generation Investors aged 18 – 25 – are taking up stock portfolios. Their goals include saving for a holiday (50%) or paying down existing debt (34%).

The ASX study highlighted a few other interesting points:

Women prefer products more commonly understood, such as direct Australian shares (53%), residential investment property (37%) and term deposits (31%).
Women are less concerned than men about low interest rates and market fluctuations, but consider issues like whom to trust, hidden fees and liquidity.
While men are more accepting of market volatility, women prefer stable or guaranteed investment returns.

While we’re about breaking down stereotypes, the study found that women are generally more successful in their investments than men. This could be because women are cautious by nature, taking longer to research investment choices and, once settled, preferring to ride out market ups and downs.

Conversely, men tend to regularly review their portfolios and trade aggressively, buying and selling assets, potentially incurring additional fees and losses due to market swings.

In recent times there has been a surge in Australian women backing other Australian women in start-up business ventures.

According to SmartCompany.com.au, female venture capitalists are recognising that entrepreneurial women face a specific set of challenges, such as a lack of networking and mentoring opportunities, and lingering perceptions around gender-based work/family roles. Further, support for Indigenous businesswomen is increasing as women’s investment networks strive to encourage women from diverse backgrounds.

Fact is, almost 40% of Australian women who are single for reasons of divorce, widowhood or otherwise, will retire in poverty. Issues around the gender pay gap are recognised contributors to women generally having less money in savings and/or superannuation: women save an average of $598 per month compared with men $839.

In an effort to improve these figures, many women strive to secure their financial futures through self-education: magazines, blogs, podcasts etc. Others seek professional advice through referral from a trusted friend or relative.

The financial planning industry recognises that more women are actively investing. Financial advisers are developing strategies specific to women’s needs and goals – in fact, the industry is well-served by a large number of financial professionals who are women.

The Financial Planning Association of Australia (FPA) can put you in touch with a qualified professional adviser, just like us, so you can ensure all your decisions are well-informed and that your personal needs and goals are considered.

The information provided in this article is general in nature only and does not constitute personal financial advice.

Building financial resilience

30 January, 20249 February, 2024 Updated on9 February, 2024 Budgeting, Education, Finance, Investing

Resilience is the ability to quickly recover from setbacks, and while setbacks can come in many forms most of them will have a financial component. So what can you do to build financial resilience? Expect the unexpected Rarely do we get advance warning that something bad is about to happen to us, so the time to develop your resilience strategy is now. And while we don’t know the specifics, we can anticipate events that would throw our finances into disarray. A house burning down or a car being stolen. Not being able to work due to illness or injury. The death of a breadwinner or caregiver. With some idea of the type of threat we face we may be able to insure against some of them. If you have taken out any type of insurance policy you’ve already made a start on your resilience plan. Create buffers You can’t insure against every possibility, but you can build financial buffers. This might simply be a savings account that you earmark as your emergency fund that you contribute to each payday. If your home loan offers a redraw facility you can also create a buffer by getting ahead on your mortgage repayments. Buffers can be particularly important for retirees drawing a pension from their super fund. Redeeming growth assets for cash in order to make pension payments during a market downturn can lead to a depletion of capital and reduction in how long the money will last. By maintaining a cash buffer of, say, two year’s worth of pension payments, redemptions of growth assets can be deferred, giving time for the market to recover. Cut costs The Internet abounds with tips on how to cut costs and save money. In difficult economic times cost cutting can help you maintain your financial buffers and important insurances. Key to cost cutting is tracking your income and expenditure and yes, that means doing a budget. Find the right budgeting app for you and this chore could actually be fun. Invest in quality There are many companies out there that have long track records of consistently pumping out profits and dividends. They may not be as exciting (i.e. volatile) as the latest techno fad stocks but when markets get the jitters these blue chip companies are more likely to maintain their value than the newcomers. This is important. The more volatile a portfolio the more likely an investor is to sell down into a declining market. This turns paper losses into real ones, depriving the investor the opportunity to ride the market back up again. The other key tool in creating resilient portfolios is diversification. Buying a range of investments both within and across the major asset classes is a fundamental strategy for managing portfolio volatility. With a well-diversified portfolio of quality assets there is less need to regularly buy and sell individual investments. Unnecessary trading can create ‘tax drag’ where the realisation of even a marginal capital gain triggers a capital gains tax event and consequent reduction in portfolio value. Take advice Building financial resilience can be a complicated process requiring an understanding of a range of issues that need to be balanced against one another and prioritised. Your financial planner is ideally placed to assist you in developing your own, personalised plan for financial resilience. The information provided in this article is general in nature only and does not constitute personal financial advice. 

When debt collectors call, know your rights

7 October, 20248 October, 2024 Updated on8 October, 2024 Budgeting, Education

Debt is a fact of life; some might say it’s a necessity. Rarely is a home or large-ticket item purchased without finance of some kind. Australians typically manage their financial obligations well, but rising interest rates, cost of living pressures and unexpected expenses combine to place stress on a household budget. In an increasingly cashless economy, it’s difficult to keep track of spending, and before you can say, tap-and-go, the morning latte and toastie has maxed out the credit card. Most people tighten the belt and get back on track. Unfortunately, others find themselves caught in a downward spiral that quickly gains momentum until realising they’re in over their heads. Failure to meet your financial obligations may result in you being contacted by a debt collection agency as creditors seek to recoup their losses. While this is traumatic, keep your cool and remember that you have rights. According to MoneySmart.gov.au a debt collector can only contact you: Debt collectors may: Debt collectors cannot: If you believe a debt collector, or agency they represent, has acted outside of their boundaries, you are within your rights to take action. Violent or threatening behaviour is never acceptable; immediately contact the police. Alternatively, if the collectors are intimidating or harassing you, write to them or their agency to report the behaviour and request it be stopped. If this doesn’t work, reach out to the Australian Financial Complaints Authority on 1800 931 678 for advice. Debt collectors aside, you must take action to manage your debt. No debt ever went away because it was ignored, but there are ways to dial down the pressure. Here are some steps you can take today to get started: You can also seek professional assistance from a qualified financial adviser. They’ll work with you to create a realistic strategy for managing your expenses and guide you in developing a plan to move forward and eliminate debt. Debt can be debilitating and seem overwhelming, but by understanding your rights, knowing where you stand financially and seeking professional advice and support, you can take back control of your finances and look towards a comfortable financial future. The information provided in this article is general in nature only and does not constitute personal financial advice. 

The impact of student loans when buying a home

27 August, 202427 August, 2024 Budgeting, Education, Finance

For many Australians, particularly young Australians, the dream of home ownership is often accompanied by the reality of carrying student loans, known as HECS-HELP debt. Understanding the impact of HECS debt on your ability to secure a home loan can help you plan for and navigate the home loan process. Case Study Sarah, is a 32-year-old marketing professional from Melbourne. She has a stable job with a steady income and has managed to save a decent deposit for her first home. However, like many Australians, Sarah carries a HECS debt from her university education. What is HECS-HELP debt? HECS-HELP is a loan offered by the Australian government to pay for studies at a university or approved higher education provider. Once a person earns above the compulsory repayment threshold, loan repayments are automatically deducted from their pay through the ATO. There is no interest on the loan, but the debt is annually indexed against inflation. Sarah’s Home Loan Goals Sarah’s goal is to purchase a two-bedroom apartment close to the city. She is aiming to take out a $450,000 home loan, considering her savings and the property prices in her desired area. Sarah is concerned about how her HECS debt will affect her home loan application and how she can maximise the amount she can borrow. The Application Process and the Impact of Student Loans When Sarah approached a mortgage broker to discuss her home loan options, she learned that her HECS debt, while interest-free, would still impact her borrowing capacity. Sarah’s potential lenders must consider her ability to meet all financial obligations, including her HECS repayments. This could potentially lower the loan amount Sarah qualifies for, as lenders assess her debt-to-income ratio. Strategies and Solutions Sarah’s mortgage broker advised that there are several strategies she can consider to enhance her borrowing capacity despite her student debt: Outcome By proactively managing her finances, seeking professional advice, and implementing strategies to manage her HECS debt, Sarah was able to strengthen her home loan application. She successfully secured a home loan with a competitive interest rate, allowing her to purchase an apartment within her parameters. The impact of student loans on home loan applications is a significant consideration for many young Australians. But the good news is that there are steps you can take to minimise the impact of HECS-HELP debt. Doing so enhances the chances of securing a home loan, and empowers you to make informed decisions on your financial journey. Reach out to us today and take the first step towards home ownership! The information provided in this article is general in nature only and does not constitute personal financial advice. 

What is money… really?

4 November, 202017 September, 2021 Updated on17 September, 2021 Economy, Finance

That $50 note in your pocket. What’s it worth? “$50,” you say, probably thinking it’s a dumb question. But is it really? Or a sheet of plastic and a bit of ink that likely cost the note printer less than a cent? Your $50 note only has value because the government declares that it does. This lack of intrinsic value means your $50 note, and the balances of bank accounts that represent most money in circulation, might better be described as currency rather than ‘real money’. Over the past few thousand years all sorts of items have been used as currency, from shells and cocoa beans to soap and cigarettes. But to be considered real money, several key criteria need to be met. The most important are that it is: Recognised as a medium of exchange and accepted by most people within an economy. Durable. Portable, having a high value relative to its weight and size. Divisible into smaller amounts. Resistant to counterfeiting. A store of value over long timeframes. Of intrinsic value, i.e. not reliant on anything else for its value. Throughout history gold and silver have come closest to meeting these and other criteria, though nowadays you’ll have difficulty in paying for your groceries with gold Krugerrands. Also, you’ll want to keep your gold and silver in a safe place, and it was people seeking to do just that which gave rise to paper money and our current system of bank-created money. What started out as a good idea… Centuries ago goldsmiths would take in gold and silver for safekeeping and issue the owners receipts, or notes, confirming the amount of gold held. The depositors soon discovered that these notes could be used for payment in place of the physical gold, but the goldsmiths noticed something else. It was rare for anyone to redeem all their notes at once. They saw the opportunity to issue notes as a loan that borrowers paid back over time, with interest. Provided borrowers paid back their loans on time and only a small proportion of owners wanted their gold back at any given time, all was well, and goldsmiths transformed into bankers. But this didn’t always work out. An economic shock might see everyone wanting their gold back, and if the bank couldn’t deliver the full amount that was demanded, it went broke. To help prevent this, many countries created central banks, with some governments even acting as lender-of-last-resort. While government control and the rules around banking have evolved over time, private banks are still the source of most currency created today. When things get real In economically stable times it’s easy to think of currency and real money as the same thing. However, a couple of examples reveal the difference between the two. One is when a government starts printing money to pay for its programs. Inflation usually results, and the value of currency can plummet. In the case of hyperinflation, paper money and bank deposits can quickly become worthless as happened in Germany in the 1920s. The difference between currency and real money and the issue of intrinsic value has implications for other investments. If you would like to learn more, talk to us. We’re here to help. The information provided in this article is general in nature only and does not constitute personal financial advice.

Quarterly Economic Update: October-December 2021

19 January, 202220 April, 2022 Updated on20 April, 2022 COVID-19, Economy, Investing

Coronavirus Victoria and New South Wales saw their economies roar back to life as they emerged from lockdown just in time for a new kid to arrive on the coronavirus block. Omicron spread around the world seemingly within days knocking Delta off the front pages. Appearing to cause less severe disease than previous strains, and with Australia achieving high rates of immunisation, state governments held off resorting to lockdowns in an attempt to minimise financial carnage on businesses and workers. All this battling against the virus comes at an enormous cost. The mid-year budget update forecasts annual deficits of around $100 billion for the next few years, no surplus over the next ten years, and gross debt of $1.2 trillion by 2024-2025. Jobs galore The unemployment rate dipped to 4.6% in November as an additional 366,100 people joined the ranks of the employed. The under-employment rate fell 2% to 7.5%, and many employers reported difficulties in finding staff. Homebuyer hopes Homebuyers gained a little power over sellers towards the end of the year as a surge in listings saw auction clearance rates in Melbourne and Sydney drop to 66% and 73% respectively. If this extra supply is maintained it should help to cool what has been a very hot property market. COP this The Covid-delayed climate change conference COP26 was finally held in Glasgow, and Australia joined the large number of countries aiming to reach net zero carbon emissions by 2050. Good progress was made in some areas, such as reducing methane emissions, ending deforestation and, for some countries, phasing down coal. However, modelling predicts that if all current commitments are fulfilled we will still see temperatures rise by 2.4 degrees. This is well short of the Paris Agreement goal to limit warming to 2 degrees, and preferably 1.5 degrees. The Glasgow Climate pact calls on nations to “strengthen their pledges to reduce emissions by the end of 2022.” Expensive energy Major energy users suffered from a big spike in the costs of both coal and natural gas during the quarter. Prices corrected abruptly in November, but still remained much higher than at the start of the year. Oil prices were also higher, nudging US$85 per barrel during October and November. Aside from hitting consumers’ petrol and home energy bills, high energy prices also led to an increase in the cost of, and shortages of urea – a chemical that is critical to the production of fertilizer (and therefore food) and to keeping diesel trucks on the road. Ups and downs The volatility in the value of the Aussie dollar against major currencies continued for the quarter. It traded between 70 US cents and 75 US cents in line with its long-term trend. We gained more than 3.7% against the Euro and Yen, and held ground against the British Pound. The local share market failed to excite, tracking sideways before putting on a small end of year spurt that saw the S&P ASX 200 close the quarter up 1.5%. It was a different story for US stocks. The S&P500 closed out the year at a record high after lifting nearly 11% for the quarter. The Nasdaq was close behind with a 9% gain. The information provided in this article is general in nature only and does not constitute personal financial advice.

Economic Update: July-September 2021

7 October, 20217 October, 2021 COVID-19, Economy

COVID here to stay The third quarter of the calendar year brought with it the third and by far the biggest wave in COVID-19 infections. Largely restricted to NSW and Victoria the outbreak was driven by the highly infectious Delta variant. Such was its speed of spread it forced a change in strategy from one of elimination to learning to live with the virus, supported by a massive vaccination campaign. By quarter’s end vaccination rates were closing in on key targets that will allow a slow and selective lifting of the severe lockdown conditions that have prevailed for months. Time to chill You know Australia has a housing problem when the head of one of the big banks, in this case Matt Comyn at CBA, calls for action “sooner rather than later” to stop the property market overheating. This was on the back of CoreLogic data showing house prices in Melbourne and Sydney rose 15.6% and 26% respectively over the 12 months to August. The International Monetary Fund (IMF) also called on Australian regulators to cool the market. Don’t expect this to happen through the usual instrument of increased interest rates. Rather, look for reduced lending in specific sectors, such as investors, higher deposit requirements, or testing loan serviceability at higher interest rates. Pop goes iron ore Iron ore’s price bubble eventually popped as China instructed its steelmakers to cut back on production. Over the quarter the ore price fell 45%, with major miners taking an equivalent hit. BHP, Rio and Fortescue saw their shares tumble 33%, 26% and 44% respectively. Hot topic In August the Intergovernmental Panel on Climate Change (IPCC) released its latest report. It warned that “unless there are immediate, rapid and large-scale reductions in greenhouse gas emissions, limiting warming to 1.5°C or even 2°C will be beyond reach”. The report paints a grim picture of what that warmer world will look like and returned climate change to the front pages of the world’s newspapers. The numbers Equity markets experienced a bit of a rollercoaster ride over the quarter. All the major indices posted record highs, but most ended up within 1% of where they started. The Aussie dollar also had a volatile quarter, trading between 71 and 75.4 US cents and finishing at 72 cents. It was a similar story against the other major currencies. In both cases the late-quarter sell-offs were blamed on expectations of higher US interest rates. On the radar Many of the world’s leaders will come together in Glasgow at the end of October for the 26th UN Climate Change Conference (COP26). If they heed the warning from the IPCC, and if they agree to take the necessary steps to limit warming to 2°C (and preferably 1.5°C), it will set the scene for a dramatic economic transformation, with huge opportunities for those who can sort the winners from the losers. Of more immediate concern, Chinese property company China Evergrande appears to be on the brink of collapse. Heavily indebted to the tune of US$300 billion, if it is allowed to fail it is likely to have global ramifications, not the least for Australia. China’s construction boom has been a huge driver of demand for our iron ore. The information provided in this article is general in nature only and does not constitute personal financial advice.

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