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A helping hand to step into your first home

All / 04.06.2020

A helping hand to step into your first home

Struggling to save for a 20% deposit on your first home? A recent Australian Government initiative may allow you to buy your first home with a much smaller deposit, helping you take that first step to home ownership years sooner.

What is the First Home Loan Deposit Scheme?

The First Home Loan Deposit Scheme (FHLDS) provides lenders with a Government-backed guarantee that allows some eligible first home buyers to purchase a home with a deposit of as little as 5%.

Who is eligible?

  • Australian citizens over the age of 18 who have saved at least 5% but less than 20% of the value of an eligible property. If applying as a couple, both must be Australian citizens.
  • Genuine first home buyers only.
  • Singles with a taxable income of no more than $120,000, or couples with a combined taxable income of no more than $200,000.
  • Owner-occupiers only. If you move out of the property it will cease to be covered by the scheme.
  • The price of the property must be less than the price cap. Price caps range from $250,000 in rural South Australia to $700,000 in Sydney and some other parts of NSW.

All of these criteria must be met.

What are the benefits?

Normally, lenders require home buyers with a deposit of less than 20% of the purchase price to take out mortgage insurance. This helps to protect the lender if the borrower cannot repay the loan. Under the FHLDS the Australian Government provides a guarantee to the lender, which means you won’t need mortgage insurance. That saves you money, but more significantly, because you don’t need to save as big a deposit, you’ll be able to buy your first home a lot sooner.

What are the disadvantages?

Purchasing a home with a smaller deposit means you will need to take out a bigger home loan, leading to greater total interest payments over the life of the loan.

Will all eligible home buyers benefit from the scheme?

No. Only 10,000 applicants are expected to receive support each financial year. Currently, around 108,000 homes a year are sold to first time buyers, so chances are that, even if you meet all the qualifications, you may not receive approval under the FHLDS. It is, however, still worth applying. If you receive conditional approval for a loan, you have 90 days to find and settle on a property.

Can the FHLDS be used in conjunction with other first home buyer incentives?

All states and territories offer support to first home buyers, mainly in the form of the First Home Owners Grant, which is basically a cash handout, and in reduced stamp duty. These can be used in conjunction with the FHLDS. Be aware, however, that different eligibility criteria apply to each scheme and that limits and thresholds vary from state to state. Some incentives only apply to newly built homes, and property value cut-offs may differ. Depending on personal circumstances you may be eligible for some schemes, but not others.

How do you apply?

The National Housing Finance and Investment Corporation has appointed a number of major bank and non-major lenders to provide loans under the scheme. Search for “FHLDS participating lenders” to find them.

Applications are made through participating lenders and their authorised representatives, including mortgage brokers. These lenders and brokers will be able to assess your eligibility for both the FHLDS and other first home buyer incentives, and guide you through the application process.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.
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Waiting in cash until share markets fall

All / 29.05.2020

Waiting in cash until share markets fall

As any long-term share market investor knows, markets can go up and they can go down. While most people view a falling market as a bad thing, some investors see it as a buying opportunity. After all, it’s better to pay, say, $60 for a share after a market dip than $100 for the same share at the market peak.

Of course, to be able to exploit these buying opportunities, the cash needs to be available. That means hoarding some extra cash while markets are happy in anticipation of a rainy day. It also means having a strategy around when to invest, how much to invest, how long to hold and what to invest in. There isn’t a single, off the shelf solution to this, but 58-year-old Barry provides an example of what the rainy day investor needs to think about.

How much?

Barry is a seasoned investor with a sizable self-managed super fund. He has weathered several market slumps over the years, and when markets are trading normally, with low volatility, he is happy to build up a cash reserve of up to 20% of his fund’s value to be used when the share market goes ‘on sale’. The cash comes from dividends and distributions, contributions and realised capital gains.

When to invest?

With no hard and fast rules, Barry decides that if the market falls by 10% he will invest 25% of his reserved cash. For each further fall of 10% he will invest a further 25%, so after a market fall of 40%, all his cash stash will be invested. This could occur in a short time period or evolve over many months of ups and downs. In some market corrections he may not use all of this cash.

What to invest in?

Barry has some favourite shares and if they fall significantly in value he will top up his holdings. However, he knows this involves more risk than buying the market, so most of his purchases will be of index funds.

How long to hold?

In volatile markets price movements can be sudden, dramatic, and in either direction. Barry’s strategy is to sell any shares that produce a gain of 20% or more during the recovery phase. He also uses stop-loss orders to provide some protection from further sharp falls. Barry also limits himself to buying quality assets, and is prepared to hold them long term if the recovery is a slow one.
Barry knows his strategy isn’t perfect. If share prices don’t fall, he is left holding larger amounts of low-yielding cash than would normally be the case. If they fall a long way, he’ll miss out on buying at the bottom of the market. But Barry gains some peace of mind that if (or when) market corrections do occur, his strategy should provide some protection to his super portfolio and improve his long-term position.

Seek advice

This is just one example of a rainy day cash strategy. Everyone’s circumstances differ, and it is important to seek appropriate advice specific to your situation. Talk to your qualified financial planner about a solution that’s right for you.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

 

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Hands up – who wants to save tax?

All / 21.05.2020

Hands up – who wants to save tax?

Most investors and business owners are aware that the interest paid on an investment loan is generally tax deductible. These deductions can be maximised by prepaying the interest on the loan.

To do this contact your financial institution and arrange to have all of the interest costs for the following financial year brought forward and paid during the current year. You may then be able to claim these costs as a tax deduction in the current financial year.

The advantages could be considerable as the following example shows:

Phillip earns an annual salary of $110,000 and owns a rental property that generates an additional income of $23,400 each year. Phillip currently owes $320,000 on the property, with an interest rate of 4.5% per year on the loan. Assuming no other tax deductions, the impact of prepaying interest on Phillip’s assessable income is as follows:

Income  
Salary income$110,000
Rental income$ 23,400
Gross income$133,400
Less Deductions
Prepaid interest ($320,000 at 4.5%pa) $ 14,400
Assessable incomePrepaid interest ($320,000 at 4.5%pa)
Tax on gross income$ 39,523
Tax on assessable income$ 33,697
Tax saving due to prepaying interest$ 5,826

Prepaying the interest on your investment can bring forward related tax deductions this financial year. It may also enable you to fix the rate on your loan for 12 months and in so doing, could attract a lower interest rate.

Other conditions apply to claiming a deduction on prepaid interest, so first seek professional advice to determine if your circumstances satisfy all requirements. Don’t leave it until next June – start planning now.  

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.
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Your health and wealth during the COVID-19 Pandemic

All / 15.05.2020

Your health and wealth during the COVID-19 Pandemic

There isn’t a single person in the world who hasn’t been impacted by COVID-19. As new case numbers start to slow in Australia, so too is our economy. This time presents new challenges as everyone gets used to a “new normal” and figures out the best way to weather the coming months. This article provides an overview of different measures the Federal Government has announced to support individuals and businesses, current market performance and what you should be thinking about when it comes to your finances and continuing to build long-term wealth.

Government support for individuals and businesses

The Federal Government has announced two economic stimulus packages and the JobKeeper Payment to support individuals and businesses. An overview of the Federal Government’s measures announced to date is detailed below.

Support for individuals

The Federal Government has announced a range of measures to help individuals. Eligibility to access these measures is determined on criteria such as your employment status or loss of income due to COVID-19. Some of the key measures include:

  • two $750 payments to social security, veteran and other income support recipients (first payment from 31 March 2020 and the second payment from 13 July 2020);
  • access to the JobKeeper Payment from your employer (if eligible) equal to $1,500 per fortnight;
  • a time-limited supplementary payment for new and existing concession recipients of the JobSeeker Payment, Youth Allowance, Jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit equal to $550 per fortnight;
  • early release of superannuation funds (see overview below); and
  • a temporarily reducing superannuation minimum drawdown rates (see overview below).

Full details about the Federal Government’s measures to support individuals are available on the Treasury website.

Early release of superannuation

Eligible people will be able to access up to $10,000 of their superannuation in the 2019-20 financial year and a further $10,000 in the 2020-21 financial year. To access your super early, you need to meet one of the following five criteria:

  • You are unemployed.
  • You are eligible for the JobSeeker payment, Youth Allowance for jobseekers, Parenting Payment special benefit or the Farm Household Allowance.
  • You were made redundant on or after 1 January 2020.
  • Your working hours reduced by at least 20 per cent after 1 January 2020.
  • You are a sole trader, and your business activity was suspended, or your turnover has reduced by at least 20 per cent after 1 January 2020.

If you are considering early release of your superannuation, you need to consider what the potential long-term impacts may be to the growth of your superannuation fund and retirement income. While $20,000 split across two $10,000 withdrawals may not seem like a lot of money now, it could have significant compounding value if it’s left in your fund. Understandably, people may not have any other choice to support themselves financially. Make sure you speak to a financial professional to understand your risks and if this is a suitable option for you. If you’re eligible, you can apply for early release of your superannuation directly with the ATO through the myGov website.

Temporarily reducing superannuation minimum drawdown rates

The temporary reduction in the minimum drawdown requirements for account-based pensions has been designed to reduce the need for retirees who have account-based pensions to sell their assets to fund their minimum drawdown requirements. The new minimum drawdown rates are outlined in the table below.

AgeCurrent minimum drawdown rates (%)Reduced rates by 50 per cent for the 2019-20- and 2020-21-income years (%)
Under 6542
65-7452.5
75-7963
80-8473.5
85-8994.5
90-94115.5
95 or more147

Support for businesses

The Federal Government has announced a range of measures to help businesses facing financial difficulty. Eligibility to access these measures depends on factors such as your turnover and how much your business’s revenue has decreased due to the COVID-19 pandemic. Some of these measures include:

  • increasing the instant asset write-off threshold for depreciating assets from $30,000 to $150,000;
  • allowing businesses with turnover below $500 million to deduct 50 per cent of eligible assets until 30 June 2021;
  • PAYG withholding support, providing up to $100,000 in cash payments which allows businesses to receive payments equal to 100 per cent of salary and wages withheld from 1 January 2020 to 30 June 2020; and
  • temporary measures to reduce the potential actions that could cause business insolvency.

Full details about the Federal Government’s measures to support businesses and eligibility criteria are available on the Treasury website.

How the banks are approaching home loans

Banks have announced that homeowners experiencing financial difficulty can pause their mortgage repayments for between three and six months. It’s important to remember that, in most cases, interest will still be capitalised and added to your outstanding loan balance. When payments restart, your lender may require increased repayments, or the term of your loan may be increased. These are important factors you need to discuss with your lender. Here’s what the big four banks are offering customers:

  • ANZ: deferral of repayments for up to six months, with a review after three months.
  • CBA: deferral of repayments for up to six months.
  • NAB: deferral of repayments for up to six months, with a review after three months.
  • Westpac: deferral of repayments for three months, with the potential for a further three months after review.

What do past market crashes and corrections tell us about the current environment?

While the circumstances of the current crash are unique, it’s normal to have a market crash greater than 20% every decade. Based on the last eight market crashes, the average market decline is 40% from high to low. From the initial decline to recovery, the average crash duration is 41 months, and the market bottom usually occurs around seven months after the initial 20% decline. This means it can take roughly seven months for the market to hit bottom and the following 34 months to recover.

On February 20 this year, the S&P/ASX200 hit an all-time high of 7162 points. By 31 March, the ASX200 was down 36.5%.

What should you focus on when it comes to personal finance?

While it can be tempting to sell all your investments now as the market declines, this locks in your losses and puts your wealth in a weak position. If you haven’t already defensively positioned your investments, speak with a financial adviser about how to best adjust your investing over the coming months. You should also consider how to maximise your returns as the market recovers. As the author of the best-selling investment book The Intelligent Investor Ben Graham says, “Be the realist who buys from pessimists and sells to optimists”.

Investing and building wealth is a long-term game. As such, you should be investing with a long-term time horizon in mind.

How do you best look after your health during COVID-19?

Maintain good health by eating healthy foods and exercising regularly to make sure your immune system is as strong as possible. You also need to observe the Government’s social distancing rules and only leave home for essential activities such as going to the supermarket, pharmacy, work, or exercising.

What should I do next?

During this time, you may face some challenges in your finances. Your ability, however, to understand the options available to you and what the current period means on a long-term basis is key to getting through this challenging time productively. Further, making well thought out decisions now will give you the strong foundations you need in your health and wealth as the world recovers and embarks on a new period of growth.

Before you make any big changes to your financial situation, speak to your financial adviser and accountant to get personalised advice for your unique situation.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.
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End of year tax tips

All / 07.05.2020

End of year tax tips

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

 

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It’s to your credit to read the fine print

All / 30.04.2020

It’s to your credit to read the fine print

When using credit cards for quick personal loans beware of the fine print!

Card loans may offer reduced interest rates, but missed payments can result in interest rates reverting to the card’s higher rate. Credit card balances can quickly blow out and take years to pay off.

Let’s do the maths:

  • Card balance: $5,000
  • Interest rate: 18%
  • No fees or further purchases

By paying the minimum monthly amount ($102 then decreasing), it would take 33 years to pay off at a total cost of $17,181 (including $12,181 interest)!

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

 

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Defining your defined benefit fund

All / 23.04.2020

Defining your defined benefit fund

Defined benefit funds are superannuation funds where members’ contributions are pooled instead of being allocated to particular fund members. More common amongst superannuation funds for public sector employees, the benefits paid out of defined benefit funds are determined based on a person’s employment details such as their salary or length of employment. This means the fund takes on the risk and you are entitled to a consistent retirement income stream regardless of market performance.

Many of the funds that have been established since superannuation became a compulsory workplace entitlement for employees are accumulation funds. Defined benefit funds, however, have been around since 1862. Importantly, this doesn’t mean these funds are outdated. In some cases, defined benefit funds can provide more benefits to members than an accumulation fund. We’ve answered some common questions about defined benefit funds below.

Who is entitled to receive defined benefits?

Defined benefit funds are predominantly for public sector and some corporate employees. A lot of these funds are now closed to new members. Some of the biggest defined benefit funds in Australia include TelstraSuper, Qantas Super, Rio Tinto Staff Super Fund, Commonwealth Superannuation Scheme Fund (CSS), UniSuper and Gold State Super.

What happens in the event of death of a member?

If a member who receives income from a defined benefit fund dies, the income stream will revert to a death benefit income stream. This death benefit income stream will be a percentage of the member’s income stream. From 1 July 2017, the transfer balance cap of $1.6 million was enforced. This means that a death benefit paid after this date can’t be retained in the accumulation phase and must be paid as a death benefit income stream or as a lump sum.

What are the different defined benefit options?

Upon retirement, a member’s benefits will be paid as a lump sum, lifetime pension or a combination of these two options. For example, after 25 years of membership in a defined benefit fund, you could decide between the following retirement benefits:

  • a lump sum worth five times your annual salary; or
  • a lifetime pension as a monthly payment worth 75% of your final salary.

Which defined benefit option should you choose?

You’ll need to consider your retirement goals and objectives to determine which defined benefit option is right for you. While a lump sum payment may be tempting to pay off debts, the increased life expectancy of people since defined benefit schemes were established (most in the early 1900s), means you could comfortably service any outstanding debts such as your mortgage, plus live a comfortable lifestyle with the lifetime pension option. Of course, other factors will come into your decision such as your age and overall financial position, so you should discuss your situation with a financial planning professional before you make any decisions about your retirement income.

What are the pros and cons of each defined benefit option?

Each defined benefit option has pros and cons. Perhaps the biggest potential benefit of choosing a lump sum payment is the freedom you have in deciding how that money is used. For example, you could invest the capital elsewhere, make some big purchases, and pay off outstanding debts. The major con of choosing the lump sum payment option is the tax implications. If you withdraw your lump sum before your preservation age, it will be taxed at 22%, including the Medicare levy. Further, once the lump sum is paid, it’s no longer considered superannuation, so you may incur new taxes if you invest the lump sum elsewhere.

The key benefits of choosing the lifetime pension include consistent tax-free income if you start drawing a lifetime pension after your preservation age. With today’s increased life expectancy, a lifetime pension may also be a more reliable form of income if you’re in good health and expect to live well into your twilight years.

Choosing the right superannuation products is important, so seek the advice of a qualified financial planner to understand the right defined benefit fund for you.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.
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The true cost of an epidemic

All / 16.04.2020

The true cost of an epidemic

Recent events such as the coronavirus outbreak highlight the far-reaching effects of an epidemic. Following the initial devastation of these events, the true cost of an epidemic takes time to filter through the economy. In this article, we’re taking a look at the economic impacts that epidemics and pandemics have on a local, regional and global scale.

When did the coronavirus outbreak start?

The Chinese Government alerted the World Health Organisation (WHO) of several unusual pneumonia cases in Wuhan on 31 December 2019. In early January, the WHO announced that they had identified a new strain of coronavirus — 2019-nCoV. At the time of this article’s publication, there are over 80,000 confirmed cases and almost 3,000 deaths worldwide.

How do epidemics and pandemics affect industries?

The biggest impact on many industries in an epidemic or pandemic is supply chain delays. Industries rely on specific regions to source parts and products. Using the coronavirus outbreak and assembly lines for technology products, as an example, people in assembly lines typically work in close quarters. To contain the outbreak, factories in China have delayed restarting production after the Lunar New Year break. One smartphone factory, Foxconn, is expecting a 12% decrease in production as a result.

Tourism is another key industry effected by epidemics and pandemics. In Australia, measures to contain coronavirus, including halting incoming flights from China will have significant impacts on the tourism and education industries. An economist at ANZ expects Australia’s economic growth to decline by 0.5% in the first quarter due to fewer tourists visiting Australia and a delayed start to the academic year for international students.

How are individual businesses effected by epidemics and pandemics?

Businesses within the sectors most impacted by epidemics and pandemics experience the effects of an outbreak first. In Australia, for example, travel booking company Webjet experienced a 10% slump in its share price in late-January following the coronavirus outbreak. Other companies such as JB Hi-Fi and Harvey Norman have said their supply of electronics could be disrupted.

Small and medium businesses can often be the hardest hit. Businesses such as restaurants and retailers in tourist hotspots and tourism services companies will be among the hardest hit in Australia over the coming months.

How long does it take for markets to recover after an epidemic?

Market recovery following an epidemic is dependent on a range of factors. Following the SARS outbreak, for example, the Chinese Government deployed fiscal stimulus to aid in economic recovery. At the time of the SARS outbreak (first quarter of 2003), China’s economic growth was 11.1%. By the second quarter, the country’s economic growth fell to 9.1%. As the outbreak was contained, and fiscal stimulus was deployed, China’s economic growth recovered to 10% by the third quarter of 2003. Looking at other markets, the S&P500 posted a gain of 14.59% following the first confirmed case of SARS. The index posted a gain of 20.76% a year after the outbreak.

How will an epidemic or pandemic impact my investments?

The economy has changed since the SARS outbreak. China is now a much larger part of the global economy, accounting for around 17% of global GDP, compared to 4% in 2003, so the economic impacts of coronavirus may be more pronounced. The best thing investors can do right now is exercise caution and make sure their portfolios are defensively positioned.

To discuss how your investments may be impacted by coronavirus speak to your financial adviser. Your financial adviser can help you protect your wealth by implementing suitable hedging strategies to minimise the impacts of these events on your portfolio.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.
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Staying the Course – Still

All / 09.04.2020

Staying the Course – Still

We hope you are all staying well and keeping safe. The Team at TNR Wealth is here to assist you at all times and our message during this remarkable time remains unchanged; Stay the course. In the same way we are being asked to work from home and social distance for an extended period of time, we are asking you to stay the course during this extended period of market volatility. Three weeks has passed since we last communicated this message and I can assure your our message has not changed. And if this volatility continues for three, four, five or more months our message will remain the same. As such, rather than providing new information, we ask you to review the following which was previously communicated in March.

It is important to take the following approach to protecting your assets by:

  • utilising existing cash reserves;
  • maintaining and continuing to contribute to your asset portfolio if manageable; and
  • staying the course.

What do we mean by “staying the course”?

The following video and related transcript will provide you with an understanding of “staying the course” as well as some assurance from the Vanguard fund manager on their strategy to protect and grow your assets.

The environment is constantly changing and TNR Wealth welcome any questions you may have. If you wish to discuss your wealth management strategy please contact TNR Wealth at your convenience.

Click on the following image to view the video to highlight the current market conditions.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.
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The upside of a market downturn

All / 09.04.2020

The upside of a market downturn

Most people view share market downturns as unequivocally bad events. Suddenly, hard earned savings aren’t worth as much as they were yesterday. It seems as if our money is evaporating, and in the heat of the moment selling up can look like the best course of action.

The alternative view

But on the opposite side of each share sale is a buyer who thinks that they are getting a bargain. Instead of getting 10 shares to the dollar yesterday, they might pick up 12 or 15 to the dollar today. When the market recovers, the bargain hunters can book a tidy profit.

So why do share markets experience downturns, and what are the upsides?

A range of natural and man made events can trigger market selloffs:

  • Terrorist attacks.
  • Infectious disease outbreaks such as SARS and COVID-19.
  • Wars, the possibility of war, and geopolitical issues such as threats to oil supplies.
  • Economic upheavals, the bursting of speculative investment bubbles, and market ‘corrections’.

In short, anything that is likely to reduce the ability of a broad range of companies to make money is likely to trigger a market sell off.

The common thread that runs through the causes of downturns is uncertainty. In the immediate aftermath of the 9/11 attacks nobody knew what the size of the threat was and markets dropped. As the fear of further attacks receded, markets soon recovered.

However, the initial drop in market value occurred quite rapidly. By the time many investors got out of the market the damage was already done. Paper losses were converted to real losses, and spooked investors were no longer in a position to benefit from the upswing. After the initial sell off it took the ASX200 Accumulation Index just 36 days to completely recover from 9/11.

Other downturns and recoveries take longer. The Global Financial Crisis began in October 2007, and it wasn’t until nearly six years later that the ASX200 Accumulation Index recovered its lost ground. This caused real pain to investors who bought into the market at its pre-crash peak, but for anyone with cash to invest after the fall, this prolonged recovery represented years of bargain hunting opportunities.

If? Or when?

Of course much hinges on whether or not markets recover. While history isn’t always a reliable guide to the future it does reveal that, given time, major share market indices in stable countries usually do recover. It’s also important to remember that shares generally produce both capital returns and dividend income. Reinvesting dividends back into a recovering market can be an effective way of boosting returns.

Seek advice

Of course, it’s only natural for investors to be concerned about market downturns, but it’s crucial not to panic and sell at the worst possible time. The fact is that downturns are a regular feature of share markets. However, they are unpredictable, so it’s a good idea to keep some cash in reserve, to be able to make the most of the opportunities that arise whenever the share market does go on sale.

For advice on how to avoid the pitfalls and reap the benefits offered by market selloffs, talk to your financial adviser.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

 

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