Are we at the beginning of a property bubble?
An excellent summary of the current residential property market, and where it is likely heading. Enjoy. Rick Maggi. Read more here
05/08/13: Consistency over the long term
Australian and international equities. Which sector performed the best?
Picking the market sector that will outperform and timing it to maximise returns is a difficult thing to do. Produced by Vanguard Australia, the following tables graphically illustrate the performance of different sectors (within the Australian share market) and the performance of different regions (international shares).
The take away is simple one. Building a portfolio within broadly diversified equity funds at the core can help lower risk and smooth out peaks and troughs in returns over time. Rick Maggi
12/08/13: Property: Autumn Report (Westmount Clients Only)
Suburb-by-suburb property report...
Accurate to April 30th 2013, these two reports provide a general guide for investors and suburb-by-suburb statistics.
08/08/13: The Federal Election
Implication for investors...
In this article AMP Capital's Dr Shane Oliver takes a look at potential implications for investors as move towards and beyond the Federal Election. Interesting reading. Rick Maggi. The Federal Election
06/08/13: Cash rate cut by 25 basis points
Interest rates fall...
Today Reserve Bank of Australia (RBA) decided to cut interest rates today, by 25 basis points or 0.25%. The cash rate is now at a historic low of 2.5%. This was widely expected as a raft of weak economic data, including yesterday's disappointing retail sales data, was enough pressure to force the RBA to act now. While our economy continues to grow it is grinding slower with some sectors, particularly outside of mining, still struggling, so the hope is that lower rates will give a lift to those sectors to create more 'uniformity'. As we're at the beginning of the Federal Election campaign, the timing of the cut will no doubt be controversial.
As at the time of writing many of the Australian banks have quickly responded, passing on the full rate to borrowers. From an investment perspective, this should take the vast majority of 6-12 month Term Deposit rates well below the 4% mark, forcing an increasing number of cautious investors back into higher yielding risk assets such as shares, bonds and property. Rick Maggi.
26/07/13: The Vanguard Index Chart 2012-13 (Westmount Clients Only)
Some eye candy...
Every year Vanguard releases it's 'Vanguard Index Chart' and it's always worth a look. The chart illustrates what the value of $10,000 invested twenty years ago might be worth today had you invested in various sectors such as Australian shares, commercial property, cash etc. Along the twenty-year journey you see the impact of important events (both positive and negative) such as 9/11, US subprime and the Japanese Tsunami on markets and the value of the original investment. Vanguard also includes a second graph, called 'the power of diversification' which shows the performance of each sector in percentage terms, every year, for the last twenty years.
Seeing visual proof of market volatility (all of them), each having their day in the sun, followed by less than happy times, serves as a potent reminder of the importance of diversification and patience. We can all do with some gentle encouragement, especially during tougher, challenging times, so I like to keep this chart on my wall! Rick Maggi. View charts here
26/07/13: New normal, old story
'Outside the Flags' by Dimensional VP, Jim Parker
"Low returns are shaping as the new normal" That was the headline in The Australian Financial Review in early July 2012 in anticipation of another grim year on global equity markets for Australian investors. How did that forecast turn out? Rick Maggi Read more here
25/07/13: Investment outlook after a strong financial year
Dr Shane Oliver...
The last financial year saw returns of over 20% from Australian and global shares, so what's in store for 2013/14? Rick Maggi Read more here
22/07/13: SMSFs: Where the ATO is looking
How does your SMSF fund measure up?
The tax office - in its role as regulator of self-managed super - stripped 132 SMSFs in 2012-13 of their prized complying status for committing serious breaches of superannuation law. This is the toughest action that the ATO can take against a wayward SMSF. And it typically affects the savings of all the fund's members.
The market value of SMSFs declared non-complying is taxed at the top marginal rate, less any non-concessional (after-tax or undeducted) contributions. This could remove almost half a fund's assets.
And the ATO prevented 180 proposed new funds from entering the system. (As part of its compliance work, the tax office examines whether a fund has been established for "genuine" superannuation purposes. Sometimes funds are setup as means to extract savings from the super system before the members are legally entitled to the money.)
The ATO's Compliance in focus 2013-14 publication - released over the past week - reveals how the regulator will scrutinise the activities of SMSFs over the coming 12 months.
The annual compliance program can serve not only as a warning of where the tax office is looking but as a reminder of areas where your self-managed fund could possible improve.
During 2013-14, the ATO intends to particularly focus its SMSF attention on:
1) Prohibited loans. (SMSFs are prohibited from making loans to fund members and their relatives or providing other financial assistance to them.)
2) Funds with a history of non-compliance, including failure to lodge annual returns on time. The ATO is also keeping an extremely close watch on the compliance of new SMSFs.
3) Incorrect reporting of tax-exempt pension income. (The tax-exempt treatment of pension assets is a valuable tax break that some SMSFs incorrectly claim.)
4) Tax losses. (The ATO wants to ensure that funds are correctly calculating any claimed losses.)
5) Related-party transactions. (Generally, an SMSF is barred under the in-house asset rules in superannuation law from leasing or having investments with related parties involving assets that are worth more than 5 per cent of a fund's total market value. Business property is among the few exceptions to the rule.)
6) Non-arm's length transactions. (Self-managed funds are required to invest on a commercial, arm's length basis, including transactions involving related parties.)
How does your fund measure up in regard to these areas of ATO focus? Rick Maggi.
01/07/13: A matter of knowledge
A survey of financial literacy...
A comprehensive survey in the United States asked 25,000 adults to rank their financial knowledge. Their responses are somewhat disturbing. Read more here
12/07/13: Second guessing
A commentary from Dimensional's Jim Parker...
Markets have had a rocky time lately. Is this something to worry about? Rick Maggi Read here
02/07/13: Interest rates on hold, for now
RBA stays the course
As expected, the Reserve Bank of Australia decided to keep interest rates on hold today.
While the official rate remains unchanged, we're watching closely what the banks do with their rates as some of Australia's biggest lenders have recently made changes to their rates regardless of official interest rate moves by the RBA. If in doubt about your home or business loan arrangements, you should call us.
From an investment perspective, this leaves 6-12 month Term Deposit rates in the area of 4%, providing a low risk-free return (still high by global standards) alternative to other assets such as shares and property.
Going forward, the RBA really wants to see what the real impact of the tapering down of 'quantitative easing' in the US will translate into. If the RBA sees evidence of a slowing down of our economy, particularly in the retail sector, you should expect to see further easing. Our falling currency will also have an impact on the future direction of interest rates. We'll keep you posted. Rick Maggi.
02/07/13: Happy New Year!
New Financial Year. Fresh Start.
Want to be kept informed in real-time? Tired of stale, irrelevant websites and blogs? Subscribe to our free updates here. Happy New Year! Rick Maggi & Staff.
01/07/13: Why 'core-satellite' makes sense...
Can funds really outperform the market?
In this brief article, Vanguard's Robin Bowerman takes another look at the merits of 'indexing'. Not sure what indexing is? Then you might want to read-up on it as it has the potential to boost your investment or retirement outcome and reduce your costs.
Also included is a more detailed (but user friendly) look at indexing from Vanguard's 'Plain Talk' library. Worth a read. Rick Maggi.