News Updates
AS IT HAPPENS
As the China driven mining boom fades, the Australian housing recovery couldn't come at a better time. But with interest rates poised go up over the next six-twelve months, what does this mean for property investors and borrowers? Read more here (Rick Maggi, Westmount. Financial Solutions.)
Human beings love stories. But this innate tendency can lead us to imagine connections between events where none really exist. For financial journalists, this is a virtual job requirement. For investors, it can be a disaster. Read on here (Rick Maggi, Westmount. Financial Solutions.)
Despite concerns over the strength of the Australian dollar (now 0.9296) and a potential property bubble, the Reserve Bank of Australia has, moments ago, announced that it will be keeping the cash rate on hold at 2.5 per cent.
This comes as no surprise as concerns about the strength of the Australian economy still linger, now that the mining investment boom is essentially over. While rising house prices is something the RBA really doesn't want to encourage, the general consensus is that record low interest rates will continue for just a little while longer. Some are expecting rates to be higher by Christmas, or even earlier. We'll keep you posted.
(Rick Maggi, Westmount. Financial Solutions.)
If we've learned anything since the GFC, it's that a well diversified portfolio of assets, including local and overseas shares, property, cash, bonds etc., is the smartest (and easiest) way to preserve and grow your capital, whether you are retired or accumulating assets. Even as the global economy recovers, thanks to the pain experienced by most of us during the GFC, its unlikely that a new found respect for asset allocation will fade anytime soon.
In this article, Dr Shane Oliver explains what asset allocation is, why it's important to you and how to manage the economic cycles. It should be liberating to know that about 90% of the gains (or losses) investors experience in a lifetime have to do with the amount of exposure they have to various sectors like shares, property, cash etc., and much less to do with micro-decisions such as stock selection or the specific managed fund they purchase.
In other words, managing your portfolio of assets can be much less time consuming, less stressful and less expensive, if structured and maintained properly, regardless of your personal objectives and style. (Rick Maggi, Westmount. Financial Solutions)
A well balanced update on the subject. Read here (Rick Maggi, Westmount. Financial Solutions)
In this article, AMP's Shane Oliver focuses on the Australian economy, which has been getting some depressing press lately. Read more here (Rick Maggi, Westmount. Financial Solutions.)
Russian President Vladimir Putin said he saw no immediate need to invade Ukraine while leaving open the possibility of using force, as the U.S. weighed sanctions on Russia and offered aid to the Ukrainian government.
In his first public remarks since Ukraine said its Crimean peninsula was seized by Russian forces, Putin said yesterday he has a duty to defend ethnic Russians in the region and reserved the right to military action. U.S. President Barack Obama challenged Putin’s rationale for intervening, as Secretary of State John Kerry unveiled $1 billion in loan guarantees to Ukraine’s cash-strapped government during a visit to Kiev.
As a result stocks rebounded worldwide yesterday after Putin’s remarks stirred optimism that the worst crisis between Russia and the West since the end of the Cold War is cooling. Putin said troops stationed in Crimea, where Russia keeps its Black Sea fleet, have only been securing their bases. Gunmen who’ve seized crucial infrastructure and surrounded military installations are acting independently, he said. At the time of writing, the US Dow Jones Index had rallied 227 points to 16,395 overnight while Australia's All Ordinaries Index is up 0.60% to 5,444.
And locally...
Perhaps more importantly, today, Australia's quarterly GDP surprised on the upside posting an annualised rate of 2.8% - higher than the 2.5% GDP rate economists were expecting. When coupled with the announcement today, from Chinese authorities, that their growth rate 'goal' for 2014 will remain at 7.5%, this should add more fuel to the overall optimism currently taking hold of financial markets - great news for Westmount clients. (Rick Maggi. Westmount. Financial Solutions.)
The US economy is yet again reinventing itself. this has been helped along by a determination to get the US economy moving again after the Global Financial Crisis, but the real drivers are an energy boom, a manufacturing renaissance and American innovation. Read on Rick Maggi (Westmount. Financial Solutions.)
Warren Buffett's annual letter to shareholders is almost always a treat to read, even if you don't own any shares of Berkshire Hathaway. It's eminently readable, and he usually throws in some evergreen personal advice that anyone can use. This year is no exception, based on an exclusive excerpt just published by Forbes magazine.
In the letter, Buffett tells the story of two investments made more than two decades ago: a 400-acre farm outside Omaha and a commercial building in Manhattan. The farm is now worth more than five times what he paid. And he says the Manhattan investment produces annual income equal to more than a third of the initial investment.
His secret? He focused on the fundamentals of what the investments would produce, not on their fluctuating value. The real estate property, for instance, was adjacent to New York University, which he notes "wasn't going anywhere."
"Games are won by players who focus on the playing field -- not by those whose eyes are glued to the scoreboard," writes Buffett. "If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays."
Buffett says that for "the nonprofessional" (that's the rest of us), there's no need to be picking winners in the stock market, or hiring someone else to do it either. And you should definitely ignore people on TV who try to predict broader market conditions. A low-cost index fund, which captures a wide enough cross section of businesses, should be plenty. And he reveals that he's following his own advice in his will (emphasis added):
My money, I should add, is where my mouth is: What I advise here is essentially identical to certain instructions I've laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife's benefit. (I have to use cash for individual bequests, because all of my Berkshire Hathaway shares will be fully distributed to certain philanthropic organisations over the 10 years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard's.) I believe the trust's long-term results from this policy will be superior to those attained by most investors -- whether pension funds, institutions, or individuals.
So there it is. You don't need much more than a portfolio of well diversified index funds (like Vanguard's) along with the right exposure to various assets, which depends on your personal attitude towards risk, volatility and reward. Of course, the lesson from Buffett and others is that ordinary investing doesn't need to be complicated. In fact, if it's not simple, you're doing it wrong.
As most Westmount clients are already taking advantage of 'indexing' and have seen the results first hand, Buffett's comments should come as no surprise, but it's reassuring to know that you're in good company! Rick Maggi (Westmount. Financial Solutions.)
Produced by the Financial Times/BCG last year, this 60 page article is an interesting and beautifully presented read. Not exactly 'on-topic' for a financial planning blog, but hey, we all need a little inspiration from time to time! Enjoy. Download here Rick Maggi (Westmount. Financial Solutions.)
Today the All Ordinaries Index closed at its highest level since 19 June 2008 as Australian company earnings continue to impress, but also following a strong lead from Wall St overnight.
Interestingly, investors have been dismissing disappointing US economic data of late, pointing to harsh winter weather as a reason for unexpected weakness. Instead, investors have been taking a relatively optimistic view, positioning themselves for an improving growth trend in the US, betting that improved earnings will be enough to lift the market further this year.
In other words, sentiment, for better or for worse, is finally taking on a life of its own, pushing up US markets (and in turn our own), despite mediocre to 'ok' earnings results. Of course, we'll need to see concrete improvement over the coming months to justify the optimism, and clearly there are are some headwinds out there if you really want to worry (Fed tapering, lower Chinese and Australian growth, Ukraine debt default etc.), however, for now, our general view remains unchanged - we're still at 8pm, on the 'Economic Clock' (a quaint measure, certainly, but a useful tool just the same) View Economic Clock Here Enjoy your weekend. Rick Maggi (Westmount. Financial Solutions.)
Whether you have a superannuation, pension or managed fund, direct shares or property, what happens in China, the world's second largest economy, matters to your financial health. In this article AMP Capital's Dr Shane Oliver looks more closely at some of the 'noise' surrounding China these days, and whether this is something we should all be worried about. As usual, an easy to understand reader-friendly article from one of Australia's most respected Economists. Enjoy. Read article here Rick Maggi (Westmount. Financial Solutions.)
If you're still working, male, and you were aged 65 or over (or 63.5 or over if you're a female) before September 2009, then you need to read this article.
If you fall into this age group and you expect to receive the Age Pension when you do finally retire, then you need to be aware that the Pension Bonus Scheme (PBS) closed to new members from 20 September 2009. Assuming you fall into this specific age group, the good news is that you can still register for the Age Pension Bonus, but you will have to hurry because applications close 28 February 2014.
Background: The PBS is a scheme to encourage older Australians to defer taking the Age Pension. The scheme pays a tax-free bonus to eligible individuals who work beyond Age Pension age, provided that they qualify for the Age Pension when they eventually retire. The maximum payment available is around $47,000 when you defer claiming the Age Pension for five years or more, and you're eligible for the full Age Pension when you do claim your entitlements. If you're eligible for a part-pension, you may be entitled to a part-Pension Bonus.
According to Centrelink, you will be eligible for the Age Pension bonus if you satisfy the following conditions:
> reached Age Pension age before 20 September 2009 (age 65 for men, 63.5 for women).
> continue to work since reaching Age Pension age.
> have not yet claimed the Age Pension.
> register before 1 March 2014.
If you have already applied for the PBS, then the scheme continues to apply for you, subject to meeting the scheme's 'work test' condition.
Note: Your eligibility for the PBS runs from the time you register, rather than the time you reached Age Pension age.
If you think that you may be entitled for the PBS, we recommend that you immediately make an appointment with Centrelink to formally determine your eligibility. Westmount clients can call our office if in doubt - we'll perform a quick calculation based on your current circumstances - beats waiting in a queue! Rick Maggi (Westmount. Financial Solutions.)
The decision about whether to take super benefits as a lump sum, superannuation pension or both as a lump sum and a pension is a key financier issue. But be careful, funding your retirement requires serious resources… Read more here Rick Maggi (Westmount. Financial Solutions.)
Sometimes being at one with a crowd can be nice, as safety in numbers can provide comfort. However, when crowds turn they can be dangerous - you might get trampled! In fact a wariness of crowds is essential to successful investing. Read more here Rick Maggi (Westmount. Financial Solutions.)
An interesting, quick article from Vanguard's Robin Bowerman. Read here Rick Maggi (Westmount. Financial Solutions.)
Since 1950 the average cyclical bull market in Australian shares lasted 48 months with a 126% gain. The current bull market has gone for 28 months with only a 37% gain. So where are we now in the cycle? Are we heading into a bear market already or is there more growth to come? Read on… Where are we now? Rick Maggi (Westmount. Financial Solutions.)
The following is an excellent overview by AMP Capital's Dr Shane Oliver. Definitely worth a read. Read article here Rick Maggi (Westmount. Financial Solutions.)
Overnight the US Federal Reserve announced that it will begin carefully and slowly scaling back its massive stimulus program next month. It is the central bank's first step towards winding back the stimulus that has helped the US recover from its worst recession since the 1930s and a sign that the US economy is recovering.
In response, the US share market surged by almost 2% and at the time of writing, local markets are up by about 1.5%. Our local currency immediately dropped to 88.18 US cents but then quickly recovered to 89.45 US cents as investors digested the news. Most importantly, this should be viewed as good news. AMP Capital's Dr Shane Oliver discusses the implications for investors here. Rick Maggi (Westmount. Financial Solutions.)
