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Author: Provision Wealth

How an ageing superhero echoes our experiences

Date: Sep 12th, 2018

Almost 58 years ago, Action Comics published a look into the future of the then 22-year-old Superman as a senior citizen. The cover illustration shows a grey-haired Superman – still wearing his red cape yet with a walking stick – sitting on a park bench with an also grey-haired Lois Lane.

The rather poignant comic strip, The old man of the metropolis, depicts an ageing hero who is trying to come to terms with the weakening of his super powers.

When Superman finally turned 80 this year, he was still working as a superhero on a clearly part-time basis, yet had retired from his Daily Planet reporting job in the guise of the mild-mannered reporter Clark Kent.

Hopefully, Superman had the foresight to make the most of the Daily Planet’s retirement plan or super fund. And his decision to keep working provides an interest, and perhaps a little income, to subsidise his retirement lifestyle.

A fifth of Australia’s workforce over 45 plans to keep working long past traditional retirement ages, according to the Australian Bureau of Statistics (ABS). Just like Superman.

As well, Superman is unlikely to become bored as he ages. Apart from money, boredom is the main reason why 5 per cent of Australian retirees want to return to work, another ABS finding.

Besides the satisfaction that many people find in working into old age if possible given such considerations as health and employment opportunities, there’s the money side of it.

As Smart Investing comments from time to time, a longer working life if possible may provide an opportunity to save more for what will be a shorter and, therefore, less-costly retirement.

An Economist magazine special report, The new old, on the economics of ageing, opens with a few words from Mick Jagger, who has just turned 75. “No age jokes tonight, all right,” says Jagger as he opens a Rolling Stone performance.

The Economist argues that the world’s rapidly ageing population can provide a valuable “longevity dividend” in such ways as making the most of older employees, often part-time, workers and older entrepreneurs and improving retirement products.

“The pessimism about ageing populations is based on the idea that the moment people turn 65, they move from being net contributors to the economy to net recipients of benefits,” the magazine comments. “But if many more of them remain economically active, the process will become much more gradual and nuanced.”

“The most important way of making retirement financially sustainable will be to postpone it by working longer,” the report’s authors add. “But much can be gained, too, by improving retirement products.”

Think about your personal position and those of your family. Pleases contact us on |PHONE| perhaps we can turn the so-called “grey tsunami” to your advantage.


Source : Vanguard August 2018 

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.

© 2018 Vanguard Investments Australia Ltd. All rights reserved.

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.

Seven lessons from the Global Financial Crisis for investors

Date: Sep 12th, 2018

The period August to October is a time for anniversaries of financial market crises – the 1929 share crash, the 1974 bear market low, the 1987 share crash, the Emerging market/LTCM crisis in 1998, and of course the worst of the Global Financial Crisis in 2008. The GFC started in 2007 but it was the collapse of Lehman Brothers on 15 September 2008 and the events around it which saw it turn into a major existential crisis for the global financial system. Naturally each anniversary begs the question of can it happen again and what are the key lessons. And so it is with the tenth anniversary of the worst of the GFC.

A brief history of the GFC

The events around the failure of Lehman Brothers and the GFC have been done to death. But here’s a brief history. It was the worst financial crisis since the Great Depression. It saw the freezing up of lending between banks, multiple financial institutions needing to be rescued, 50% plus share market falls and the worst post-war global economic contraction. Basically, the environment of low interest rates prior to the GFC saw too many loans made to US homebuyers that set off a housing boom that went bust when rates rose and supply surged.

  • 40% or so of loans went to people with a poor ability to service them – sub-prime and low doc borrowers. And many were non-recourse loans – so borrowers could just hand over the keys to the house if its value fell – “jingle mail”!

  • This was encouraged by public policy aimed at boosting home ownership and ending discrimination in lending. Some extolled the “democratisation of finance”!

  • It was made possible by a huge easing in lending standards and financial innovation that packaged the sub-prime loans into securities, which were then given AAA ratings on the basis that while some loans may default the risk will be offset by the broad exposure. These securities were then leveraged, sold globally and given names like Collateralised Debt Obligations (CDOs). But after securitization there was no “bank manager” looking after the loans.

  • This all came as banks were sourcing an increasing amount of the money they were lending from global money markets.

This stopped in 2006 when poor affordability, an oversupply of homes and 17 Fed interest rates hikes saw US house prices start to slide. This made it harder for sub-prime borrowers to refinance their loans after their initial “teaser” rates. So they started defaulting, causing losses for investors. This caught the attention of global investors in August 2007 after BNP froze redemptions from three funds because it couldn’t value the CDOs within them, triggering a credit crunch with sharp rises in the cost of funding for banks – evident in a surge in short term borrowing rates relative to official rates (see next chart) – and a reduction in its availability causing sharp falls in share markets.

Source: Bloomberg, AMP Capital

Shares rebounded but peaked around late October 2007 before commencing roughly 55% falls as the credit crunch worsened, the global economy fell into recession, mortgage defaults escalated, and many banks failed with a big one being Lehman.

The crisis went global as losses magnified by gearing mounted, forcing investment banks and hedge funds to sell sound investments to meet redemptions which spread the crisis to other assets. The wide global distribution of investors in US sub-prime debt led to greater worries about who was at risk, with the loss of trust resulting in a freezing up of lending between banks and sky-high borrowing costs (see the previous chart). All of which affected confidence and economic activity.

The cause of the GFC lay with home borrowers, the US Government, lenders, ratings agencies, regulators, investors and financial organisations for taking on too much risk. It ended in 2009 after massive monetary and fiscal stimulus along with government rescues of banks. But aftershocks continued for years with sub-par growth and low inflation into this decade. From an economic perspective the GFC highlighted that:

  • Fiscal and monetary policy work. There is a role for government, central banks and global cooperation in putting free market economies back on track when they get into a downward spiral. (While some have argued that easy money just benefitted the rich, doing nothing would have likely ended with 20% plus unemployment and worse inequality.) Hopefully there will be the same common sense ‘do whatever it takes’ approach again if the need arises.

  • The return to normal from major financial crises can take time – in fact a decade or so according to a study by Kenneth Rogoff and Carmen Reinhart – as the blow to confidence depresses lending and borrowing and hence consumer spending and investment for years afterwards. The key is to allow for this and not turn off the policy stimulus prematurely, but also to avoid thinking it is permanent as the muscle memory does eventually fade.

  • “Stuff happens” – while after each economic crisis there is a desire to “make sure it never happens again”, history tells us that manias, panics and crashes are part and parcel of the process of “creative destruction” that has led to an exponential increase in material prosperity in capitalist countries. The trick is to ensure that the regulation of financial markets minimises the economic fallout that can occur when free markets go astray but doesn’t stop the dynamism necessary for economic prosperity.

Will it happen again?

History is replete with bubbles and crashes and tells us it’s inevitable that they will happen again as each generation forgets and must relearn the lessons of the past through another bubble based on collective euphoria about some new innovation. Often the seeds for each bubble are sown in the ashes of the former. Fortunately, in the post-GFC environment seen so far there has been an absence of broad-based bubbles on the scale of the tech boom or US housing/credit boom. There was a brief surge in gold and some commodity prices early this decade but it did not get that big before bursting. Bitcoin and other cryptos were another example but they blew up before sucking in enough investors to have a meaningful global impact. E-commerce stocks like Facebook and Amazon are candidates for the next bust but they have seen nowhere near the gains or infinite PEs seen in the late 1990s tech boom.

Source: Thomson Reuters, Bloomberg, AMP Capital

Post a GFC related pull back, global debt has grown to an all-time high relative to global GDP posing an obvious concern. However, this alone does not mean another GFC is upon us. The ratio of global debt to GDP has been trending up forever, much of the growth in debt in developed countries post the GFC has been in public debt and debt interest burdens are low thanks to still low interest rates in contrast to the pre-GFC period. Furthermore, the other signs of excess that normally set the scene for recessions and associated deep bear markets in shares like that seen in the GFC are not yet present on a widespread basis. Inflation is low, monetary policy globally remains easy, there has been no widespread overinvestment in technology or housing, and bank lending standards have not been relaxed as much as prior to the GFC.

Source: IMF, Haver Analytics, BIS, Ned Davis Research, AMP Capital

Moreover, financial regulations have tightened with banks required to have higher capital ratios and get more funds from their depositors. Much of the surge in debt post the GFC has been in private emerging market debt rather than in developed countries suggesting emerging markets are at greater risk.

Another economic crisis is inevitable at some point, but it will likely be very different to the GFC.

Seven lessons for investors from the GFC

The key lessons for investors from the GFC are as follows:

  1. There is always a cycle. Talk of a “great moderation” was all the rage prior to the GFC but the GFC reminded us that long periods of good growth, low inflation and great returns are invariably followed by something going wrong. If returns are too good to be sustainable they probably are. 

  2. While each boom bust cycle is different, markets are pushed to extremes – with the asset at the centre of the upswing overvalued and over-loved at the top and undervalued and under-loved at the bottom, which for credit investments and shares was in first half 2009. This provides opportunities for patient contrarian investors to profit from.

  3. High returns come with higher risk. While risk may not be apparent for years, at some point when everyone is totally relaxed it turns up with a vengeance as seen in the GFC. Backward-looking measures of volatility are no better than attempting to drive while just looking at the rear-view mirror. 

  4. Be sceptical of financial engineering or hard-to-understand products. The biggest losses for investors in the GFC were generally in products that relied heavily on financial alchemy purporting to turn junk into AAA investments that no one understood. 

  5. Avoid too much gearing and gearing or the wrong sort. Gearing is fine when all is well. But it magnifies losses when things reverse and can force the closure of positions at a loss when the lenders lose their confidence and refuse to roll over maturing debt or when a margin call occurs forcing an investor to sell just when they should be buying.

  6. The importance of true diversification. While listed property trusts and hedge funds were popular alternatives to low-yielding government bonds prior to the GFC, through the crisis they ran into big trouble (in fact Australian Real Estate Investment Trusts (REITs) fell 79%), whereas government bonds were the star performers. In a crisis, “correlations go to one” – except for true safe havens.

  7. The importance of asset allocation. The GFC reminded us that what matters most for your investments is your asset mix – shares, bonds, cash, property, etc. Exposure to particular shares or fund managers is second order.


Source: AMP Capital 12 September 2018

Important notes: While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided.

Money mistakes you make in your 20s

Date: Sep 12th, 2018

See how you can work around common money traps so you’ve got cash today, tomorrow and in the future.

In your 20s, you might be saving for an overseas trip, eyeing a new car, looking for your own pad, or simply trying to keep your wardrobe up-to-date, and have cash left over for Saturday night.


While you mull things over, it’s worth giving some thought to how what you spend today could also impact you later on—especially with one in four Aussie households experiencing financial stress.1

Misdemeanours worth avoiding

Going without a budget

Budgeting might sound too much like hard work, but knowing what you earn, owe and spend can give you control over your money, and let you quickly identify areas where you could be saving.

Using your credit card for everything

Credit cards can be convenient but they’re often more expensive than other forms of credit as they usually have higher interest rates2. Plus, people tend to spend more than if they’re just taking out cash.

Whenever you don’t pay your balance in full for the month, interest is also payable—and that includes when you only pay the minimum amount owing. For more info, check out our article – Are hefty interest charges costing you your social life?

Keeping up with the Joneses

The pressure to stay up-to-date with your peers and even celebrity icons can be a subconscious motivation behind a number of poor financial decisions.

Try to live within your means and stick to realistic goals.

Borrowing money from friends and family

When you’re in a bind, while you may be tempted to ask for a hand-out, it can put strain on relationships, particularly if it becomes a regular occurrence.

The person may need the money back quickly, begin judging your spending habits, or worse—end the friendship if they don’t get the money back.

Buying an expensive car

The average household in Australia is currently juggling car debt of $19,500.3 The purchase price of a new car is one thing, but the added costs are another.

ASIC’s new mobile phone app MoneySmart Cars can help you work out the overall costs.

Pursuing higher education without a plan

According to AMP.NATSEM research, estimated lifetime earnings for those with degrees are, on average, higher than those who don’t go beyond year 11.

However, if you’re considering further education, ask yourself whether the field you want to enter is the right one for you. The average debt for a tertiary student in Australia is about $19,100.4

Quitting your job on a whim

You may not like where you work but if you’re planning your exit march, it’s wise to have another gig lined up as it could be months before you find another opportunity and have cash coming in.

If it’s your current pay cheque that’s got you twisted, consider whether you’ve earned a pay rise and how you might go about asking for one.

Not prioritising your goals                                                                          

The benefits of thinking long term when it comes to your goals are pretty clear. For instance, buying a car, going on holiday and moving into a new apartment all within a six month period mightn’t be financially viable. Our online tool can help you prioritise and create your own goals timeline so you can map things out accordingly.

Foregoing an emergency fund

One in eight Australians don’t have enough money set aside to cover even a $100 emergency.5 And, you don’t want a busted phone or car tyre leaving you financially stranded.

An emergency fund can give you peace of mind and reduce the need to rely on high interest borrowing options. See our pointers on how to set one up.

Avoiding the money talk with your partner

It’s not nice to think about, but disagreements about money is a major cause of divorce in Australia.6

So, before you set up joint accounts or move in together, address how you’ll both contribute. If you are moving in together, it’s also worth knowing what happens to your finances if you split with a de facto.

Spending a fortune on the wedding

The average Australian wedding today costs around $36,200, and 35% blow their budget.7

To avoid a wedding budget blowout, start saving, talk to your partner—and parents if they’re involved—write down what you can afford, get quotes, and look at how many and who’ll be on your guest list early on.

Being blasé about insurance

It’s estimated that at least one in five Australian families will suffer from an insurable event.8

While you may choose to go without insurance to save money, for many Australians insurance is affordable and can be paid via monthly premiums or your super, which is where more than 70% of Australian life insurance policies are held.9

Choosing a property that’s not within your means

Whether you’re renting or buying it’s important to think about the upfront and ongoing costs involved, and the location you’re looking at as different suburbs come with different price tags.

If home ownership is on the cards, get a full run-down of the costs you’re likely to come across.

Not caring about your super

It might seem like a lifetime away but with many Australians looking at a retirement of 30 years or more—and the Age Pension alone unlikely to be enough10, putting money into super is worth thinking about while you still have time on your side.

More information

There’s a lot to think about when it comes to the short and long term, but the good thing is doing a little bit now can make a big difference down the track. 

For further assistance please contact us on |PHONE| to discuss .

Source : AMP September 2018

This article 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.

AMP.NATSEM – Buy now, pay later: Household debt in Australia
MoneySmart – Credit cards 
ASIC – Consumer watchdog launches new mobile app to highlight the real cost of buying a car
Australian Government – Higher Education Loan Program and other student loans: a quick guide
5 Finder – How a $500 emergency could spell financial ruin for millions of cash-strapped Aussies
Relationships Australia – Impact of financial problems on relationships 
MoneySmart – How much can a wedding cost 
8 Finder – The impact of underinsurance in Australia
Rice Warner – Insurance through superannuation
10 ASFA – Retirement Standard

Minding your own business

Date: Sep 07th, 2018

Many of us dream of being our own boss and, with hard work and careful planning, self-employment can bring financial and lifestyle rewards – along with enormous personal satisfaction. But, without the backup of a regular wage or salary, running your own show calls for careful money management.

Manage your cash flow

Many self-employed Australians earn a good living. But, while your overall annual income may be strong, the flow of money is not always regular. It can be weeks and even months between pay cheques.

Smart tip

If you buy second-hand equipment, machinery or vehicles for your business, check the Australian Government’s Personal Property Securities Register (PPSR) to make sure there’s no money still owing on it.

So it’s very important to manage your money carefully. Running out of cash before you get paid again could mean living on credit cards, which charge high interest rates.

Pay yourself a wage

Rather than treating all the income you earn from your business as your personal spending money, pay yourself a weekly wage. You should also maintain separate bank accounts for business receipts and personal spending.

Deposit or transfer your business revenue into a high-interest savings account, and only draw on this account to pay yourself a set amount as a wage, or to pay actual business expenses. Putting your business earnings in a high interest account is a simple way of earning extra income through interest.

Set a personal budget to help you live within your wage, and so that you don’t dip into business receipts too often.

Compare your wages to your spending.

Use the budget planner

Plan ahead for holidays

As a self-employed worker you won’t enjoy the benefit of paid holidays: it’s up to you to set aside funds. Saving a little extra on a regular basis will help you manage through any quiet business periods, as well as funding a well-deserved break.

First Business app

Thinking about going into business for yourself? ASIC’s First Business app can help you as you move towards starting your own business. The app provides tips and things to think about, checklists, case studies and links to additional small business information.

Set aside money for tax

A common pitfall for small business is failing to set aside money for income tax. As you become more established, the Australian Taxation Office (ATO) might also require you to make quarterly pay as you go (PAYG) tax instalments. Use the ATO’s PAYG instalment calculator to estimate how much tax you’ll have to pay.

If you don’t meet your tax obligations each year, you could pay hefty penalties. Talk to your accountant and read ATO: Due dates for lodging and paying your BAS. At worst, the ATO can take legal action, including winding up your company or bankrupting you to recover unpaid taxes.

Unless you plan ahead for tax, it can be difficult to pay tax bills when they fall due. So it’s worth making this a priority for your business.

Work out how to set aside money for your upcoming bills.

Use the savings goals calculator

Divide your cash takings

Keep on top of your tax obligations by opening a separate savings account and regularly deposit part of your takings into this account. It can take discipline not to dip into the account, but a good incentive to leave the money aside until you need to pay tax is to remember that the ATO can charge high penalties for late tax payments.

Don’t forget GST

If your business is registered for Goods and Services Tax (GST), you will also need to set aside money for that.

Self-employment and super

Self-employed people often earn a decent income while working, but without the benefit of employer-paid superannuation contributions, find they have very little money to live on in retirement. Almost a quarter of self-employed Australians had no superannuation at all in 2016, according to research by the Australian Super Funds Association (ASFA).

Don’t rely on selling your business to fund your retirement. Without your involvement, your business may be worth less than you think. Many business ventures can also be hard to sell. Instead, think about building a separate pool of retirement savings. You may also be eligible for the government super co-contribution. For more information see super for self-employed people.

Save for retirement, save on tax

Superannuation is a tax-effective investment for retirement savings. Adding to your super can also reduce the tax on your current income.

As a guide, you or your business may be able to claim a tax deduction of up to $25,000 annually for contributions to your superannuation fund. It’s an easy way to trim your tax today while building a nest egg for the future.

Be sure to make your contributions before 30 June to claim them as tax deductions, but be careful not to go over the contribution caps so that the penalty tax does not apply.

Protect your income

One hazard of running your own business is being unable to work due to illness or injury. Without sick leave, your financial situation could take a turn for the worse if you become sick or injured.

Income protection insurance protects you financially if you can’t work because of illness or injury. It’s worth thinking about when you run your own show because bills don’t stop if you’re unable to work.

Premiums for income protection insurance are usually tax-deductible, which helps reduce the cost. Most large insurance companies offer income protection insurance, or you might be able to buy it through your superannuation fund. Do an internet search to compare different income protection insurance products and prices.

Keep control your cash, and draw a line between your personal and business’ money, to help you make the most of self-employment.


Please contact us on |PHONE| if we can be of assistance .


Source : ASIC’s Moneysmart September 2018 

Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at


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.  Past performance is not a reliable guide to future returns.

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.

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