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Springtime is a time of renewal, a chance to enjoy the sunshine and the opportunity to rejuvenate the garden. The same also applies to our finances. It’s a good idea to regularly review where your money is invested to ensure your portfolio remains relevant to your needs and expectations. Where your money was invested two or three years ago may no longer be appropriate to your needs, particularly if you have experienced a change in your life circumstances, such as a new job, new mortgage or perhaps you may be thinking of winding down with retirement in mind. In addition to life events, factors beyond our control such as rising interest rates and escalating inflation are placing great pressure on many households’ ability to meet the increasing costs of utilities, groceries and rent or mortgage repayments. When we take time to review our financial resources, outgoings and investments it can present opportunities we may not otherwise have identified. Opportunities that could save you money or lead to better investment returns in the future. It’s why we recommend at least an annual review of your financial circumstances and future outlook. And as we look forward to some warmer, sunnier weather there’s no better time to get started. Contact us today to find out how.

With interest rates increasing for the first time in many years, its effects will be felt by all Australians, not just those paying off their homes. In this article we address how interest rate increases may affect you, depending on your circumstances, and possible ways to manage it. Super members and retirees Super members Interest rate rises can affect your super balance depending on how your retirement savings are being invested. As opposed to increasing like a bank account that’s paid a constant interest rate, the value of your super changes in line with the assets of the investment options in which your super is invested. So, it can go up and down. While this can be unsettling, it isn’t necessarily a cause for concern if you’re a long-term investor who’s still some years from retirement. From what we’ve seen in the past, share markets bounce back eventually. Making changes to how your super is invested based on short-term volatility may therefore increase the risk that your super balance fails to meet your retirement goals. Retirees As for retirees, if their retirement savings are invested in defensive assets – such as fixed interest and cash – they may see an improvement in their returns over the longer term. Homeowners and potential homeowners Homeowners Unfortunately for homeowners paying off a variable interest rate loan, they will see an increase in their mortgage repayments when interest rates rise. In an environment where interest rates look to be rising, you may want to consider fixing at least some portion of your mortgage. This may also give you a better handle on your finances each month to budget effectively for your other living expenses. Prospective buyers For people looking to get into the property market, the rate rises may provide greater opportunity as it often slows the growth of property prices. This is due to there being less demand and more supply. It may however, impact your borrowing capacity as you’ll need to show you can repay the loan based on the higher interest rate. Investors Shares In terms of the impact on share markets, from what we’ve seen in the past, even if investors experience volatility in the short-term, markets eventually recover with time. Rate rises can therefore provide investors with more opportunity to buy while prices are low. Property Rising interest rates can slow down the property market by reducing demand. They can also reduce the borrowing capacity for investors and borrowers. Fixed interest investments For those holding fixed interest investments such as government and corporate bonds, interest rate increases may reduce the value of bonds. This is because the capital value of bonds generally fall as interest rates rise. Australian dollar When interest rates fall, the Australian dollar usually weakens making Australian commodities and exports more affordable for offshore buyers. But generally, when rates rise the Australian dollar strengthens. This is because overseas investors are attracted to a higher yield, driving up demand for Australian currency. Savers Interest rate rises are generally good news for people with savings or using savings to supplement another source of income such as a pension. Term deposits offer higher returns too and can help to reduce volatility in an investment portfolio as they’re less sensitive to interest rate changes. How you can prepare yourself for future rate increases When reviewing your finances, consider building a buffer for further rate increases that might affect your mortgage repayments. It may also be worth looking at consolidating your debts and renegotiating your current interest rates to protect yourself from future increases. When it comes to your super, see if you’re still happy with the investment options you’re invested in. If not, consider speaking with a financial adviser. Their job is to help you with every aspect of your financial lifesavings, insurance, tax, debt—while keeping you on track to achieve your goals.     Source: IOOF

The human brain is an incredibly powerful processing unit. Every day we make numerous judgements and decisions – hundreds if not thousands if you conclude everything we do is an individual ‘decision’. As the human brain has evolved, in part due to the increasing complexity of our environment, it’s developed little short-cuts, or ‘heuristics’. These mental pathways circumvent multi-stage decisions and allow us to make judgements quickly and efficiently. While heuristics are helpful and allow us to function without stopping to think about our next action, they can – and do – lead to cognitive biases. There are actually over 100 of these recognised habits, and their mix and dominance varies from person to person. Unfortunately, these biases sometimes trip us up leading to bad judgements and poor decisions. Consequences of sub-par decisions or erroneous conclusions are most often inconsequential but unfortunately – and consequentially – such biases exist in the full spectrum of our decision-making, including those in the realm of safety – and investing. “The investor’s chief problem – even his worst enemy – is likely to be himself” Benjamin Graham A vital ingredient to successful investing over the longer term is knowing yourself – and specifically knowing the mental traps you may fall into when making investment decisions. So to better help know yourself, here are a few of the more typical behavioural biases of investment decision-makers. Anchoring bias Anchoring bias is the tendency to rely on, or anchor to, a particular piece of information, or event. There are a few common anchors for investors. Many people base their investment decisions on the current price of an asset relative to its history. Where a price is now relative to where it has been in the past is not a reliable indicator of the future direction of the price, or whether the asset might be cheap or expensive. Another Anchor is the purchase price of an asset. While a gain or loss represents the difference between the current price and the purchase price, is this actually helpful when deciding to buy, hold or sell? An event Anchor; a good example being the Global Financial Crisis. Many investors, scarred by their loss of capital through the GFC, now anchor to the event (and the associated financial loss or psychological pain) when making investment decisions. An asset should be assessed based on its intrinsic value and investors should attempt to determine an asset’s current and potential future worth in isolation from other values (or events). Disconnecting from Anchoring bias can be difficult, but a good starting point is to consider what you anchor to and when you do it. Herd mentality There’s something innately safe about being in a herd. We humans are hard-wired to herd. So it’s not surprising that this is common in investment circles where investors place a big emphasis on what groups are doing. There are all sorts of emotions at play with this bias. There’s an element of FOMO (fear of missing out) when there’s a bull-rush to a type of investment; there’s the psychological pain of going against the crowd; and then there’s the fear of humiliation or embarrassment (aside from the financial consideration) of just being proven wrong. Recognising the lure of running with the pack requires an ability to think independently. Be self-aware about the social and emotional pull of the herd. If this is confusing or overwhelming, then consider using a professional investment manager to dislocate you from this pull. Confirmation bias Confirmation bias is the tendency of people to pay close attention to information that confirms their belief, and ignore information that contradicts it. This can lead to overconfidence and the risk of being blindsided. Our natural tendency is often to listen to people who agree with us. It feels good to hear our opinions reflected back to us. Many people choose their news sources based on a confirmation bias. Do your news sources reflect your views and opinions? There’s nothing particularly wrong with this per se, but such bias can be disastrous for investors, as it can validate and reinforce a view which may be flawed. Instead, we should be looking for disconfirming information to test against an initial view. A discipline of stress-testing and deconstructing ideas runs consistent in many of the world’s most successful investors. To overcome this bias start looking for information that might disprove your ideas, rather than confirm what you want to do. Overconfidence bias People tend to overestimate their skills, abilities, and predictions for success. This bias is prolific in behavioural finance. Careful risk management is critical to successful investing and overconfidence tends to make us less cautious in our investment decisions. Many of these mistakes stem from an illusion of knowledge and/or an illusion of control. Anecdotally, a significant number of SMSF-holders suffer from overconfidence bias. Asset allocation data collated by the ATO suggests the average SMSF is highly concentrated in domestic assets (particularly shares and cash), poorly diversified and consequently exposed to various material risks. Overconfident investors often put down their wins to talent and losses to plain bad luck. Guarding against overconfidence involves acute self-awareness and the ability to isolate the role of skill versus timing, or luck. Loss aversion Loss aversion is a tendency to dislike losing money a lot more than enjoying making money. This kind of bias is commonplace with stock traders, but definitely also applies to longer term investors. The GFC is a period in many investors’ lives which created an enduring fear of substantial loss. Scarred by losses from such periods, investors can be at risk of creating portfolios too conservatively invested with a primary goal of fortifying against loss, rather than looking at their time horizon and structuring a portfolio to suit. Investors need to remember that to generate a certain level of returns they need to take a certain level of risk, and periods of negative returns are to be expected when taking on risk. The idea is to not take excessive … Read more

Aussies are living longer than ever before, with men expected to live until age 80 and women until age 85. However, an increased life expectancy also means Australians may spend longer in retirement than previous generations, and in turn, need more money to fund retirement during those extra years. When you’re retired and no longer earning money, it can be difficult to know how much you can afford to spend and what you need to preserve for the future, without the fallback of a regular retirement income. You may also have added pressures in the mix, such as paying off debt, healthcare costs, and dependants in the form of kids or elderly parents. Striking the right balance between enjoying your retirement and having enough to live on can be tough. However, you don’t have to go without – you may just need to consider your budget a bit differently. If you’re planning your retirement , here are some money management tips that may help you get off on the right foot. Look into having a U-shaped budget Rather than a linear budget, where your expenses remain the same year after year, it may be worth considering a ‘U-shaped’ budget in your retirement. This is where your spending over the period of your retirement resembles a ‘U’, with the highest expenses in the first years of retirement and your later retirement years. When you first retire, your spending will most likely be higher as you take that trip of a lifetime, splash out on that caravan or boat, or pay off your home loan (or all of the above) and engage in an active, and possibly more expensive, social life. Your spending is then likely to settle into a more regular pattern in mid-retirement, before increasing again in your later years when greater healthcare costs and aged care expenses come into the mix. Tips for paying off debt in retirement Carrying debt into retirement isn’t ideal, but it’s a reality for many of us. If you find yourself owing money on your credit card, a personal loan or home loan once retired, there are things you could look into to help manage your repayments and minimise the amount of interest you pay. Consolidating your debts by bringing them together into one loan could mean you pay less in interest, fees and charges. You could also contact your providers to try to renegotiate your repayment terms. How much super should I have, and can I use this to pay off debt? Some Australians withdraw their superannuation as a lump sum once they reach their super preservation age and use it to clear their debts, to avoid having any repayments and interest during retirement. If you’re considering this, think about whether you’ll still have enough to live on in retirement, and the tax implications of doing this. In this case, it’s a good idea to speak with a financial adviser to weigh up your options. Consider where you can save money Although you may not have a steady income like before, it’s still possible to save money so you have more to spend on what’s important to you during your retirement. You can do this by leveraging some of the government’s benefits and subsidies, or by reducing your expenses. Here are a few ideas to get started: Consider selling your second car (if you have one), and take advantage of public transport concessions available to seniors instead. You may be able to save on car registration, insurance and maintenance costs, plus you’ll be doing a bit for the environment. Take a look at government websites to learn about benefits and payments you may be able to access, such as pensions, allowances, bonuses, concession cards, supplements and other services. Consider bundling your phone and broadband to save on technology bills, and your electricity and gas to save on energy costs. Compare providers’ rates through comparison websites and ask if they offer a seniors discount. Think about ideas to entertain more at home instead of going out, such as dinner parties, game nights or movie nights. It also may be handy to subscribe for newsletters to your favourite restaurants and shops, or invest in a coupon book like the Entertainment Book, so you can take advantage of any offers and special deals when you do go out. It may be worth putting your bills onto direct debit rather than paying them month by month. This way, you may be eligible to qualify for the pay on time discounts and avoid late fees if you forget a payment. Groceries are a necessary expense, but it’s possible to save money here as well. Consider researching online for sales ahead of time, buying seasonally for fruits and veg, or buying in bulk and sharing with family or friends. Tips if you’re helping your family financially If you’re part of the ‘sandwich generation’, with elderly parents who are dependent on you and adult kids who are still at home or continue to need a bit of financial assistance, it’s still possible to have a good quality of life in retirement. In order to do so, it’s all about finding balance. It’s important not to lose sight of your own goals during retirement, while still helping the ones you love. You may consider having some conversations with your children on the limits of what you can provide, and spend more time to help them understand the benefits of financial independence: for example, instead of financial assistance, perhaps you can help them with some invaluable financial education. Tips if you’re estate planning Estate planning is also an important part of your financial planning in retirement. Estate planning goes beyond just making a will. It can also be valuable to think about who your super beneficiaries are, and how you want to be looked after (both medically and financially) if you can’t make your own decisions later in life. If you get your estate in order during the early years of … Read more

Sharp share market falls are stressful for investors as no one likes to see their investments fall in value. But at times like these, there are number of key things for investors to bear in mind. Compounding Compound interest is magical! The value of $1 invested in 1900, allowing for the reinvestment of dividends and interest along the way, by the end of May this year would have been worth $243 if invested in cash, $901 if invested in bonds, and $757,136 if invested in shares. Of course, this is pre-tax and fees but the relativities remain the same. The higher end point for shares reflects their higher long term return. So, to grow our wealth we need to have a long term exposure to growth assets like shares. It’s cyclical Sharp falls in share markets as we are now seeing are not nice, but they are a regular occurrence and the price we pay for the higher returns they provide over the longer term compared to assets like cash and bonds. The key is to recognise that these setbacks are part of the cycle. So, the key is to not get thrown off by the higher returns that shares and other growth assets provide over the longer-term by cyclical falls. Diversify The best performing asset class each year can vary dramatically. Last year’s top performer is no guide to the year ahead. So it’s important to have a combination of asset classes in your portfolio. This particularly applies to assets that have low correlation, i.e. that don’t just move in lock step with each other. A well-diversified portfolio is less volatile. Understand risk and return Put simply: the higher the risk of an asset, the higher the return you should expect to achieve over the long-term, and vice versa. There is no free lunch, and you should always allow for the risk and return characteristics of each asset in which you invest. If you don’t mind short-term risk, you can take advantage of the higher returns growth assets offer over long periods. Time-in, not timing In times of uncertainty like the present it’s tempting to try to time the market. But without a proven asset allocation or stock picking process, it’s next to impossible. Market timing is great if you can get it right, but without a process, the risk of getting it wrong is very high and can destroy your longer-term returns. Selling after big share market falls can feel comfortable given all the noise is negative but it locks in a loss and makes it much harder to recover. Time is on your side Since 1900 there are no negative returns over rolling 20-year periods for Australian shares. Short-term share returns can sometimes see violent swings, but the longer the time horizon, the greater the chance your investments will meet their goals. When it comes to investing, time is on your side, so invest for the long-term. Remove the emotion Emotion plays a huge roll in amplifying the investment cycle, both up and down. Avoid assets where the crowd is euphoric and convinced it’s a sure thing. Favour assets where the crowd is depressed, and the asset is under-loved. Don’t get sucked into the emotional roller coaster. The wall of worry It seems there’s plenty for investors to worry about at the moment. While this is real and creates uncertainty, in a long-term context it’s mostly noise. The global and Australian economies have had plenty of worries over the past century, but they got over them. Australian shares have returned 11.8 per cent per annum since 1900. So, it’s best to turn down the noise around the short-term movements in investment markets.   Source: AMP

Exchange Traded Funds (ETFs) have been available on the ASX for over 2 decades, but in recent years, this category’s variety and representation within Australian portfolios have grown rapidly. By offering exposure to different global markets, industry sectors and strategic themes, as well as non-equities asset classes like bonds and commodities, ETFs can provide relatively low-cost “building blocks” for a diversified portfolio. However, as with any investment, it’s very important to understand what you are putting your money into, and to ensure that it suits your specific needs.  Here are five questions to ask yourself, or your financial adviser, before you purchase an ETF. Question 1: Does it accurately capture the market exposure that I want? You wouldn’t judge a book by its cover, so make sure to look beyond the ETF’s name to properly assess the underlying exposure of the product. Common misunderstandings include: Mistaking a “picks and shovels” exposure, through owning suppliers and supporters of a sector, for that sector’s output. For example, a portfolio of cryptocurrency miners and exchange operators is not the same as a direct investment into cryptocurrency; Confusion between ETFs linked to a commodity’s spot price, which is the price for immediate delivery, and those representing a futures curve, which will move with expectations for longer-term pricing; and Overlooking exchange rate movements, which can influence your returns from anything not priced in Australian dollars. This impact can be neutralised with a currency-hedged ETF. Question 2: Is the exposure active, passive, or somewhere in between? Early ETFs were purely passive, usually linked to an equities index like the S&P/ASX 200, but now, there are also actively managed portfolios within an ETF structure. “Smart beta” portfolios which apply rules-based investment strategies are becoming more common too, for example, one might invest in a basket of stocks which screen well on quality factors. The exposure type affects fee levels and return potential, with passive ETFs tending to be the cheapest, but lacking the potential to outperform an index benchmark. Question 3: How liquid is this product? It is possible for the price of an ETF to diverge from that of its underlying exposure, particularly in volatile market conditions such as the COVID-19 panic in early 2020. To ensure that investors can get in and out of a product when they want to, ETF providers often employ a Market Maker, an institution which quotes separate prices to buy and sell units. Generally, ETFs with a smaller pool of units on issue are more likely to have poor liquidity, and this can show up in a wide spread between the buy and sell prices. Using “at-limit” orders when trading ETFs can help ensure that you receive the price you expect. Question 4: How does the fee compare to alternatives, and what are the trade-offs? Low cost is a major benefit of ETFs, but when you have several to choose from, it’s worth understanding why one’s management fee is cheaper. Active management usually costs more, and ETFs linked to a major market benchmark are sometimes priced higher because the index provider takes a cut of the total fee. Unusual products may carry a scarcity premium, while new or smaller-scale offerings may have lower fees, both to compensate for their initially poor liquidity, and also to entice more patronage over time. Question 5: How does it fit with the rest of my portfolio? Any new investment should be considered in the context of your existing portfolio. ETFs can provide valuable diversification, but they can also be a source of inadvertent overlap or concentrated exposure to certain sectors or factors. For example, ETFs linked to the S&P 500 index, the NASDAQ 100 and an actively-managed global growth strategy might overlap in high exposure to the Big Tech stocks, so this combination might not provide adequate diversification.   Source: Lonsec

Equity and bond markets bounced back hard from disappointing returns in June, amid suggestions that rising interest rates in key regions will help bring inflation under control. Australian shares registered gains of more than 5%. Most major overseas share markets performed even more strongly – the MSCI World Index closed the month 8.0% higher, with selected markets enjoying double-digit gains. This made July the best month for risk assets since late 2020, when encouraging Covid vaccine trial results were first reported. The tone of earnings announcements among US firms for the three months ending 30 June was generally encouraging. Fixed income markets also generated solid positive returns, following dismal performance in the first half of 2022. A sharp drop in government bond yields in all key regions supported positive returns from sovereign bonds. In fact, returns from US Treasuries in July were the strongest in more than two years. Credit securities fared well too, as the general improvement in risk appetite saw spreads narrow. Australia: The Reserve Bank of Australia raised the Official Cash Rate by 0.50 to 1.85 per cent on August 2, 2022. Consumer price inflation rose by 1.8% in the June quarter, and by 6.1% on a rolling 12-month view. Whilst high, these measures were below consensus expectations. In turn, this prompted hopes that local interest rates might not need to increase as much as previously feared. Encouragingly, Australian employment increased quite sharply in June, with more than 88,000 jobs created. This pushed the unemployment rate down to 3.5%; a record low. New Zealand: Controlling inflation appears to be the primary goal for now, despite the risk of strangling growth and impeding the housing and labour markets. Inflation in New Zealand quickened to an annual rate of 7.3% in the June quarter, which was higher than expectations and seemingly unpalatable for the central bank. US: The US economy contracted in the three months ending 30 June. According to the latest available data, the economy shrank by 0.9% over the period, following a 1.6% contraction in the first quarter of the year. By one measure, this suggests the world’s largest economy is already in recession. Some observers argue that activity levels remain quite buoyant, however, and not consistent with a recessionary environment. The labour market also appears to remain healthy. More than 370,000 new jobs were created in the US in June, taking the total in the first half of 2022 to more than 2.7 million. While debate rages on about whether or not the economy is in recession, most commentators agree that conditions are deteriorating. Consumer price inflation quickened to an annual rate of 9.1% in June, which is eroding confidence levels and clouding the outlook for spending. Households are also facing higher debt repayment costs owing to rising interest rates. Time will tell whether these pressures result in a full-blown recession or a shallower, temporary downturn. Europe: The European Central Bank raised interest rates by 0.50 percentage points in July; the first increase in borrowing costs for 11 years. Further rate hikes are anticipated in the remainder of the year, despite a projected slowdown in growth in the region. According to central bank forecasts, GDP in the Eurozone will rise 1.5% in 2023, down from an earlier estimate of 2.3%. The weaker economic outlook saw the euro briefly trade below parity with the US dollar, for the first time since the inception of the currency more than 20 years ago. The Bank of England released a Financial Stability Report in July, which warned that the UK economic outlook has ‘deteriorated significantly’. Asia: Chinese authorities reiterated their ‘zero Covid’ policy, which soured sentiment towards shares in China and Hong Kong. There were also concerns about further potential regulatory changes affecting Chinese technology firms. In Japan, the central bank persisted with a negative interest rate policy, holding official borrowing costs at -0.1% – a stark contrast from policy settings among other major central banks. Meanwhile, in a shocking development, former Prime Minister Shinzo Abe was assassinated whilst giving a speech. Abe held the top job twice in Japan, initially in 2006/2007 and then again from 2012 until September 2020. Australian dollar The Australian dollar strengthened in July, appreciating by 1.5% against the US dollar and closing the month just under the 70 cent level; slightly below the average over the past five years. The AUD also added 2.1% against a trade-weighted basket of other major currencies. Australian equities Australian equities benefited from a broad-based rally in July, with 10 out of 11 sectors posting gains. This resulted in the S&P ASX 200 Accumulation Index closing the month 5.8% higher. The IT sector, which returned 15.2%, was the best performing area of the market. Solid gains in the A-REIT and Financials sectors also propelled the market higher, with several stocks clawing back lost ground from June. Despite strength towards month end, Energy (+2.1%) and Materials (-0.7%) stocks initially struggled on the back of commodity price weakness, owing to US dollar strength and concerns about a moderating demand outlook. Oil prices slipped below US$100/barrel, for example, before stabilising and closing the month around US$103. Investors in Materials stocks remained cognisant of China’s increasingly challenging GDP growth targets, given the impact of Covid outbreaks and associated disruptions. The outlook for China’s property construction market remains particularly uncertain. This is important, as the sector accounts for around a third of China’s steel demand. Concerns weighed on iron ore prices, and on sentiment towards Materials stocks in general. The overall improvement in risk appetite supported small caps. The S&P/ASX Small Ordinaries Accumulated Index returned 11.4%, outperforming the large cap index for the first month this calendar year. All small cap sectors fared well, with performance of Health Care stocks a particular highlight. Listed property Global property securities performed well in July. The FTSE EPRA/NAREIT Developed Index returned 6.4% in Australian dollar terms. Although high frequency data are starting to show signs of an economic slowdown in the US, investors seemed confident that … Read more

Gifting, or financially assisting family or friends by giving away some of your assets or accumulated retirement savings, can be a great way to help out younger family members or friends. But before you gift a significant amount, it’s important to understand how this could impact your Age Pension or other social security benefits you receive now or in the future. What is gifting? Gifting can be a viable strategy as gifts given within certain limits can not only provide you with the satisfaction of being able to help others, but also slightly increase your Age Pension entitlement. However, exceeding these limits could result in the gift continuing to be treated as your asset for a period of time, even though you no longer hold this asset. But gifting isn’t just about giving away an amount of your savings. There are a number of other scenarios where gifting rules may apply, for example: Transferring shares to someone without receiving the full market value in return. Giving up control of a company or trust which holds underlying assets. Transferring an investment property worth $300,000 to another person for less than its true value (for example, for $200,000). Forgiving a loan someone owes you. Providing money to a company or trust you don’t control, without a loan agreement showing the amount is to be repaid. What’s not included as gifting? You wouldn’t be viewed as gifting an asset when you sell or reduce any of your existing assets to meet normal living costs – for example, to pay for a holiday or fund renovations to your home. You’re also able to transfer assets between yourself and your spouse without the gifting rules applying. Additionally, there may be opportunities to contribute assets to your spouse’s superannuation account and increase your Age Pension entitlements, where your spouse has not yet reached their age pension age. How much can you give when gifting? While you are not limited in the amount, there are limits within which a gift wouldn’t affect your Age Pension benefit. Centrelink use two tests to determine if you are within or outside the allowable gifting limits. Firstly, individuals and couples combined can gift up to $10,000 per financial year or up to $30,000 over a five financial year period and remain within the gifting free area. Any amounts gifted outside this limit will result in the excess amount being treated as a ‘deprived asset’ which will be counted as an asset under the assets test and deemed under the income test. How can gifting affect your Age Pension? The deprivation provisions are designed to limit the potential for social security recipients to reduce their assets and as a result reducing the impact of the income and asset means tests on their benefit entitlement.   Where a person has given away, destroyed or diminished the value of an asset or given away an amount in excess of the gifting free area, Centrelink will treat the individual as continuing to hold the asset under the asset and income means test for five years from the date of the gift. Concerned about the impact of gifting? Given the complexities involved in planning for and calculating the impact a gift may have on your Age Pension or other Centrelink benefit, it’s worth seeking help from a qualified financial adviser or Centrelink directly, before you gift.   Source: BT

Australians are being urged to be extra diligent when it comes to investment opportunities that look too good to be true. According to Scamwatch, Australians lost over $205 million to scams between 1 January and 1 May this year – a 166 per cent increase compared to the same period last year. Investment scams on the rise The majority of losses over this period have been to investment scams with $158 million lost – an increase of 314 per cent compared to the same period last year. However the true losses to scams are likely to be much higher, as research suggests that only around 13 per cent of people report their losses. While the reported losses have increased the number of reports has reduced slightly, indicating that on average people reported higher individual losses. The majority of losses to investment scams involved crypto investments, with $113 million reported lost this year. Cryptocurrency is also the most common payment method for investment scams. People aged 55 to 64 reported the highest total losses, $32 million between 1 January and 1 May and over 80 per cent of losses reported by this age group was lost to investment scams ($26m). Scammers are becoming increasingly sophisticated in their techniques and strategies with one such strategy targeting victims again through “money recovery” scams. What is a Money Recovery Scam? These scams target people who have already lost money to a previous scam by promising to help victims recover their losses after paying a fee in advance. Australians have lost over $270,000 to these scams so far this year, an increase of 301 per cent. “Scammers will ask for money and personal information before offering to ‘help’ the victim and will then disappear and stop all contact,” ACCC Deputy Chair Delia Rickard said. “Money recovery scams are particularly nasty as they target scam victims again. These scams can lead to significant psychological distress as many of the people have already lost money or identity information.” This year Scamwatch has received 66 reports of money recovery scams – a 725 per cent increase compared to the same period in 2021. Scammers target previous scam victims, contacting them out of the blue, and pose as a trusted organisation such as a law firm, fraud taskforce or government agency. They may have official looking websites and use fake testimonials from other victims they have ‘helped’. As well as an up-front payment they often ask victims to fill out fake paperwork or provide identity documents. Scammers may request remote access to computers or smart phones, enabling them to scam their unsuspecting victims.   Another tactic scammers use is to contact people by phone or email who haven’t actually been a victim of a scam and convince them that they’ve unknowingly been involved in one and are entitled to a settlement refund. “If you get contacted out of the blue by someone offering to help recover scam losses for a fee, it is a scam. Hang up the phone, delete the email and ignore any further contacts,” Ms Rickard said. “Don’t give financial details or copies of identity documents to anyone who you’ve never met in person and never give strangers remote access to your devices.” “Scammers can be very convincing and one way to spot them is to search online for the name of the organisation who contacted you with words like ‘complaint’, ‘scam’ or ‘review’,” Ms Rickard said. Warning signs of an investment scam Promise of low risks with high returns: Always remember, if something seems too good to be true it probably is. If you are promised ‘guaranteed returns’ this is a warning sign. You are contacted out of the blue: You receive a call, email or message on social media from someone offering unsolicited advice on investments. High-pressure tactics: You are contacted repeatedly and are told that you need to act quickly and invest or you will miss out. Remember you have less protections with cryptocurrency investments and scammers know this. Someone you haven’t met in person offers you investment advice: Never take investment advice from someone you meet on social media or a dating app. Use of celebrity endorsements or images: These are usually fake. Celebrities rarely discuss their investments or financial decisions in public. Someone has convincing promotional materials or websites: If documents like prospectuses aren’t registered with ASIC, it is likely part of a scam. You are asked to deposit funds into different accounts for each transaction: Scammers may claim this is for security reasons, or because they are an international company. Do your research Do not let anyone pressure you into making decisions about your money or investments and never commit to any investment on the spot. Take time to research before investing. You can check who owns a website using search websites such as who.is. It’s also a good idea to check whether any account details you have been told to transfer to match the name of the company you are supposedly dealing with. If you feel an offer to buy shares might be legitimate, always check the company’s listing on the stock exchange for its current value and recent shares performance. Some offers to buy your shares may be well below market value. If you suspect you have been scammed People who have lost money to a scam should contact their bank or financial institution as soon as possible. If they are not happy with the financial institutions response, victims can make a complaint to the Australian Financial Complaints Authority which is a free and independent dispute resolution service. Financial institutions may be able to find where the money was sent, block the scam accounts and help others to avoid sending money to scammers. For more advice on how to avoid scams and what to do if you or someone you know is a victim of a scam, visit the Scamwatch (www.scamwatch.gov.au) website.   Source: Scamwatch.    

Investing in shares is a popular way of helping people to achieve their long-term financial goals. These investments can generate favourable returns over time as companies grow and improve their profitability. Dividends paid by listed companies can also generate a useful income stream. However, there are also risks associated with investments in shares. Companies (or stocks) that struggle are likely to see their share prices fall and share markets as a whole can be affected by periods of economic weakness or unexpected events. All investments carry risk, including those in professionally managed funds. However, exposure to shares in such funds may be one way that investors can navigate the volatility in markets. These funds are usually well diversified, spreading investment risk across a wide range of companies. There are two distinct types of funds available to investors – active funds and passive funds. What is Active Investing? Most actively managed funds aim to outperform a particular index – for example, the S&P/ASX 200 Accumulation Index, which represents the top 200 stocks listed on the Australian share market. The intention is that the combined portfolio of shares will perform better than the relevant index, which is often used to ‘benchmark’ or measure the performance of stocks. Investment managers of funds have access to the information and research necessary for completing detailed analysis on companies traded on the index. As qualified professionals, they can identify the stocks likely to outperform the market average over time. With robust investment processes not readily available to individuals, active investment managers draw from their industry experience and analysis to buy and sell shares in an effort to maximise returns for investors. They buy stocks that are expected to perform better than the broader market, sell winning stocks following a period of favourable performance, and avoid those that are expected to underperform. Of course, investments can experience day-to-day fluctuations, and there is also a risk that active funds will underperform compared to the benchmark if the selected stocks do not perform as well as investment managers anticipate. While the value of a benchmark fluctuates from day to day, the extent to which returns vary from those of a benchmark can be an indication of a manager’s skill. What is Passive Investing? A passive investment manager tries to replicate a share market index, such as the ASX 200, by owning shares that make up the index. The quantity of each stock held is determined by the stock’s weight in the index. For example, if BHP Billiton accounts for 6.7% of the ASX 200, a passive fund manager will invest 6.7% of the fund in that stock, and so on, for every stock in the index. The investor should expect returns to be close to that of the market index. Which Type of Fund is Right for You? One approach is not necessarily better than the other. When deciding on a preferred style of investment, investors should first consider their investment objectives, return targets and how much they want to pay. Many investors expect to receive returns that are above that of a market index and may therefore prefer investing in an actively managed fund. In this case, choosing an active investment manager can be important and a key consideration for investors is their confidence in a manager’s ability to achieve their investment objectives. While past performance is not necessarily an indication of future performance, most investors will consider a manager’s long-term performance track record before making an investment in a fund. Cost can be another differentiator of the two styles. Actively managed funds typically have higher management fees to cover the cost of research and to pay for the employment of experienced analysts as part of the fund management process. In contrast, management fees for passive funds tend to be much lower. That’s because no attempt is made to outperform a benchmark index through research or stock selection. Source: Colonial First State