There are a number of factors that I consider when contemplating an investment on behalf of my clients or for me, personally. I think it’s very important to consider a vast array of investment opportunities (or appoint an advisor to do it on your behalf). But it is even more important to discount most of them. Being diligent, setting a high bar and having the discipline to stick to sound fundamentals is critical for success. This blog sets out the important factors that I always consider. Will i...
Jul 13, 2021•17 min•Season 1Ep. 170
Last week a prospective client asked me a very good question. They asked whether I have data that shows what investment returns my clients have generated. Whilst this sounds like a logical question, my response was that not only did I not have this data [1] , but it also wouldn’t necessarily be that useful. The reason is that investment returns are highly dependent on a client’s stage of life, their risk profile, the quantum of their investable income, their starting financial position and so on...
Jul 06, 2021•17 min•Season 1Ep. 169
Some buyers’ agents promote investing in more affordable locations. I can understand why some investors might be attracted to follow their advice. But it’s not until you delve into the theory and evidence that it becomes blatantly obvious that such investments have a high probability of under-performing. Here’s an example I saw on social mediaI noticed a buyers’ agent advertise that he bought this "north Brisbane" property for a client for $530,000. He estimated that the rental income would be $...
Jun 29, 2021•19 min•Season 1Ep. 168
Twenty-three-year-old, Ashleigh Petrie nominated her mother as the sole beneficiary of her super. However, Ashleigh’s 63-year-old fiancé was successful in claiming her full super balance after she died in a car accident. Ashleigh was in a relationship with her fiancé, Rodney Higgins for only 7 months (living together for four of them). This story highlights the pitfalls and limitations to super fund death benefit nominations. Superannuation doesn’t form part of your willA super fund is a type of...
Jun 22, 2021•16 min•Season 1Ep. 167
It is true that buying a property in any market will generate a lot of wealth as long as you (1) buy the right property and (2) hold it for a few decades. But it is also true that you do not need to rush into the market at the risk of substantially overpaying. My wife and I planned to buy an investment property this year so we have been monitoring the property market a bit closer than usual this year. Of course, we expect to pay fair market value for a high-quality asset (quality assets rarely s...
Jun 15, 2021•14 min•Season 1Ep. 166
The Corporations Act makes a distinction between wholesale and retail clients. It is assumed that wholesale clients have a sufficient level of financial literacy to self-assess the appropriateness and risks of various investment products and to protect this own interests. As such, there are fewer disclosure obligations (and lower compliance costs) for financial services businesses working with wholesale clients. It is my contention that similar provisions should be available to banks and mortgag...
Jun 08, 2021•15 min•Season 1Ep. 165
One of the Australian Labor Party’s (ALP) big election promises in the 2019 federal election was to abolish negative gearing. It would be logical to think that the ALP’s shock election loss in 2019 will serve as a warning for policy makers. That is, banning negative gearing is an unpopular policy. However, I would caution investors against assuming that negative gearing is here to stay. What is negative gearing?Negative gearing allows investors to offset property investment losses against other ...
Jun 01, 2021•16 min•Season 1Ep. 164
Active fund managers use their skill and experience to pick which stocks to invest in. An alternative to active investing is to invest in low-cost index funds. One criticism of index funds is that they blindly invest in a broad index which might not always make sense. Index funds participate in the highs and lows. This led me to consider how well actively managed funds did last year. Last year’s share market opportunitiesBetween 1 January 2020 and mid-March, the international share index (MSCI W...
May 25, 2021•15 min•Season 1Ep. 163
Many lenders are taking a number of weeks (sometimes months) to approve loans at the moment. These delays have been caused mainly by significantly higher mortgage application volumes and the operational disruption from onshoring back-office services due to Covid lockdowns in the Philippines and India. As such, banks are prioritising applications for borrowers that have already purchased property and have a definitive settlement date to meet. Consequently, pre-approval applications are low priori...
May 18, 2021•20 min•Season 1Ep. 162
Treasurer Frydenberg handed down the federal budget last night and to be honest, there’s not a lot in it for individuals and investors. However, there are some real positives for small business, first home buyers and retirees. This blog provides a summary of the initiatives announced on 11 May 2021. First home buyers’ to be able to access more super for a depositThe First Home Super Saver (FHSS) scheme was introduced four years ago to help first home buyers save a deposit. In summary savers can ...
May 12, 2021•17 min•Season 1Ep. 161
After 1 July this year, your employer must increase your super contributions from 9.5% to 10% of your salary . This contribution rate will then increase by 0.5% p.a. for the subsequent 4 years until it reaches 12%. This could boost your retirement savings but only if you optimise two things. The government was tempted to delay this increaseIt has been reported that the government was contemplating delaying increasing the Superannuation Guarantee Charge (SGC). The increase in SGC was proposed by ...
May 04, 2021•22 min•Season 1Ep. 160
Tax isn’t necessarily a bad thing. If you’re paying tax, it means that you are making money (income or capital gains). But of course, there’s no need to pay any more than you legally have to. I discuss our common-sense approach to saving tax below. Minimising risk is often more important than saving taxIt is not worth it to bend or break the law to save a few hundred dollars in tax. For example, if you get audited and you have some dodgy deductions, it will encourage the ATO to look harder. The ...
Apr 27, 2021•16 min•Season 1Ep. 159
It’s stating the obvious to say interest rates are very low at the moment. But what can be easily missed is how powerful low rates can be for investors. And arguably, the next few decades could provide the best opportunities in a lifetime for investors, if they are diligent and invest in high quality assets. When will interest rates rise?That is the million-dollar question. The short answer is that no one really knows. But we should remind ourselves that interest rate expectations can change ver...
Apr 20, 2021•16 min•Season 1Ep. 158
Growth investors have been well-rewarded over the past decade. For example, the S&P500 index (US market) has delivered an average return of 14.5% p.a. over the past 10 years solely off the back of growth stocks, mainly technology. However, this year to date, value has outperformed growth . If this continues, it could have significant implications for investors.Value versus growthA ‘value’ approach involves investing in companies that appear to be under-valued by the market. Investors use a n...
Apr 13, 2021•19 min•Season 1Ep. 157
The internet and newspapers are awash with stories of properties selling for amounts wildly above reserve. Such news can create FOMO and fuel buyer demand. But buyer overexuberance is rarely sustained for long periods of time. My feeling is that price growth will level out this year and I set out the reasons why below. Properties can sell above reserve for many reasonsLast month, a property located in the Eastern suburbs of Sydney ( 209 Edgecliff Road, Woollahra ) sold for $1.5 million more than...
Apr 06, 2021•19 min•Season 1Ep. 156
The word ‘holistic’ is defined by Oxford Languages as “characterised by the belief that the parts of something are intimately interconnected and explicable only by reference to the whole.” This definition implies what a holistic accountant is positioned to offer you the most value. But not all accountants are able to adopt a holistic approach. This blog sets out the key considerations to help you assess whether you would benefit from engaging a holistic accountant. Taxation and investing are ine...
Mar 30, 2021•14 min•Season 1Ep. 155
Almost everyone is predicting that property prices will surge higher this year. In fact, the newspapers are already full of stories about properties selling well above reserves. Low stock levels are partly responsible for the currently exuberant property market. That exuberance might cool as more stock becomes available. But the RBA and the government do not want prices to rise too quick as it might create a bubble, and all bubbles pop eventually. Predictions of rising property pricesWestpac’s c...
Mar 23, 2021•15 min•Season 1Ep. 154
It is alleged that Sydney-based financial advisor, Melissa Caddick stole $25 million from her clients. She has recently gone “missing”, leaving a trail of disaster for her clients and family members. Many con artists are very cunning and go to great lengths to conceal their wrongdoings. But there are a few simple steps you can take which will virtually eliminate any chance of you being ripped off. An advisor must be an independent intermediately, not a fund managerVirtually all fraud committed b...
Mar 16, 2021•17 min•Season 1Ep. 153
Do you realise that $10,000 invested in Bitcoin 5 years ago would be worth over $1.1 million today? Makes you think, right? With lockdowns occurring almost everywhere around the world, no one is travelling and AirBNB’s business has been decimated. Yet, its share price has risen by more than 40% over the past year, and it is currently worth nearly $160 billion. That is $10 billion more than Australia’s most valuable company, CBA. Oh, by the way, AirBNB lost $5.8bn in the 2020 fiscal year. In fact...
Mar 09, 2021•17 min•Season 1Ep. 152
Choosing the right accountant can make a world of difference. A proactive accountant will share tax-saving and wealth-building ideas, be available to answer questions during the year and ensure you never end up in the ATO’s ‘bad-books’. Common complaintsThere are two common complaints about accountants. Firstly, that they don’t provide proactive advice, including wealth building ideas. They are so involved in their day-to-day work that they don’t stop to ask themselves; “if I was in this client’...
Mar 02, 2021•13 min•Season 1Ep. 151
If the recent property price growth predictions become reality over the next couple of years, more homeowners may become ‘priced out’ of their desired location. What might be affordable today, could quickly become unaffordable, as prices can rise quickly. Sometimes it’s not possible to buy your dream home in one fell swoop. But do not despair. A steppingstone strategy could be the solution. Buying a dream home has always been a struggle, embrace itProperty has always seemed expensive. I bought m...
Feb 23, 2021•15 min•Season 1Ep. 150
Exchange Traded Funds (or ETF’s) have become very popular, particularly over the past 5 years. In fact, the amounts invested in ETF’s has doubled over this time. Last year (2020), Australians invested over $20 billion in ETFs. It is true that there are some advantages to investing in ETF’s. However, of course, not all ETF’s make good investments and there are some common pitfalls you must be aware of. What is an ETF?An ETF is simply a managed fund that is owned in a company structure and that co...
Feb 16, 2021•16 min•Season 1Ep. 149
It is generally an accepted investment principal that diversification can reduce your risk and improve investment returns. The common vernacular is, spread your eggs amongst various baskets. I would agree with this principle, so long as it doesn't result in deterioration of investment asset quality. Sometimes property investors should not diversify. That's because the quality of your investments, will determine your future investment returns. You cannot expect to invest in average quality assets...
Feb 09, 2021•18 min•Season 1Ep. 148
One good financial decision will have positive consequences. But five good decisions in a row will be life changing. It will create a lot more than five times the positive outcomes than one good decision will. That’s because good decisions are a compounding asset. Our lives are a sum total of the choices we have made - Wayne Dyer. When it comes to building wealth and fulfilling your lifestyles goals, true success comes when you master all six facets: (1) good cash flow management, (2) having a c...
Feb 02, 2021•18 min•Season 1Ep. 147
A common question people ask is, “can property values continue to rise at the same rate which they have over the past 3 to 4 decades?” The short answer is no, they cannot. Mathematically, this is unlikely to occur as incomes are not rising at the same pace. I came across the interesting graphic/visualisation (below) which sets out how property values have changed in real terms (excluding inflation) since 1970. The surprise for me was how much Canberra prices have risen (thanks, public servants a...
Jan 27, 2021•24 min•Season 1Ep. 146
Interest rates on savings accounts were over 5% p.a. in 2011… only 10 years ago. Today, you would be lucky to receive more than 0.5% p.a.! That means your savings won’t even keep pace with inflation, let alone provide you with any investment return. As such, many investors are wondering what to do with their cash savings, other than depositing the money with a bank. This blog discusses some alternatives to bank deposits. However, please do not make any financial decisions solely on the informati...
Jan 19, 2021•18 min•Season 1Ep. 145
The beginning of a new year is a great time to take stock and set personal and financial goals for the coming year. I wanted to share the process that I use personally. It has worked well for me and of course, I use the same approach when advising my clients too. It’s particularly useful to undertake this exercise after you have had a break, which most of us do over the Christmas/New Year period. That way you should have enough emotional energy to think and reflect clearly. It’s not a good idea ...
Jan 12, 2021•27 min•Season 1Ep. 144
During 2020, most economists and commentators predicted that property values would plummet by 10%, 20% or even 30%! In May I wrote a blog outlining the reasons why I disagreed with these overly bearish forecasts. We now know that property prices didn’t fall by any more than 2% to 3% and have since recovered. In 2021, I predict the property market rhetoric will switch from “values will fall” to “values are too high”! The media will start saying that property prices are too high, they’re over-valu...
Dec 15, 2020•17 min•Season 1Ep. 143
One of the advantages of investing in property is that you can make improvements to enhance its value and consequently your personal wealth. A disadvantage is that dwellings require ongoing maintenance, and this expense reduces an investment property’s cash flow. Minimising or avoiding maintenance costs is often a false economy. Maintenance cannot be avoided, only deferred. Problems either remain unresolved or they get worse. Either way, you will have to complete the maintenance at some stage or...
Dec 08, 2020•15 min•Season 1Ep. 142
Without wanting to seem too philosophical, I believe that life offers us lessons, but we must be prepared to look for them. As we are approaching the end of 2020, I thought it would be a good idea to reflect on what Covid has taught us about our financial decisions. I have been very proud of how my clients have stayed-the-course this year. Only one client insisted on selling down some investments when the pandemic hit. To be fair, there were some extenuating circumstances. Thankfully, we helped ...
Dec 01, 2020•20 min•Season 1Ep. 141
