Provision Newsletter

At the end of 2018, after a dismal fourth quarter – in fact, the worst quarterly performance in seven years – the Australian share market closed at a two-year low.

No doubt, many investors at the time were probably anticipating a mediocre year ahead.

Yet, seven months later, the Australian share market had not only recovered all its 2018 fourth-quarter losses, but breached its all-time peak set back in November 2007.

And, while ongoing geopolitical tensions and economic fears, overshadowed by the US-China trade war, have continued to rattle global financial markets through 2019, it’s been a relatively solid investment year.

The message from us at Vanguard to investors, as always, has been to tune out from the daily market noise, and to remain disciplined and diversified, irrespective of shorter-term volatility.

Many investor portfolios are well ahead on where they started 12 months ago. In fact, just about every major asset class barring cash has delivered strong year-to-date returns.

Driving that has been an insatiable hunt for yield. With interest rates at record lows, investors globally have been searching for investments generating higher returns. Concurrently, investors seeking a degree of safety have diverted capital into the more defensive asset classes such as bonds.

That’s driven huge capital inflows into shares, listed property and fixed income assets. In turn, that demand has driven strong price appreciation across global financial markets.

Strong double-digit returns

Those with broad exposures to Australian, US and international shares, and to Australian and international listed property, have achieved double-digit 12-month returns. Even bonds have returned close to 10 per cent so far this year.

You can see the relative returns of a range of different asset classes over the year, and all the way back to 1970, by accessing and bookmarking the Vanguard Interactive Index Chart.

Of course, past performance is never an indicator of future performance. The best and worst performing asset classes will often vary from one year to the next.

Australian listed property was the best-performing asset class return in the financial year to 30 June, 2019, delivering 19.3 per cent. But, in 2018, the best performer was US shares, and the financial year before it was hedged international shares.

In fact, the last example of the same asset class delivering the best returns in two consecutive years was more than a decade ago, back in 2008 and 2009, when hedged international bonds returned 8.6 per cent and 11.5 per cent respectively.

Taking a longer-term look

Although shorter-term returns analysis can be somewhat useful, it’s only when one does a much longer examination of investment trends that a more meaningful picture emerges.

This year marks two decades since the turn of the century, so it’s an opportune time to capture almost a full 20 years of investment returns across eight different asset classes.

The chart data below goes up to the end of October (the latest chart data available) – which is broadly in line with total returns through to the middle of December.

 

One of the biggest retirement challenges is ensuring that the savings accumulated during your working years lasts as long as you do.

If you had invested $10,000 in Australian shares on 31 October 2009 without any further contributions or withdrawals, you would have experienced an average of 8.3% annualised rate of return and ended up with $22,278 a decade later on 31 October 2019.

Obviously, the numbers change once you start withdrawing income.

Unforeseen events such as market downturns can shorten the lifespan of your retirement portfolio if you withdraw funds to pay bills during a period of falling share values. The market downturn not only impacts the value of your portfolio but the regular withdrawal of funds to pay for everyday expenses (exactly what your retirement portfolio was meant to do) means that the capital left in your portfolio to help earn gains when the market eventually rebounds, is also diminished.

If the market downturn continues into the beginning of your retirement years, during which a high proportion of negative returns occur, it can have a lasting negative effect, ultimately reducing the amount of income you can withdraw over your lifetime. This is known as the sequence of returns risk.

Fortunately, there are number of straightforward strategies that can limit the odds that investors will fall into the downturn trap.

An approach that has been rather successful in the US is the target date fund model, which works to derisk an investment portfolio based on a ‘target date’ for retirement with the fund. The concept has been gaining momentum here in Australia and superannuation funds typically base these products on a ‘lifecycle design’.

Vanguard’s US target date fund glide-path takes place over four stages and constructs a portfolio based on balancing market, inflation, and longevity risks in an efficient and transparent manner over an investor’s life cycle. Investors are generally split into four phases beginning at those aged 40 years and younger, and gradually moving towards the fourth and final retirement phase. The first phase considers the time horizon of an investor in the early stages of their career, thus allocating up to 90 percent of the portfolio to equities. Phases 2 and 3 gradually de-risk the portfolio away from equities before the retirement phase.

Phase 1 starts with an allocation of around 90 percent to equities and then commences de-risking during the mid to late career phase. Phase 3 encompasses the transition to retirement phase, where the portfolio de-risks further before reaching a landing point in the final retirement phase.

While this is a sound concept, it could have adverse effects if not implemented properly. For instance, being too conservative in the investment approach during the early years of one’s career or too aggressive as one approaches retirement. The objective of this asset allocation model is to avoid being either extreme end of the spectrum and to adequately diversify where possible.

Having a proper asset allocation strategy will improve the odds that your retirement portfolio will endure but you may want to investigate other methods that also achieve this goal. Another suggestion is the dynamic spending strategy, in which investors set minimum and maximum percentage withdrawals based on market performance and individual goals.

Whichever strategy you choose, finding a way to curb the effects of volatility on your retirement portfolio may improve your odds of retiring on your own terms and not the market’s.

Please call us on |PHONE| if you would like to discuss.

Source : Vanguard 

Written by Robin Bowerman, Head of Corporate Affairs at Vanguard.

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2020 Vanguard Investments Australia Ltd. All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author.

Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

My Business Health, a free web portal designed to provide holistic support to small business owners, is now live.

Many small and family business owners may not be aware that their everyday worries – be it cash flow, staff related concerns or paying suppliers – can actually cause high levels of psychological distress.

Accessed via the Australian Small Business and Family Enterprise Ombudsman website, My Business Health offers practical information and resources to help with those day-to-day issues that keep small business owners awake at night.

If you are experiencing any such worries or concerns about your business, visit My Business Health today and find out how it can help you.

Please contact us on |PHONE| if you seek further assistance .

Source : ATO Small Business Newsroom January 2020 

Reproduced with the permission of the Australian Tax Office. This article was originally published at https://www.ato.gov.au/Newsroom/smallbusiness/General/Holistic-support-for-small-business/

Important:
This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. 

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author.

Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Looking to reduce your impact on the environment and save money? Making your kitchen more eco-friendly helps both the planet and your bank account! Use the tips below to save money in the kitchen and help save the planet. 

1. Plan Meals in Advance

A little planning goes a long way! Set aside time each week to plan your meals. List exactly what ingredients you’ll need for each meal and add them to your grocery list. This step alone will help you avoid unnecessary purchases at the store. Having a weekly menu also reduces the temptation to order take out or go out to eat.

2. Eat Leftovers

A little planning goes a long way! Set aside time each week to plan your meals. List exactly what ingredients you’ll need for each meal and add them to your grocery list. This step alone will help you avoid unnecessary purchases at the store. Having a weekly menu also reduces the temptation to order take out or go out to eat.

3. Reuse Kitchen Scraps

Many kitchen scraps can be reused and repurposed for different recipes. For instance, you can use leftover vegetables or chicken bones to make homemade broth and stock. 

Some other ways I repurpose old food is turning stale bread into croutons for salad and using overripe bananas to make banana bread. Look for ways you can use foods that you would otherwise throw out for different dishes. Check out the Zero Waste Chef for more ideas on how to reduce food waste.

4. Make Homemade Sauces and Condiments

Buying common sauces, and condiments like mustard and salad dressing can add up. Plus, most of these items come in single-use plastic containers which are awful for the environment. 

Instead of buying condiments at the store, try making them from scratch. There are a ton of homemade recipes online that are fun and taste better than the bland sauces you’d normally buy!

5. Skip the Dry Cycle on your Dishwasher

Kitchen appliances are no doubt convenient, but the energy they use has a negative impact on the environment… not to mention makes your electric bill shoot up! Thankfully, there are ways to enjoy these items while minimizing their negative side effects. 

One way to do this is to skip the “dry cycle” on your dishwasher. When it’s time for your dishes to dry, simply open your dishwasher door or grab yourself a drying rank and let the dishes dry off naturally.

6. Don’t Store Hot Items in your Refrigerator

Like your dishwasher, your refrigerator zaps up a lot of energy in the kitchen. There are a number of ways to reduce the amount of power your fridge uses. For a quick win, a great tip is to ensure your fridge or freezer temperature isn’t set too high. The most efficient temperature setting for your freezer is -18°C and your fridge between 2°C and 5°C. It’s also important to leave some space around the back of your fridge or freezer for air to circulate.

Another quick win is to stop putting hot food in the fridge. Warm items increase the temperature in your refrigerator. This causes your fridge to use more power to bring the temperature down to normal. Next time you want to store hot leftovers, let them cool down first before putting them in your fridge.

7. Unplug Kitchen Appliances that aren’t in use

Keeping items plugged into an outlet uses energy; even if they’re not turned on. How many kitchen appliances do you keep plugged in when they’re not in use? While you may not be able to power off your refrigerator, there are many smaller appliances that you can unplug. 

Look around your kitchen and see what appliances you leave plugged in. You’ll be surprised at how many you find. Some common ones I’ve noticed are microwaves, coffee makers, and toasters. This may sound trivial, but little steps like this can add up to significant savings.

8. Stop Using Paper Towels

How often do you buy paper towels? When I crunched the numbers, I was shocked to learn how much I spent. Removing paper towels from your kitchen saves you a ton of money. Plus paper towels are one of the most wasteful single-use products you can buy!

Instead of cleaning your kitchen with paper towels, invest in a set of kitchen towels. If you’re really looking to go green you can also cut up old clothes or bed sheets and use them as DIY kitchen towels. Leave a basket of rags on your counter and reuse them over and over.

9. Bulk Bin Shopping

Shopping at the bulk bin section of your grocery store is a great way to save money. You can get discounted prices on items like rice, spices, and dried fruit when you buy in bulk. Bulk bin shopping also helps you avoid the plastic packaging that many of these items come wrapped in. Most stores offer plastic produce bags to use for the bulk bin section, so by grabbing some reusable bags you can avoid contributing to the plastic bag problem.

10. Start a Garden

Gardening is a cheap alternative to buying produce at the store. It also limits the negative impact shipping produce has on the environment. Not only that, it feels great knowing you are cooking with fresh, organic ingredients.

If you don’t have space for a garden in your home, try looking for community gardens in your area. I can’t recommend community gardening enough! It’s a sustainable way to grow food and helps you connect with the people in your neighborhood.

Saving money and saving the planet go hand in hand. Use one of the suggestions above to help the environment while cutting down costs in your kitchen!

Source : FOODMATTERS

Reproduced with the permission of the Food Matters team. This article by Megan Kioulafofski  was originally published at https://www.foodmatters.com/article/10-ways-save-money-kitchen-and-save-planet

Important:
This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. 

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author.

Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The thing I love most about coming back to work at the start of the new year is a renewed willingness to do and look at things differently. 

Call it clarity. Fresh perspective. Or more honestly, the result of shutting down the laptop and having rested for a week or two. Bliss. 

I like to think of the climb back into work as an opportunity to hit the refresh button on all the tasks from the ‘old’ year and consider doing them differently. 

It’s a good way to lift the spirits when you’d rather be on the beach with your kids, and may even prompt a better way of doing the things you always do.

Helpfully too there are always plenty of ideas floating about how to improve the way you do ‘you’. 

This one from American CEO coach, author and speaker, Lauren Zander has really inspired me.

She calls it the meditation of ‘designing your days’ and it’s done by swapping out your regular to-do list with a letter to yourself, about how the day ahead unfolded.  

Here’s how Lauren explained it to Forbes magazine: 

“I teach clients to “design their day” each day.  This is where I have them write out how their day went before it actually happened and send it to me and any other people in their lives who will hold them accountable to it. Your “Designed Day” (DD) is an accounting of how you want your best and most fun day to unfold, equipped with attitude and aspirations.” 

It’s basically like writing a letter to your future 5:30pm self, at the start of the day detailing all the things that went well for you. Lauren says the power of this process helps us connect our daily ‘tasks’ with our emotional and even spiritual aspirations. 

“Whether you told the truth at a meeting and inspired everyone to do the same, or you completed all the work you set out to accomplish, had zero traffic, out of the blue magic or found that key new person to hire. YOU get to create excellence that is on point with your dreams. You get to manage and inspire yourself, keep your promises and talk to your life, directing it and practicing the art of authoring it,” she says. 

Now that’s what I call I an interesting twist on the ‘normal’.

Source : Flying Solo

This article by Lucy Kippist is reproduced with the permission of Flying Solo – Australia’s micro business community. Find out more and join over 100k others.

Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Any information provided by the author detailed above is separate and external to our business and our Licensee. Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for any action or any service provided by the author.

Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Education is the gift that parents can give their children that keeps on giving.

But if you are considering private schools it is a gift that comes with a significant – and usually rising – bill attached.

Cue visions of stately buildings, sweeping playing fields, uniformed students—and steadily rising school fees.

One in three Australian children attend a non-government school¹ and education is the second largest expense for many families, with some spending a third of their household budget on school fees². Private school education costs are outpacing both inflation and wages growth³.

A cursory internet search found that a private school in New South Wales charges almost $37,000 a year for a year 12 place.

And even if you were sending your child to a public school, fees aren’t the only thing you need to plan for. Other items to consider include is the cost of textbooks, contributions to the increasingly prevalent compulsory laptop program, school uniforms and an endless list of ‘back to school’ items you’ve never heard of.

So savvy parents start planning early. But what’s the best way to save for your children’s education? And how can you avoid the trap of redrawing your mortgage, or worse?

The first step to successfully funding your children’s education expenses is planning.

And the first question to ask is – how much will you need?

The costs of education vary dramatically depending on both your choice of school and how early you choose a fee-paying school. There is an enormous difference between sending a child to a private school from kindergarten and going private for high school only. Some schools also offer day-care and pre-school places, potentially adding up to five extra years of fees.

Once you understand how much you need, the next question is how long you have—and how much you can add to your savings pool as you go. The longer the time frame before school fees become due, the more time there is to invest and compound your earnings. The more you can save along the way, the faster you will reach your goal.

It’s also important to think about your risk tolerance as higher returns are possible only with higher risk.

The next step is to select an appropriate savings vehicle for your money.

There are three basic ways to hold and grow the money you save for your children’s education: you can save regular amounts into a bank account, but given record low interest rates that is looking less attractive, you could build an investment portfolio – a basket of shares for example – or buy a managed fund or a more specialised product like an investment bond.

Saving your money in the bank might seem the safest option, but with school fee growth outpacing inflation it can actually mean you go backwards. Still, it remains a good option if your timeframe is tight or your risk tolerance low.

For people paying off a mortgage it can make sense to use an offset account to park savings. An offset account effectively earns interest at an equivalent rate to your mortgage. You can then redraw the funds when it is time to pay the school fees.

Managed investment schemes are another option for growing your savings over the years before school begins. Many people opt for making regular contributions to managed funds) or exchange traded funds allowing their savings to compound over time.

Managed investments can be terrific for providing diversification, which can reduce your risk of capital loss by spreading your investments over different asset classes and over hundreds or thousands of individual investments. They also come with the flexibility of withdrawing fund whenever you need them.

But as with every investment, do your research as some of these products come at a high cost, with fees varying wildly.

Investment bonds are another option for saving but they are a peculiar beast so extra research may be required to understand what you are investing in and any specific restrictions or conditions.

As you make these decisions, keep two principles in mind—watch your costs and stay the course.

Remember that lower cost investments usually outperform their higher cost counterparts⁴, and starting early will give you – and your children – the best chance of success.

1 https://www.abs.gov.au/ausstats/abs@.nsf/mf/4221.0
2 https://edstart.com.au/blog/record-low-wage-growth-impact-on-family-budget-and-school-fees/
3 https://edstart.com.au/report
4 https://personal.vanguard.com/pdf/ISGSFA.pdf

Source : Vanguard

Written by Robin Bowerman, Head of Corporate Affairs at Vanguard.

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2020 Vanguard Investments Australia Ltd. All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author.

Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.