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Welcome to the April 2009 edition of Your Financial Future.
In this issue, we examine what the volatile investment markets mean to you. We also explain why the Government’s Co-Contributions Scheme offers a return that’s hard to beat and provide some tips on how you can stay smart online.
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We also introduce you to Chris Tsiolis, a senior financial planner at Chifley Financial Services.
As usual, we also include an offer from the Fair Go Member Benefits program, and update you on how the different asset classes and investment markets have performed in the past quarter.
Are we there yet?
An update from Michael Block, General Manager - Investments
The question that I am asked most often is whether the market has reached a bottom and will things stop getting worse.
The answer is that I don’t know. Nobody does.
So you might then ask me, if I don’t know whether share markets will improve, do you suggest that investors continue to hold growth assets in this environment?
The answer is yes and here are my reasons:
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Predicting equity returns in the short-term is not easy and often not possible. That is because equities regularly make annual returns of anywhere between -30% and +50% and occasionally even worse than that.
Thus, your guess is as good as mine as to what the return from equities will be over the next year. Pick a number anywhere between -30% and +50% and you have as good a chance of being correct as the next person, no matter how expert they believe that they are.
However, as the time period gets longer, the range of returns from equities gets lower and the return gets more certain. Over the long-term, equities have returned 7 to11% and have generally been a good long-term investment.
Even though I am suggesting that experts are no good at picking short-term movements, there is a very good chance that they will be right in the long term.
So, what I am saying is that there can be some bad periods, but if you stick with a well considered portfolio that includes growth assets such as equities it is a reasonable expectation that your return over a longer time period will be good and better than cash or fixed interest.
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A 50 year old is likely to live beyond 80 years of age and as such should plan for the long term.
Cash will not and has not provided a good investment return over long periods and therefore should only be a temporary place to store investment funds.
- With bonds and cash paying a low rate of return (under 4%) and equities being more attractively priced than previously, the odds are even better that equities will return better than cash and fixed interest in the future.
There is a theory called mean-reversion that suggests that investment returns will eventually get back to their average over time.
Based on data from one of the world’s leading fund mangers, Jeremy Grantham of GMO, mean-reversion suggests that equities will make a good positive return over the next seven years.
So what do you do now?
Hang on, be prepared for more volatility, and make sure that your investment plan is suitable for the long term.
Of course these views are only general and you should seek personalised and professional advice from your financial planner.
We can help you with more than just your super
- Looking for a low cost flexible home loan? We can help you.
- Would you like to build an investment portfolio? We can help you.
- Interested in gearing? We can help you.
- Need insurance? We can help you.
- Looking to create an estate plan i.e. a plan to protect your assets in the event of your death? We can help you.
Call 1800 800 002 for more information.
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A sure benefit
With the end of the financial year fast approaching, it's a good time to consider the Government's Super Co-contribution scheme.
The scheme is available to Australians who earn less than $60,342 a year and is based on after-tax personal super contributions made by 30 June, 2009.
If you have an annual income of $30,342 or less, the Government will match your contribution with a payment of $1.50 for every $1 you put in up to $1,000. The amount the Government pays steadily reduces on incomes over $30,342 and stops after the income level tops $60,342. In the current climate, this kind of return on your investment will be extremely hard to match.
To find out how to make a personal contribution, please call Member Services on 1800 067 059.
Getting the best home loan deal
Are you considering downsizing, a sea change or taking out a mortgage on your home? If you are, it’s vital to obtain the best possible mortgage rate even if interest rates have been coming down.
Every unnecessary cent paid is money down the drain, which could have been better invested to help you boost your retirement nest egg.
When looking for a mortgage, remember to ask for the Comparison Interest Rate schedule. By law, this schedule should be displayed wherever a loan product is sold. To help consumers compare the interest rates of one lender’s products to another, it must include the interest content of the loan together with all fees charged.
So, if Bank A displays an interest rate of 5% pa and has no fees and we compare it to Bank B, which also has an interest rate of 5% pa but charges fees such as an establishment fee of $600 and a monthly maintenance fee of $10, you’d soon know which bank to choose because the Comparison Interest Rate for Bank B would be higher than Bank A.
Also, when asking for the Comparison Interest Rate, don’t forget to ask your lender to supply the “true rate” for the amount you are proposing to borrow. This can be important as the advertised rates are usually based on a loan of $150,000 over 25 years as an average comparison and this may differ substantially from the loan you are interested in taking out.
But asking for the Comparison Interest Rate isn’t enough. There are some items that are not included in the comparison interest rate, such as an early repayment fee, government charges (stamp duty, registration of mortgage fees etc). So it’s vital to also ask your lender about these.
And, before you start, remember that as one of our valued customers, you are able to secure one of the most competitive home loans in the market from Chifley Home Loans.
Chifley Home Loans offers you low interest rates, a choice of loans to suit your circumstances and a simple process that takes all the hard work out of getting and maintaining your home loan.
Some of our Home Loan features include:
- Application fee - $0
- Monthly account keeping fee - $0
- Split loan fee - $0
- Redraw fee - $0
For more information on Chifley Home Loans, call 1800 800 002.
Stay smart online
The World Wide Web has opened the world to many benefits – from instant news and information to the ability to research anything and everything quickly or communicate and network with people around the globe.
It’s hard to imagine how we managed before the Internet arrived. But despite all its benefits, the online world is also fraught with risks, such as fraud, online identity theft, cyberstalking, scams and malicious software.
Indeed, the Government’s Stay Smart Online site warns that personal information such as name, address and age details posted on social networking sites can be used to create an ‘identity package'. A false identity package can be used to open or close bank accounts and steal and transfer money. In addition, by using information that you provide about yourself, your interests and friends, a criminal could impersonate a trusted friend or convince you that they have the authority to access other personal or financial data.
Stay Smart Online warns that you may not be as cautious online as when you meet someone in person, because the Internet provides a sense of anonymity and the lack of physical interaction provides a false sense of security. You may intend information to be read just by friends, forgetting that others may see it.
So before you put any of your personal information online consider:
- Is there a risk in sharing this information?
- Is this a safe/secure way to share this information?
- How do you know that the information is safe and won’t be misused?
Understand that whatever information you share on the Internet may remain on the internet and could be used inappropriately, either now or sometime in the future. Even if you remove the information from a site, saved or cached versions may still exist on other computers.
If you use online networking sites, remember that anyone can create a profile on a site. Online contacts may not be who they say they are and fake profiles can be used to gain your trust.
Online networking sites often have privacy settings set low to maximise the people that can "find" you for legitimate purposes. Think about who you really want to have access to your information, and restrict it accordingly.
Some tips include not putting your full birth date or address online. Also, think carefully before publishing photos containing street-names, car licence plates or venues you frequent, in a way that can be linked to you.
It’s also important to check and monitor how much information about you is publicly available online. Type your own name into a search engine and see how many hits you get.
Meet your planner: Chris Tsiolis
Firstly, stay calm and secondly, stay in contact with your adviser. These are the two main tips for surviving the tough investment climate that Chris Tsiolis, a senior financial planner at Chifley Financial Services, gives his clients.
“I tell them not to make a knee-jerk reaction without speaking to their adviser first. Although the global financial crisis has caused many clients to be concerned about the state of their investments, it doesn’t mean that financial advisers were necessarily wrong in the decisions made around asset allocation, provided that a client’s risk profile, objectives and investment timeframe have been taken into consideration,” he says.
“For example, a client over 60 years of age in, or approaching, retirement may generally have no more than 50% of a portfolio invested in quality Australian and international shares as a means of managing volatility. The crisis does highlight the need to ensure that client portfolios are properly allocated to withstand market volatility. This may require some ‘rebalancing’ of portfolios throughout the client's lifecycle. Therefore, in certain cases, exposure to specific product groups within asset classes will need to be changed. But the exposure to the overall asset class should not necessarily change unless the client’s situation alters.”
Chris also reminds clients that the potential for inflation to eat into their returns is one of the biggest long term risks. “Investment performance historically does improve,” he says.
In the current climate, he says the biggest mistakes clients can make include being too conservative in their investments, not sticking to them for the long-term and being too product focused. “If the asset allocation is right, your portfolio should withstand volatility during these difficult times,” he says.
Chris, who has an economics degree, financial planning diploma and is studying towards a Masters degree in financial planning, has been in the financial services industry for just over 10 years. He’s worked at both large for-profit organisations and smaller boutiques providing financial advice, training financial planners or implementing large projects.
He says he was attracted to the world of financial planning because of the challenges involved in keeping up to date on complex and ever changing regulations and market conditions. He also enjoys the satisfaction of working with people and being able to help them improve their financial positions.
Investment and market commentary
Click here for commentary on how investment markets performed over the March 2009 quarter.
Fair Go
EcoPoint Resorts Hot Deal: Stay one night free!
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EcoPoint Resorts invite FuturePlus Financial Services members to experience nature at its absolute best with a range of accommodation options ideal for couples, families and friends. Facilities at both Resorts include a swimming pool, restaurant, bar, free Eco Kids Club**; or get busy bushwalking, fishing, kayaking, cycling and more.
Book online at www.ecopoint.com.au
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Murramarang Resort
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Myall Shores Resort
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*Conditions apply. Subject to availability. Not valid during peak periods. This offer is valid for bookings of three consecutive nights only. Offer valid to 18 December 2009. Please quote FP0708
**Eco Kids Club is free for Villa guests only and is open seasonally and subject to availability.
Come along to a seminar
Are you looking to set aside some money for a house, a holiday or perhaps for your children's education? Would you like to know more about investment options, risk and return and managed funds? Are you wondering whether you will have enough money to retire on?
You could get the answers to these questions, and more, by attending one of the free pre-retirement planning seminars we are running at a venue close to you. To find out more, click here or contact Member Services on 1800 067 059.
Contact us
Chifley Financial Services Limited
Ground Floor
28 Margaret Street
Sydney
Member Services
T: 1800 067 059
F: (02) 9273 0033
Financial Planning
T: 1800 800 002
Please note that the information contained in this document is of a general nature only and is not for personal advice and has not taken into account your personal objectives, financial situation or needs. Any advice in this document is provided by Chifley Financial Services Limited (ABN 75 053 704 706), as an Australian Financial Services Licensee (AFSL 231148). Chifley Financial Services Limited is the trustee of FuturePlus Super (ABN 76 829 356 693). FuturePlus Super is a Registered Superannuation Entity (RSE: R1004366). Chifley Financial Services Limited is co-owned by the Local Government Superannuation Scheme, the Energy Industries Superannuation Scheme and Unions NSW. Members should not rely solely on this information and should consider their own personal objectives, financial situation and needs before acting on this information. Prior to making any decision you should obtain and consider the relevant Product Disclosure Statement (PDS) pertaining to your membership.
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