Tag Archives: Investments

Incorporating alternative investments in self-managed super funds

By Robert Wright /May 17,2019/

It’s no secret a diversified portfolio may help to protect your wealth from market ups and downs.

Including investment alternatives in your self-managed super fund, may therefore provide additional diversification.

But what exactly are alternatives and what can they do for your portfolio? We take a closer look under the hood to find out more.

How alternatives could fit within your self-managed super fund

Alternatives cover a very wide range of asset classes that could be incorporated within your self-managed super fund, should you choose to. Their performance, as well as associated risks, can differ greatly.

As the name suggests, alternative investments fall outside of the traditional asset class sectors of shares, listed property, fixed income and cash. Broadly, the different types of alternative investments include:

• Commodities – which cover a wide range of assets such as live cattle, wheat, corn, soybeans, gold bullion, copper, aluminium, oil and coffee.
• Infrastructure – covers services essential for communities such as airports, roads, power, hospitals and telecommunications.
• Private equity – investments in unlisted companies that offer the prospect for increases in shareholder value. Also known as “venture capital”, which is an early stage private equity investment.
• Hedge funds – which aim to protect investment portfolios from market uncertainty, while providing positive returns during both upward and downward trends in the market.
• Real assets – Direct property such as retail or commercial premises or facilities.
• Other direct investments, such as artwork and antiques.

The benefits of alternatives in a self-managed super fund

The main attraction of alternatives is that they tend to be less correlated to the major asset classes of equities, bonds, property and cash.

Correlation refers to the relationship between the returns of two different investments. For example, if two different assets move in the same direction at the same time, they are considered to be highly correlated. On the other hand, if one asset tends to move up when another moves down, the two assets are considered to be uncorrelated.

So in periods when traditional markets trend downwards, allocations to alternatives may not move in the same direction, or may even move in the opposite direction which can potentially provide an extra layer of diversification for your self-managed super fund.

Importance of diversification in a self-managed super fund

The importance of diversification for self-managed super investors was highlighted in research conducted by Investment Trends and the Self-Managed Super Fund Association, where just one in five advisers considered their self-managed super fund client portfolios to be well diversified.

In addition, 64 per cent of self-managed super fund advisers acknowledged even a portfolio of 30 individual stocks many not provide sufficient diversification – particularly when combined with a strong bias of investing domestically.

And the drawbacks

While alternatives can be an attractive diversification method, they also carry some risks. In addition, as they’re often not traded on an open market such as the ASX, it may be more difficult for investors to sell these investments and cash out. But just like any investment, the potential for a higher return or complexity of the investment strategy generally carries a higher level of risk.

Getting access to alternatives for your self-managed super fund

While alternatives have been historically used by institutional investors such as super funds, pension funds and government sovereign funds (e.g. our own government’s Future Fund) their higher initial investment served as a barrier for many self-managed super fund investors. For example, investing in an infrastructure project such as a new airport could cost hundreds of thousands, or even millions of dollars.

But gaining exposure to different markets and asset classes, including alternatives within your self-managed super fund has now become easier. Thanks to managed investments and exchange-traded funds, you can gain diversification across asset classes, locally and globally.

In summary

Alternatives may be a useful diversification tool in a broader self-managed super fund due to their lower correlation to traditional sectors. But like all investments, they’re not risk free so you may find it worthwhile to speak to your financial adviser about your current portfolio to determine if investing in alternatives is suitable for you.

Source: BT

How you can benefit from market fluctuations

By Robert Wright /May 17,2019/

When share markets experience a downturn, it’s easy to get nervous about the impact on your investments. But this kind of volatility doesn’t always necessarily spell bad news – as billionaire entrepreneur Warren Buffett once said, “Be fearful when others are greedy, and greedy when others are fearful.”

While it may seem strange to buy when everyone else is selling up, the fact is that even a declining market can present opportunities. The key is to choose a mix of investments that allows you to take advantage of both positive and negative market movements.

Here are some strategies that every savvy investor should keep in mind.

Understand share price changes

When markets are driven lower by negative sentiment, assets can potentially fall below their fundamental value. These conditions may then provide valuable opportunities for investors to temporarily buy shares at a discount.

This is because the value of an individual stock is the sum of the returns it can potentially generate over the company’s lifetime. So while short-term shockwaves such as recessions or political events can affect the immediate share returns on an asset, they won’t necessarily impact its intrinsic worth.

But be careful as this doesn’t mean you should buy anything and everything that’s on sale. For instance, a company’s share prices may be falling because of other factors that will erode the long-term potential of those shares. And with any investment, you want to be reasonably confident that its value will rise in the future.

Investment managers and financial advisers work hard to identify undervalued assets and take advantage of market dips. That’s why it’s always important to seek professional advice before you make any major investment decision.

Take a long-term view

A down market offers the potential to earn greater returns than an up market. This is because, theoretically speaking, the lower your starting point, the higher your stocks can move. However, this is usually only true if you adopt a long-term investment strategy that will help you ride out any future market fluctuations.

Despite periods of short-term fluctuations, historically share markets tend to move upwards, and shares are an investment vehicle designed to be held for periods of five years or more. So, whether the market is up or down, you may be wise to ‘buy and hold’ so you can increase your potential for strong returns in the long run.

Diversify your portfolio

Even the most seasoned investor knows how difficult it is to time the market. Rather than trying to predict future movements, some say it helps to take a measured approach by investing regularly over months and years, regardless of how the market is performing. So if you continue investing consistently when prices fall, you’ll be able to buy a larger number of shares for the same amount you usually invest.

It can also help to diversify your portfolio by investing in defensive assets such as fixed-interest investments and cash. These tend to be less dependent on market cycles, so they can provide stable earnings through periods when markets are on the move.

Most importantly, remember that a financial adviser can help tailor your investment strategy so you can make the most of market movements. Your adviser can also ensure your portfolio is robust and diversified, so you can protect your investments and keep your financial plan on course.

Source: Colonial First State

What kind of money parent are you?

By Robert Wright /April 05,2019/

Many parents approach the topic of money differently, but could your way of doing things influence your kids’ success?

The majority of Aussie mums and dads recognise that they’re accountable when it comes to shaping their children’s perspective around money matters.

A recent report published by the Financial Planning Association of Australia (FPA), revealed parents listed themselves (95%), followed by grandparents (63%) and teachers or coaches (59%) as the top three biggest influencers when it came to instilling money values in their kids.

What money conversations are parents having?

As part of the research, parents said they mainly concentrated on day-to-day issues when talking money with their children, admitting that more contemporary issues, such as making transactions digitally, were sometimes overlooked.

What parents said they discussed:

• 52% – how to spend and save
• 43% – how to earn money
• 32% – how household budgeting works
• 24% – how much people earn
• 19% – making online purchases
• 13% – in-game app purchases
• 5% – buy now, pay later services, such as Afterpay.

What approach do you take with your kids?

The research undertaken indicated that there were four prominent personalities parents assumed when discussing money with their children, with some parents initiating conversations more frequently, while others were sometimes a little more hesitant.

The four distinct personalities that came out of the research included:

The engaging parent

Common traits:

• You have the most conversations around money with your kids and feel comfortable doing so
• You tend to have a higher household income
• You’re more likely to use money to encourage good behaviour in your children
• Due to high engagement, your kids are often more financially prepared than other kids
• Your kids have a greater interest in learning about all types of money matters.

The side-stepping parent

Common traits:

• You are less comfortable talking to your kids about money so have fewer conversations
• You may have less money coming in as a household
• You’re less transparent about what you earn and money matters in general
• You tend to provide the least amount of pocket money and as a result your children may be less interested in learning about money and how to make transactions.

The relaxed parent

Common traits:

• You’re comfortable talking to your kids about money but don’t do so too often
• You take a relaxed approach to money matters and are transparent about money issues
• There is little financial stress in your home
• Your relaxed nature may lead to your children missing out on opportunities to learn about money, which means your kids may need to explore money matters on their own.

The do-it-anyway parent

Common traits:

• You’re not always comfortable talking about money but still have frequent conversations
• You’re mainly concerned your child will worry about money if you talk about it
• Despite your discomfort, your perseverance generally pays off
• Your teenage children are more likely to have a job than the average child.

What approach is best according to the research?

Engaging parents were more likely to report that their children were more curious, confident, and financially literate than they were at their age.

According to parents who fell into this category, their children were the most equipped to understand and transact in today’s digital world and their teenagers were the most likely to have a job and make online purchases for themselves or their family.

In addition, the research found children with a paid job outside of the family home were more financially prepared to engage with money.

They were also used to transacting digitally and showed greater interest in learning about paying taxes and superannuation than those who didn’t have a job.

Source: AMP, Feb 2019

Dust off your lunch boxes

By Robert Wright /March 22,2019/

If you want to get ahead with your savings goals in 2019, packing a lunch each day is a great place to start. (And forget the soggy cheese sandwich, as with a bit of planning and thought, you’ll be guaranteed to give your colleagues lunch box envy.) With ING research showing that Australian employees spend a whopping $129 on average per month filling their bellies at lunchtime, you could tuck away over $1,500 in your savings account in one year alone, just by getting a little lunchbox virtuous…

So why dust off the lunch box?

Tuck into the savings

With the average lunch being $15 a day, it’s not hard to give your savings a major boost by cutting out the daily pilgrimage to the sandwich shop. And it’s not just money that you’ll be saving, there’s more…

Quality ‘you’ time

People often say buying lunch is an excuse to get out of the office. However, instead of spending half your lunchtime standing in a cafe queue, you could spend that time meaningfully. Go for a run or walk around the nearest park. You’ll not only fit in your 10,000 steps but it will clear your head. The best way to come back alert and refreshed to work.

Underwhelming, indeed

How often do you get excited about getting take away, and then feel underwhelmed or like you need a decontamination shower afterwards? As well as being more expensive than bringing food in from home, takeaway food can often be less fresh and nutritious than your own pantry. It’s also hard to justify buying fruit from a takeaway cafe or shop too because it’s often more expensive then supermarkets. So to guarantee your daily ‘five’ veggies and ‘two’ fruit intake, it’s worth being ready to pack and go.

Waste wars

In our waste conscious society, it’s good to look at our food wastage. Packing up a lunch each day is a great way to decrease food waste and save leftovers from going furry in the fridge. You can take last night’s meal as is, or be creative and give the dish a lunchtime twist.

Gain savings, lose pounds

With a combination of having more time to exercise at lunchtime and by bringing in nutritious and controlled amounts of food (without the temptation of buying that banana cake at the counter) your healthier lifestyle could convert to diminished kilos.

How to create lunch box envy

Plan A

Planning is key to rolling out enviable packed lunches each day. Shop for your lunches on the weekend, and batch cook and freeze/chill items such as salads, frittatas, soup and rice paper rolls so you can grab and run during the week. You can even freeze sandwiches in advance (yep you heard right)! Just seal them well. Take it one step further and divide and store your food into individual containers in advance to make mornings more relaxed.

Go naked and nude

Treat yourself to some quality Tupperware or splash out on a state of the art Bento box. The beauty of Bento boxes is that you can reduce plastic wrapping waste and go with nude food! The environment will thank you for it. Why not keep your lunch cool with a frozen bottle of water or for extra nutrients, coconut water.

Pick and mix it up

Inject as much variety as you can into your lunchtime treats. If you don’t, you’ll be back in the foodcourt queue quicker than you can butter your bread. Get out of your comfort zone and enjoy the process. Go crazy in the fruit and vegetable aisle, and treat yourself to healthy snacks you wouldn’t usually buy. Try baby cucumbers, snow peas, or baby sweetcorn for quick grab and go snacks. And prep-free fruits, fresh or dried, like lychees, apricots, dates or cranberries. Swap recipes with colleagues and find the perfect sweet treat, such as Taste’s Cacao Coconut Date Balls or Coconut Sesame and Sultana Bar.

Stuck for ideas?

Ditch the daily egg sandwich and be inventive. There’s a wealth of free lunch box ideas online to give you inspiration. Explore making items such as vegetable patties, savoury slices and try quinoa as a base for salads. As well as go-to recipe sites such as Taste and All Recipes, government health and association websites such as the Dieticians Association of Australia are great for recipes and nutrition insight. The Healthy Eating Advisory Service has a great lunch box guide for kids and adults.

Source: ING February 2019