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Superannuation funds have recorded another impressive year of returns for members with international technology and Australian banking shares driving above average returns over 2024. Concerns over inflation caused a slow start to the year, with multiple negative monthly returns recorded until October 2023. Increased confidence in the outlook for inflation and ongoing developments in artificial intelligence led a market rally from November to March and while higher than expected inflation data led to a stumble in April, returns recovered quickly to finish the year strong. Given the significant range of outcomes across different months it remains important to focus on longer term outcomes, with funds continuing to prove they can deliver good outcomes over various market cycles. All Balanced funds, those with a strategic allocation of between 60% to 76% of their portfolio invested in growth assets, are expected to deliver positive returns to members, while the top performing funds provided members with double digit returns over the financial year. Hostplus’ Indexed Balanced option was the top performing option in the SR50 Balanced (60-76) Index for the year ending June 2023, returning 12.2%, closely followed by Raiz Super’s Moderately Aggressive option and Colonial First State’s Enhanced Index Balanced option with returns of 12.1% and 11.4% respectively. Top 10 Balanced options over 12 months to 30 June 2024 Rank Option Name 1 Year % 10 Year % p.a. 1 Hostplus – Indexed Balanced 12.2 7.7 2 Raiz Super – Moderately Aggressive 12.1 – 3 CFS-FC Wsale Pers – CFS Enhanced Index Balanced 11.4 6.7 4 ESSSuper – Balanced Growth 11.1 – 5 IOOF Employer Super – MLC MultiSeries 70 10.9 7.0 6 Brighter Super – Balanced 10.6 – 7 GESB Super – My GESB Super Plan 10.4 6.6 8 Qantas Super – Growth 10.1 7.3 9 Australian Retirement Trust – Super Savings – Balanced 9.9 8.1 10 MLC MKey Business Super – MLC Balanced 9.6 7.0 SR50 Balanced (60-76) Index^ 8.8 7.0 ^ indicates interim result. Returns are after investment fees and taxes and are rounded to one decimal place; however, rankings are determined using unrounded data held by SuperRatings. Based on options included in the SR50 Balanced Index. The table above displays the top performing balanced funds for the year to 30 June 2024, as well as showing 10-year returns for options with a 10 year performance history, an important consideration given the long-term nature of superannuation investments. In a repeat of 2023, funds with a higher exposure to shares and listed assets generally outperformed for the year, while those with greater exposure to unlisted property reported more subdued outcomes. As a result, members who were invested in index funds generally outperformed more actively managed options, given the strong focus on, and allocation towards, listed shares. Top 10 Balanced Index options over 12 months to 30 June 2024 Rank Option Name 1 Year % 5 Year % p.a. 1 Aware Super Future Saver – Balanced Indexed 12.9 – 2 Hostplus – Indexed Balanced 12.2 7.2 3 Rest – Balanced Indexed 12.2 7.1 4 Australian Retirement Trust – Super Savings – Balanced Index 12.1 6.6 5 Brighter Super – Indexed Balanced 12.0 7.2 6 HESTA – Indexed Balanced Growth 11.9 – 7 netwealth Super Accelerator – Index Opportunities Growth Fund 11.5 5.3 8 AustralianSuper – Indexed Diversified 11.5 7.0 9 Cbus – Indexed Diversified 11.4 – 10 NGS Super – Indexed Growth 11.4 6.0 Returns are after investment fees and taxes and are rounded to one decimal place; however, rankings are determined using unrounded data held by SuperRatings. Based on index options tracked by SuperRatings. The top performing indexed fund was Aware Super’s Future Saver – Balanced Indexed option with a return of 12.9% for the year to June, while all top 10 indexed options returned double digits to members. Top 10 MySuper Lifecycle options over 12 months to 30 June 2024 Rank Option Name Growth Assets % 1 Year % 10 Year % p.a. 1 Colonial First State Essential Super MySuper – LifeStage 1975-79 90 14.6 – 2 Colonial First State First Choice MySuper – LifeStage 1975-79 90 14.4 7.6 3 Virgin Money Super – LifeStage Tracker Born 1979 – 1983 90 13.2 – 4 Vanguard MySuper – Lifecycle Age 47 and under 90 13.2 – 5 Mine Super MySuper – Lifecycle Investment Strategy Under Age 50 95.2 12.5 8.2 6 Russell iQ Super MySuper – MySuper GoalTracker Age 50 and Under 95 12.3 – 7 GuildSuper MySuper – Growing LifeStage 75 11.6 7.5 8 Mercer SmartPath – MySuper Born 1979 – 1983 85 11.6 7.9 9 AMP SignatureSuper – MySuper 1970s 91 11.1 7.6 10 Aware Super Future Saver – MySuper Lifecycle High Growth 88 10.9 8.8 Returns are after investment fees and taxes and are rounded to one decimal place; however, rankings are determined using unrounded data held by SuperRatings. Based on MySuper Lifecycle options for a member aged 45 or under tracked by SuperRatings. Members who are invested in default options have also done well over the year with funds that have adopted a lifecycle investment style outperforming single default options. This is due to their higher allocation to shares, particularly for younger members. We have noticed a trend of lifecycle options increasing their exposure to growth assets such as shares over the past 12 months. While this has benefited members this year, higher exposure to these assets also comes with increased ups and downs, and we encourage members to learn how their fund’s investment strategy works so they are comfortable with annual and long-term performance outcomes. Top 5 Sustainable Balanced options over 12 months to 30 June 2024 Rank Option Name 1 Year % 5 Year % p.a. 1 Raiz Super – Emerald (SRI) 14.8 8.4 2 UniSuper – Sustainable Balanced 12.2 7.0 3 Vanguard Super SaveSmart – Ethically Conscious Growth 12.2 – 4 Aware Super Future Saver – Balanced Socially Conscious 11.1 7.5 5 Future Super – Balanced Index 10.1 5.3 Returns are after investment fees and taxes and are rounded to one decimal place; however, … Read more

A managed fund generates income from its investments – for example, through share dividends, interest on cash or fixed interest investments in the fund, or any gains made when fund investments (like shares) are sold. So in short, a distribution is profit or income made by a fund and paid to investors. How are distributions paid? Managed investment funds are required to pay all realised income and capital gains to investors for the financial year. Income can be paid monthly, quarterly, half yearly or yearly, depending on the fund. You may receive your distribution as a cash payment, for instance as a payment to your designated bank account, or as an amount that is reinvested back into the fund. As an investor, you should also receive a statement that outlines the amounts and types of income generated by the fund and distributed to you, which may be helpful at tax time. How are distributions calculated? The income of all individual investments in a fund for a given time period is calculated taking into account things like share dividends or interest payments. The fund’s deductible expenses (things like management fees and other payables) are then subtracted, leaving the total amount of income that can be paid out. That amount is then divided by the total number of units in the fund to provide an amount of distribution per unit. For example, if the distribution for a fund was $1 per unit and an investor owned 100 units in the fund, they would receive a distribution of $100. What does the unit price have to do with distributions? When you invest in a fund, you’re pooling your money with other investors to access a professionally managed portfolio of investments overseen by skilled investment managers. In exchange, you’re allocated a number of units that correspond to how much money you’ve invested – based on the fund’s unit price at the time of investment. Why does the unit price fall after a distribution? When you receive a distribution for the income generated by a fund’s investments, the value of the fund reduces by the amount of the total distribution. This results in a lower unit price because income from the fund’s investments is being paid from the fund to investors, reducing the total value of the fund’s assets – a figure that is divided by the total number of units owned in the fund to determine the unit price. This doesn’t mean you’ve lost money on your investment or that your investment in a particular fund has changed – rather, you retain the same number of units in the fund, which has simply decreased in value by the amount of the distribution paid to you. Distributions that are reinvested back into a fund are used to acquire more units in it. This means the value of your investment should not fall as you will be allocated additional units. Why aren’t distributions paid to super funds? While managed investment options (funds) outside of super pay distributions to investors, investment options within super do not. That’s because there is a different structure and purpose for super, which members can’t access until retirement. Generally, super balances fluctuate higher and lower over time depending on the contributions members make and the performance of the funds their super is invested in. Investment options within super contribute to super balances through the unit price, which changes daily based on the performance of each fund’s investments. Effectively, the distribution amount is retained in your super and forms part of your super balance, which over time can be used to acquire more investments in the options your super is invested in. Source: Colonial First State

While an exposure to hedge funds can provide a lift to a portfolio’s performance, they also offer the potential to generate high returns… at a risk. What’s a hedge fund and how do they work? Hedge funds typically play an important role in financial markets. In fact, when markets are volatile, hedge fund managers are often able to spot, and take advantage of, interesting investment opportunities and inconsistencies in markets that can generate extra returns for a portfolio. Alfred W Jones is widely considered to have started the first hedge fund in 1949 in the US when he raised US$100,000 to start his fund. Of this money, US$40,000 was his. Jones’ aim was to use some of the money he raised to establish the fund to minimise its losses. Back then, the fund was known as a ‘hedged’ fund. That is, it tried to hedge its investments by using different types of financial instruments to offset the risks it took on its positions. This is a trait of hedge funds that continues to this day. Hedge funds can invest in many different asset classes – shares, bonds, listed property trusts, as well as all the derivative instruments they use to hedge their positions such as options, futures and foreign exchange contracts. They can also invest in listed and unlisted investments. This style of fund also has a number of other defining features, such as investors needing a large minimum amount to invest (an initial outlay of $50,000 or more is typical). Usually only sophisticated investors or professional fund managers allocate money to them, because of the significant risks to which hedge funds are exposed – they have the potential to make, but also lose, lots of money. So it’s not usually appropriate for retail investors to have significant exposure to them, unless it’s through an investment fund managed by professionals. Hedge funds are also relatively illiquid. This means it can be hard to withdraw money from them at short notice. They are often largely unregulated, which also increases the risks to which they are exposed. For instance, unlike other managed funds, they don’t have to produce extensive disclosure documents that clearly outline their risks. In terms of fees, hedge fund managers are rewarded for the returns they produce. So while their fees can be quite high, so too can their returns. So, how do they invest? Long/short strategies This is a classic hedge fund strategy. It involves going ‘long’ on a position, and at the same time going ‘short’ on an associated position to offset any potential risks. A common example is to buy one stock in a sector in the belief its share price will rise and short, or, sell another stock in the same sector in the belief its share price will decline.   Global macro fund Global macro fund managers make their investments based on their views on what’s happening in different markets around the world, often trading off a positive view about a market with a negative view about a market. For instance, if a fund manager thinks economic growth in Asia will outstrip economic growth in Europe, it might invest in Asian shares and sell European shares. This style of fund is similar to a pure long/short fund, but typically, it’s far more leveraged. In other words, the fund manager will borrow large amounts of money to take bets on various investment themes it can express in markets right around the world. Macro funds also use derivatives to express an investment view and manage risk. Distressed debt Some hedge funds look to take positions in fixed income investments issued by businesses that are under stress or not rated as investment grade. These bonds often pay a relatively high interest rate and offer guaranteed income for the life of the bond, which can help support the hedge fund’s returns. The fund manager applies its skill to identify assets that have the potential to generate healthy returns over time, in line with its risk profile. Hedge fund of funds Another approach to hedge fund investing is to allocate to a ‘fund of funds’. This is a fund that invests in a group of hedge funds, all with different exposures and risk tolerances. The reason why investors choose to invest in a hedge fund of funds is to diversify their exposure, while maximising their potential for gains. How are hedge funds used in an investment portfolio? An allocation to hedge funds can provide an important source of diversification, not just when markets are volatile, but over time. Hedge funds invest in many different strategies that are uncorrelated to equities markets, such as fixed income funds and emerging markets opportunities, so an exposure to hedge funds has the potential to smooth out a portfolio’s returns over time. There are many different types of hedge funds, all with different target returns and investment profiles. So it’s often useful to delegate the choice of hedge funds to professional managers who are able to select funds based on their risk/return profile, to suit the investor’s objectives. Source: BT

Investing in infrastructure is about investing in the companies that provide essential services to society and earning predictable, reliable returns in the process. More than 350 infrastructure and utility companies are listed on global stock markets, with the sector having a combined market capitalisation in excess of US$4 trillion; about three times the market value of the Australian stock market[1]. The services provided by these companies are essential to the efficient function of communities, providing assets that have reliable earnings growth and stable income streams in times of market declines. As investments, infrastructure stocks exhibit unique characteristics, including reliable cash generation, inflation protection, defensiveness in declining markets, and low correlations with other asset classes creating a compelling case to include the sector in a diversified portfolio. As it is traditionally defined, infrastructure typically refers to large, tangible assets that deliver essential services. While utilities, highways and pipelines are widely regarded as infrastructure, the status of other assets, including car parks, data centres, and satellites attracts debate. Notwithstanding this complexity, the case for investing in infrastructure is clearly demonstrated by an examination of the sector’s attributes. Why invest in listed infrastructure?  As an asset class, infrastructure exhibits four distinctive characteristics: Infrastructure generates reliable cash flows – The vast majority of infrastructure assets exhibit predictable demand, limited competition and a stable regulatory environment. Infrastructure is thus well positioned to generate reliable cash flows and solid and stable earnings growth, no matter what economic conditions prevail. Infrastructure offers inflation protection – Infrastructure comes with built-in protection against inflation because regulators allow these companies to raise their prices to protect their earnings when their costs rise. Infrastructure has lower risk of capital loss – Assets that have reliable earnings growth and stable income streams are typically havens in periods when equity benchmarks decline. Infrastructure exhibits low correlations with other asset classes – Because the earnings of infrastructure companies exhibit low levels of sensitivity to economic conditions, the returns of infrastructure investments typically exhibit low correlation with other asset classes, offering diversification benefits for investors. Including infrastructure in a diversified portfolio can enhance returns and reduce portfolio risk. Infrastructure – always in demand Investing in infrastructure is about investing in the companies that provide essential services to society. We are so used to these services in our lives that perhaps we underestimate the range of essential services that are provided the world over, every minute of every day. Communication towers The phenomenal growth of the Internet and mobile devices means that communication towers play an essential role in the efficient function of a modern community. The biggest tower operators have a large reach. American Tower, for example, has nearly 226,000 towers across 25 countries in five continents[2]. Other examples of telecommunication tower stocks include Cellnex Telecom, Vantage Towers and Crown Castle International. Global mobile data traffic is expected to grow 20% p.a. over the six years to 2028. Water Water is perhaps the most essential of all infrastructure services. Australians consumed more than 13,800 gigalitres of water in FY2020-21[3], with the average household bill being $832 a year[4]. In 2020-2021, the total expenditure on distributed water by Australian households, businesses and other bodies was about $9.2 billion. Examples of global infrastructure water stocks include United Utilities of the UK and American Water Works. Humans can use only about 0.3% of the world’s supply of water[5]. Natural gas Natural gas is nearly as interwoven into our daily lives as electricity. In Australia, ~42,000 kilometres of natural gas transmission pipelines shift gas from where it is produced to demand centres[6]. Natural gas supplies ~27% of Australia’s energy needs[7]. Global natural gas consumption is expected to increase by more than 40% over the period to 2025[8]. Electricity Electricity is integral to almost every aspect of our modern lives. In the US, the power grid is made up of over 7,300 power plants, nearly 160,000 miles of high-voltage power lines, and millions of miles of low-voltage power lines and distribution transformers, connecting 145 million customers throughout the country[9]. The average US household spends US$137 per month on power[10]. Examples of global infrastructure ‘electricity’ stocks include the National Grid of the UK, WEC Energy and Xcel Energy with service territories in the USA. Electricity wasn’t ‘invented’ it was ‘discovered’ because it is present in nature. Airports In 2022, planes carried over 3.8 billion passengers worldwide through the world’s airports[11]. Airports within the global infrastructure sector include Zurich Airport, Paris Charles de Gaulle Airport, London Heathrow. Airports play a vital role in economic growth, job creation and international trade and tourism. Toll roads Toll roads have been around for thousands of years, the history of toll roads in Australia dates back to 1811 when the first toll road (Sydney-Parramatta) was built. Today the US has more than 9,500 kms of toll roads and host more than five billion trips a year[12]. Examples of global infrastructure ‘toll road’ stocks include Transurban with operations in Australia and North America, Ferrovial with toll road assets in North America. Sydney’s toll roads host an average of more 950,000 trips each day[13]. Source: Magellan Group [1] https://www.ceicdata.com/en/indicator/australia/market-capitalization [2] American Tower Overview – Q2 2023, Data as of June 30, 2023 [3] Australian Bureau of Statistics: 2020-21, total expenditure on distributed water by industry and households [4] Canstar Blue research, January 2023. [5] ngwa.org – https://www.ngwa.org/what-is-groundwater/About-groundwater/information-on-earths-water [6] Australian Pipeline and Gas Association: https://www.apga.org.au/pipeline-facts-and-figures [7] https://www.energy.gov.au/data/energy-consumption (2020- 2021) [8] https://www.energy.gov/fecm/liquefied-natural-gas-lng [9] https://www.epa.gov/green-power-markets/us-electricity-grid-markets [10] https://www.eia.gov/todayinenergy/detail.php?id=56660#13 [11] https://centreforaviation.com/analysis/reports/the-worlds-airports-the-state-of-the-industry-in-jan-2023-in-11-numbers-635413 [12] IBTTA. https://www.ibtta.org/sites/default/files/documents/MAF/2015_FactsInBrief_Final.pdf [13] https://www.parliament.nsw.gov.au/lcdocs/inquiries/2792/Report No. 16 – Road Tolling Regimes.pdf

Investors maintained a healthy risk appetite for much of October, which enabled major share markets to make further progress. Movements in the US set the tone, with the S&P 500 Index rising to fresh all-time highs during the month. Towards month end, however, subdued results from some of the largest technology firms in the US saw markets reverse direction and close the month slightly lower. Returns from bond markets were also negative. Despite a 0.50% cut to the Federal Funds rate in September, investors remain concerned that inflation could creep higher – especially if Trump pursues expansionary fiscal policies after becoming President. Treasury yields rose sharply – dragging bond valuations lower – as some of the interest rate cuts anticipated in the US for 2025 were removed from consensus forecasts. US Initial estimates suggested the US economy grew at an annual rate of 2.8% in Q3. This was marginally below expectations and was a slowdown from Q2, but nonetheless highlighted the resilience of the economy. Growth was supported by strong consumer spending, with encouraging demand for both goods and services. It seems discretionary expenditure was underpinned by a buoyant labour market and the associated impact on consumer confidence. Payrolls data showed that more than 250,000 jobs were created in September, which was more than 100,000 ahead of forecasts. Employment growth in October – released at the beginning of November – was much less strong. The labour market will therefore remain very closely monitored in the months ahead, as investors try and work out the likely interest rate path. For now, inflationary trends seem quite persistent. The Core PCE measure showed consumer prices still rising at an annual rate of 2.7% in September, which makes it less certain that policymakers will lower interest rates aggressively in the near term. Rate cuts are still anticipated both this year and next, but consensus forecasts now indicate official borrowing costs will settle around 3.5% by the end of 2025, rather than 3.0% that was anticipated at the beginning of October. Australia No formal Reserve Bank of Australia meetings were scheduled in October and so official interest rates were unchanged at 4.35% during the month. Policymakers will meet once more before the end of this year and continue to monitor incoming economic data to gauge whether changes in monetary policy settings are warranted. The ‘trimmed mean’ measure of inflation showed consumer prices rising at an annual rate of 3.5% in Q3. This was down slightly from the prior quarter, but was still above the Reserve Bank of Australia’s 2% to 3% target range. With inflation still running above target and given ongoing strength in the labour market, few observers are expecting interest rates to be lowered any time soon. Australian unemployment remained at 4.1% in September and more than 60,000 jobs were created over the month. New job adverts also increased, suggesting the unemployment rate could remain low for the foreseeable future, in turn exerting upward pressure on wages. Against this background, policymakers might even consider raising borrowing costs further, rather than lowering them as many homeowners and businesses are hoping. New Zealand Interest rates were lowered by 0.50% at the Reserve Bank of New Zealand’s October meeting, following an initial 0.25% cut in August. The annual inflation rate fell to 2.2% in Q3, down from 3.3% in Q2 and 4.0% in Q1, highlighting the extent of the moderation in pricing pressures. There appears to be excess capacity in the New Zealand economy following a recent slowdown, increasing the case for lower borrowing costs. Europe At 0.9% year-on-year, GDP growth in the Eurozone came in higher than expected in Q3. Acceleration from Q2 was supported by another strong contribution from Spain. Growth in Germany and France, the two largest economies, was also above expectations. The Olympic Games provided a boost in France, while there was an encouraging improvement in activity levels in Germany. Recent commentary from European Central Bank officials suggests policymakers are increasingly confident they are winning the fight against inflation. In turn, interest rates were lowered by 0.25% during the month; the third cut in the past five months. It seems almost certain that borrowing costs in the Eurozone will be lowered further in the months ahead. The release of the new Labour government’s first Budget was the main focus in the UK. As anticipated, the Chancellor outlined plans to raise an additional GBP40 billion through taxation in order to improve the country’s budget deficit. Asia Interest rates were lowered in China, as officials in Beijing tried to boost borrowing and investment. The one-year loan prime rate – used as a reference for consumer and business lending – was cut by a further 0.25%, following an earlier 0.10% cut in July. Separately, there was an unexpected improvement in Chinese manufacturing data following five months of deterioration. This raised hopes that recent stimulus measures may be feeding through to the real economy. The increase in factory output also supported a steady improvement in business confidence, which augurs well for investment. In Japan, the latest commentary from central bank policymakers suggested the Bank of Japan will continue to rise interest rates if the inflation target is met. Officials are expecting 2.5% inflation for the 2024 year and annual GDP growth of 0.6%. Australian dollar The revised outlook for US interest rates meant the US dollar fared very well. The greenback enjoyed its strongest month of performance in two years and appreciated against almost all major currencies worldwide, including the Australian dollar. The AUD depreciated by around 5% against the US dollar over the month. This move lifted returns from overseas assets for local investors. While returns from global shares were negative in local currency terms, e.g. they added value in AUD terms owing to currency market movements. Australian equities Australian shares lost ground in October, following five consecutive months of gains. Volatility in commodity prices, owing to ongoing geopolitical tension in the Middle East and mixed economic data from China dampened sentiment. Company news … Read more

As value returns to market favour it’s time to check in on your portfolio – but not all value exposure is created equal. A notable comeback in value stocks over the past six months is an important reminder for investors to reassess their portfolio allocations. Value stocks, which typically trade at a discount to their intrinsic value and offer higher dividend yields, were long overlooked by a market fixated on growth during an extended run of low interest rates. But as market conditions normalise during 2024, value is making a strong comeback. Most people are still underweight value – but we are certainly seeing more interest. The narrowness of the market is a major risk and asset owners are starting to recognise that markets are at all time highs and 65 per cent of the return last year came from eight stocks. Herd mentality It’s time for investors to take a closer look at portfolios to ensure appropriate exposure to value stocks as world markets continue the normalisation process. Not all value exposure is created equal – there has been a striking drift away from traditional value investing even among some value managers. There has been a bit of a herd mentality in the numbers. There is a persistent concern among some investors about missing out on potential growth rallies, particularly in AI–related stocks. This leads to rapid swings in the market when positive news emerges. But right now, value is outperforming growth. Changing fortunes It can be easy to forget how quickly markets shift mood. In 2022, tech leaders fell heavily on the prospect of rising interest rates, sending the MSCI World Index down 18 per cent, the World Growth Index down 29 per cent, and the AI Index slumping 36 per cent. That was a value cycle. People realised that tech is cyclical and interest rate sensitive. Then from the 2023 through to the first months of 2024, growth was back on – narrow market, AI–driven, Goldilocks momentum – but the underlying economic and monetary backdrop had not changed. It was a distorted market where the Magnificent Seven drove about 62 per cent of return during 2023. Since February this year, value stocks are outperforming again. We’re in a different environment now. Value generally outperforms in a normalised inflationary and interest rate environment. Falling rates may boost value stocks Be cautious against the commonly held view that falling interest rates will boost growth stocks again at the expense of value stocks, noting that in the last rate cut cycle, value outperformed. Rates will come down much slower than they went up. That will provide good opportunity for disciplined managers to continue to win and value to continue to do well. There is a correlation between rising rates and value doing well because the financial sector benefits. But it is equally true that as rates come down, cyclical value stocks benefit. Interest rates coming down generates housing starts, housing starts help construction and appliances and other things that are typically in that cyclical value area. As auto loan rates come down, more cars will be bought. But importantly, there has to be an eye as to why rates are coming down. A slowing economic cycle will present different opportunities and outcomes versus a reacceleration of economic growth. So, it could be argued that you can win in both rising and falling rate environments. It really just depends on where you place your bets during the interest rate cycle. Source: Perpetual

You don’t have time When you’re juggling your job with your personal and family life, it can be challenging to carve out time in your schedule to really sit down with your finances. As a result, it’s easy to feel that they are slipping out of your control. You find yourself putting off big financial decisions because they feel overwhelming, drawing time and energy away from work, family and relationships. A financial adviser can work with you by researching your options and advising on a course of action that help you work toward your goals, instead of putting them off. You find investments confusing With so many investment products on the market, how can you be sure you’re getting a good return for the risk that’s involved? If you’re trying to make sense of it all by yourself, a financial adviser can clarify the concepts for you, with in depth knowledge around investments and markets. They’ll help you review your current situation and goals and get an understanding of your appetite for risk. Then they’ll work with you to create an achievable plan and match you with quality investment solutions that suit your circumstances. And even better, they can identify investment opportunities that you might not have otherwise found out about. You’ve been through a major life event Financial and personal lives are complex and interconnected – when a major life event occurs, it has a ripple effect across your finances. For example, when you get married or move in with a partner, you might want to merge finances and redefine your shared financial goals. From buying a home and starting a family to changing jobs or retiring, a financial adviser can help you before, during and after. They’ll help you understand the financial implications, then work on building or adjusting your financial plan to ensure you stay on track. You’re about to make an important purchase While you make financial choices like these every single day, there may be times in your life when you are presented with a more significant decision. For example, you may come into an inheritance, or receive a bonus at work or a redundancy payout. In these cases, there is a strong temptation to splurge the cash. It can be hard to know the best way to make the most of this money: should you pay off your mortgage, boost your super or invest it for the future? That’s where a financial adviser comes in. They’ll walk you through your options and what they mean for your situation, so you can feel confident in making the best possible financial decision. You’re feeling stressed about money One major reason why people choose to work with financial advisers is for the peace of mind it gives them and their families – particularly if they’re experiencing financial stress. Financial stress can happen to anyone, no matter their age or background. It can have a profound and lasting impact on your health and relationships. An adviser can help you analyse your finances and figure out where you can make changes to improve your financial situation. They can also help you consider important questions, like how you and your loved ones would cope financially if you were unable to work for a while due to an accident or illness. They can make sure you have a financial safety net in place and proactively help you prepare for major life events that could impact your finances and goals. With a strong financial plan, you can recover from a small setback that risks derailing your finances. Source: Colonial First State

Some of us may help provide assistance to our ageing parents or other relatives in the future. That time may bring a range of emotional and physical challenges. Planning ahead may help relieve stress down the track. Here are three suggestions that may make a difference. Talk about your parents’ future It may not be an easy discussion, but knowing what your parents want can help later. Ask them about the type of care and living arrangements they want. Find out about the different types of care they can afford. Think through whether you will be able to physically and mentally offer the support they require. This is an important but often overlooked consideration. It also helps to establish trigger points. Being unable to manage a garden or a dementia diagnosis and clear signs of memory loss may be time to change care arrangements. This process is about helping your parents to state their wishes while they still can. They can also take this information to specialists, such as their financial advisers, accountants and lawyers. Knowing this information can also help you plan ahead if you need to offer financial support. Setting up a power of attorney and enduring guardianship You never know what circumstances life may send your parents’ way that mean someone else needs to take care of them or their finances. At some point, some of us might not be able to go to a bank or make an informed decision about our care. Which is why appointing a power of attorney and setting up enduring guardianship documents can be important. This is a trust relationship, and your relatives should carefully consider the right person to appoint. It’s also important not to leave this until it’s too late. It’s difficult for someone suffering from mental deterioration to provide informed consent about changes to their finances. Setting up these documents before problems arise can protect ageing relatives and their families. Establishing clear records of finances and assets Finances and assets are a sensitive topic, which could be tough to discuss. This is understandable, but you can still help them plan by encouraging them to set up clear records of what assets or debts they have, as well as contact details for institutions they use along with details about any financial advisers, accountants, lawyers and other specialists with which they have relationships. Having clear documentation can also help down the track. For example, it can ensure any debts are attended to and avoid unexpected debt collection notices for bills that would have been covered at the repayment time if you’d known about it. Or it can help to identify funds to cover medical expenses or nursing care when needed. Being prepared can offer you and your relative’s confidence about their options for whatever the future brings, even if it feels confronting at first. It can also make difficult times a little less challenging. There is a range of tools offered by state trustees and government websites like MoneySmart to help with budgeting and estate planning. Speaking to financial advisers and lawyers can also help. Source: BT

Just as it is vital to invest in the financial planning, retirement planning must also focus on that other precious commodity – time. We live in an era of increasing longevity, and we have the opportunity to redefine the concept of retirement and create our own path forward – which may include working in some form. Having the option to retire is recognised as a significant career and life stage, and it can produce mixed feelings. At times throughout life you are likely to have initiated, pursued or welcomed change related to work, home, family, friendships, travel. You may have viewed these changes in a positive way – onwards and upwards! Any feelings of uncertainty are likely to have been pushed aside in pursuit of the exciting development. For those who will soon have the option to retire, the next step may feel very different. It can feel like the end of an era. Navigating change can feel challenging. Our brains are wired to treat uncertainty as a threat. A useful response is to identify what we can control. For example, maintaining a healthy habit and listening to some favourite music are just two ways you can calm that part of your brain that wants to activate a sense of fear and anxiety. Research suggests it is not change that we fear, it is the sense of loss that we fear. In this context, we may fear the loss of daily routine, loss of work community and networks, loss of identity, loss of purpose, possibly the loss of being part of something bigger. The good news is you can be proactive in navigating change and you can start well before you leave work. Here are three examples. First, a major change is likely to relate to who you’re spending your time with. You may assume you will spend more or all of your time with your partner. A question to consider is have you ever spent this much time together? It’s important to discuss each other’s expectations. Even if you don’t yet know exactly how you want to spend your time, identify whether you would each want to have your own interests and your own circle of friends, as well as shared interests and friends. Second, you may assume that you will spend more time with your grandchildren. It’s important to discuss your hopes with the parents of your grandchildren to check whether you all share similar expectations. If this is not the case, it can be a heartbreaking discovery at a time when you are already feeling the effects of change, so have this conversation well before you retire. Third, if you are planning to move house and possibly downsize, consider the changes involved. Will you be living in a new community? Will you have new neighbours, and be living at a new distance from friends and family? If you are planning to do this soon after leaving your work role, consider how much change you want to deal with at once. Even though you may view this as a positive development in your life, a lot of change at once can feel overwhelming. When it comes to identifying how you want to spend your time, it can be hard to know where to start. It can be tempting to fill your days with busyness. Start by considering the following: First, consider what role (if any) work will have in your life. Second, check your mindset. We often view retirement as an ending. Yet if we potentially have 20 or more years ahead of us, we can choose to see this as a magnificent opportunity to start something new. Third, we live in an era in which we have so many options for how we spend our time, so explore the broadest range of options. This doesn’t have to involve an extravagant lifestyle. You may decide to retire, unretire, travel, continue learning, teach others, pursue a passion, start a business, write a book – all of the above. People ask, ‘what makes a successful retirement?’ Arguably, the key to thriving is to spend as much time as possible in ways that are meaningful to you. The challenge is to identify what energises you, so you are genuinely loving life. The good news is you don’t need to work this out alone. That’s where a coach can help. We can’t control every aspect of life – we know there will be challenges at times, and that finances have a significant influence, but when you look back on your life at some future stage, how do you want to feel about how you have spent your time? What would a fulfilling life look like for you? That’s success – for you. Source: Money & Life

Looking for higher returns than cash in the bank with less volatility than shares and property? With interest rates generally considered to be at or near their peak, fixed interest investments, such as bonds and other credit investments, may offer an attractive ‘middle ground’. Interest rates represent the cost of borrowing money. They affect how much you earn from your savings and how much you pay for your debts. When interest rates are high, you can earn more income from your savings but it costs more to service your debt. Conversely, when interest rates are low, the cost of servicing debt is lower but so is the income you can earn from your savings. Interest rates in Australia followed a generally downward path following the Global Financial Crisis in 2008, reaching historic ultra low levels of 0.10% during the COVID-19 pandemic. However, since 2022, Australians have witnessed the most rapid increase in official cash rates of the past 20 years. Australian cash rate target Interest rates likely to stay higher for longer With inflation in Australia remaining persistently high and ‘sticky’ in recent times, the Reserve Bank of Australia (RBA) is expected to keep interest rates fairly high in the near future. For investors holding high levels of cash this has been welcome news, as these savings are now generating higher levels of interest income. Although this is being eroded to some extent by headline inflation that has remained generally above 4% since it peaked at more than 8% in December 2022. The potential for higher returns while protecting capital For those investors looking for less volatility and risk, traditional fixed interest (otherwise known as bonds) and other credit investments can offer an attractive ‘middle ground’ of higher returns than cash with lower volatility than shares, and consistent income. Examples of this include investments in government or company issued debt securities (or bonds), and emerging opportunities in private credit. Bond prices move inversely to interest rates, meaning that when interest rates rise, bond prices fall, and vice versa. While this dynamic can cause losses during a rising interest rate environment (as was the case in 2022 and 2023), it is a widely accepted view that the current interest rate cycle in Australia is close to a peak. Fixed interest securities (bonds) now offer the advantage of a higher yield, and the potential to protect investor capital if interest rates decline due to a softening economy. In contrast, many other credit investments are at a floating rate – meaning their returns follow interest rates, although they may also provide a better return or yield than cash investments. New opportunities in credit markets The current economic and interest rate environment offers some very interesting opportunities in fixed interest and credit markets, both globally and in Australia, and across publicly traded and private markets. Private credit, or capital lent to companies by non traditional lenders such as private investment funds, may offer investors attractive, risk adjusted returns. These types of investments are higher risk than cash and in some cases less able to be converted to cash quickly, but they may also offer higher interest payments than their cash equivalents. Do your homework The current interest rate environment has revealed and in some cases created some compelling fixed interest and credit opportunities However, it is always critical to do your own homework on underlying investments and their creditworthiness, and asset backing and diversification remain important. Higher returns usually come with higher risk, so consider consulting a financial adviser to find a balance that suits your individual needs and preferences. Source: Colonial First State