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You don’t need money to start investing

Kane Leersen is an authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee

I regularly hear people stating that they do not have enough money to start investing. Anyone can start investing, right at this second. You don’t even need money to start investing. Sounds silly, doesn’t it? You might not believe me, but this is fact. Investing in yourself, your family and your future.

Now before you start shaking your head and muttering that I have lost my marbles, bear with me and I will tell you how you can do this with three different ways, anyone can start investing, and by anyone, I mean anyone. Teenagers, parents, millionaires, grandmas and granddads.  So no excuses because this applies to you. I will give you the strategies, but then it’s up to you to take responsibility.

 

1. Start investing in yourself. 

Now, this is the easiest and the hardest investment to make, it’s also the most rewarding and by far the most valuable. You can start nice and simple and slowly progress it from there. Your first investment in yourself is to finish reading this article. Open up your mind to different ideas and strategies. Go onto bookdepositry.com, amazon.com, dymocks.com.au, or pop into your local book store and purchase any book that piques your interest. Read what ever your heart desires. Personal development, sci-fi, autobiographies, finance, marketing. It doesn’t matter what it is, just read as much as you can. Learn from other peoples experiences, highlight words you don’t understand, write questions on the side of the page.

The next step, when you are feeling ready, enrol in that course you always wanted to do. Make sure, no matter how long it takes you, finish that course. Then maybe find another course, never stop learning. Find yourself a mentor, someone doing something you have always wanted to do and ask them how they have done it, why they do it and what have they learnt from these experiences. Turn up to work early and tell your boss that you want to be the best employee that you can be.

All of these little investments eventually add up and they make you the rare and valuable asset. Remember, every day we are going to work we are trading our time for money. By being the best that you can be, you will make your time as expensive as possible.

 

2. Invest a few dollars, regularly

Now that you have started investing in yourself you can start to invest some money for your future. Maybe you have received a payrise, or picked up a few extra shifts.

Now the next step.

To start investing money you do not need hundreds of thousands of dollars, you don’t even need thousands of dollars. Many of my clients start investing in the hundreds, the trick is to do it regularly, don’t try and be too clever and most of all ask for advice if you are not quite sure.

I have recently purchased the 300 biggest companies in Australia, 300 of the biggest and brightest companies built by some of the best brains in Australia. The best part is, these companies are going to pay me to invest in them! Imagine, this investment returns around 10% for shareholders over the next five years. If I contribute $200 a week this means I will be investing $10,400 a year. On a 10% rate of return, I could have $69,842 invested in five years time. Not a bad investment, when we consider the early years of compounding returns are the hardest!


3. Invest in your superannuation

In Australia it is compulsory for businesses to pay 9.5% of your wage into a superannuation account for your working life. The reality is many Australians don’t understand the impact of what our employers are doing for us. Many people haven’t consolidated multiple superannuation funds into one account. They don’t ensure that they have appropriate levels of insurance to protect their family if something goes wrong. They have no idea that they can invest in just about anything they want inside of their superannuation, no different to everyday life.

Yes, inside super we can buy shares, we can buy property, we can have term deposits. We don’t have to rely on the default option. You can even put more money into superannuation to help it grow by salary sacrificing from your wage before you have paid tax. You can also contribute your inheritance after you have paid tax.

So my challenge to you is to step up, and take charge. I don’t want any excuses. We all know life can be hard sometimes, but we also must be thankful that we are living through a period of time that has generously provided us with an abundance of wealth. Think of running water, electricity, employment, aviation and globalisation for example.

So please master these three investments. Invest in yourself, start investing a little a lot and understand what your superannuation is doing. It is simple and incredibly effective. Fortunately or unfortunately, it requires discipline, commitment and understanding.

Good luck.

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way.  Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product. Past performance is not a reliable guide to future returns. 
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Ignore the Hype

Gareth Daniels is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee

As I have mentioned before (and no doubt mention again) when reading articles in the papers, watching news on TV or even listening to the radio to and from work, it is always vital to objectively consider the information we are being given.

As a history student, I was taught to always consider who has produced the source of the information, who their intended audience is and why it may have been produced. That foundation can serve us well when considering decisions that relate to our long term financial security.

At the heart of this is accepting that popular media constantly misuses the word ‘investor.’ Many of you may have heard Peter Thornhill speak or even read his book Motivated Money. He correctly spends time focusing on the difference between speculation and investing; the first being the “buying or selling of commodities or stocks… in the hope of an unexpected rise in the price“¹ and the second being “use of money productively so that an income is obtained.

Peter goes on to note that “speculation is described as investment simply to legitimise activity that has nothing to do with investing.

I read with interest the article This asset manager thinks Australian property ‘calamity’ is coming, so he sold all the firms shares². Consider this article in conjunction with the process of analysing a source:

Who has produced it: A national media organisation that knows doom and gloom predictions sell papers

Who is the intended audience: The misconception that all investors are speculators and all speculators are investors means they are attempting to reach as many people as possible. Regarding the interviewee, I would suggest he is trying to reach future potential customers (pitching for business as he apparently knows better than the market) and those clients to whom they have just returned their money (justification for selling the fund).

Why has it been produced: Again, for the publication it is the desire to get eyeballs on their paper and website and for the interviewee, future potential customers by an apparent display or foresight whilst pacifying those clients to who they have just had their money returned by way of defense of their actions.

Philip Parker may be a top fund manager as the article notes, but by what bench mark? The ASX top 200 is cited in the article, all well and good but it is the capital value of this bench mark that is the apparent measure? I would prefer to measure against corporate profits shared out as income via dividend. I would also not like to get sucked into the yield trap, jumping in and out of different assets and significantly increasing the likely effects of market timing risk.

If values are over inflated then surely it is speculators that are at risk with their hopes of gains at considerable risk that should be worried. Investors who own quality assets for the long term to be in receipt of income, should not even dedicate a second of their time to read an article clearly aimed at speculators. It can become stressful to build wealth via a fund manager who believes that over the long term, through active management³ they can beat the market rather than simply owning the best that the market has to offer. The latter allows you to confidently ignore the short term fluctuations in perceived value and and enjoying the true value of a repeating, tax-effective and increasing income stream over time.

What is intriguing is the (potentially) strategic move by this fund manager. Despite the litany of unfulfilled doomsday predictions that regularly crop up, the article even sites a few, these are readily forgotten, whilst the ones that do appear to come true elevate those that predicated them to genius status. So, this firm and it’s investment team either get lauded as the special few that were able to read the tea leaves correctly, or they simply “enjoy their time off” before returning to the fold to make further predictions; attempting to reach those that believe in speculation rather than investing. All this whilst the rest of us carry on with our investment strategy, focusing on what is important to us and critically analysing the overload of information that we are unnecessarily bombarded with.

 

1. Thornhill, P. (2015) Motivated Money; Sound Financial Advice for the post GFC World, 5th Revision. Australia: Motivated Money, pg 12

2. Patrick Commins, B. (2017) This asset manager thinks Australian property ‘calamity’ is coming, so he sold all the firm’s shares. [online] Business Insider Australia. Available at: https://www.businessinsider.com.au/this-asset-manager-thinks-an-australian-property-calamity-is-coming-so-he-sold-all-the-firms-shares-2017-5 [Accessed 7 Jul. 2017]

3. The belief that a manager knows better than most can pre-empt economic cycles, property bubbles, threats of war and crisis around the world and a whole host of other fads. They are effectively trying to speculate their way to wealth via capital appreciation.

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.
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Who is Financial Planning For?

Elise Ryan is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee

 

Financial Planning really is for everyone. It’s a misnomer that you have to have a lot of money to see a financial planner. Your financial advisor will tailor your advice and strategies to your specific life stage and current situation. As you progress through different life stages your advisor will work with you to evolve your financial plan to suit your needs.

We can review your current situation and put strategies in place around your superannuation, personal insurances, investments, debt management, retirement planning and estate planning.

It does not matter what life stage you are in, we will tailor your plan to help you achieve your goals. At Income Solutions we believe the best place to start is education and we hold free, no obligation information sessions monthly that cover all life stages:

  • Kickstart! Your Financial Future
    • Have you recently started your first full-time job? Or perhaps you’re a uni student and need some guidance around setting up your banking structures? Kickstart! has been developed for anyone who needs some advice around how to get themselves set up
  • Pivot – Your Financial Direction
    • This event is ideal if you want to actively plan, and taking the right steps toward achieving what is important to you. We can help you with setting goals, investing in yourself, investing in your career, managing your cash flow, protecting your wealth, protecting your lifestyle, and making a plan for now – don’t wait for later
  • Common Sense Investing
    • This information evening is designed to help you understand some of the basics of financial planning and will cover conquering debt, volatility and the impact on your investment strategy, what asset class will look after you long term and how to build a passive income stream
  • Income Solutions for Women
    • This event is designed specifically for women. Why women? What if we told you that statistics show us that women earn less than men, women have lower super balances than men, women are more likely to have breaks in their employment, women live longer and retire with less money than men. There are solutions and we believe that education is the first step
  • Common Sense Estate Planning
    • Presented by our Financial Planners with Coulter Roache Lawyers in Geelong and Hunt&Hunt Lawyers in Melbourne. This information session will cover why you should have a will, intestacy, enduring powers of attorney, testamentary trusts, capital gains on estates, and estate planning for your superannuation

I really believe the best time to start is now, the earlier you get started the more potential there is to increase your retirement savings. Don’t leave it until you are ready to retire to get your finances organised.

 

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.
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When? How Much? Where From?

– Retirement in the eyes of a 24 year old –

When? How much? Where from? These three questions are asked of all Income Solutions’ prospective clients, and from time to time, asked of our current clients as well. Let’s break down what we mean by these questions, shall we?

When would you like to retire? Do you have an age in mind where you would like to be able to clock off from a day’s work, never intending to return? How much income would you need to be able to live your desired retirement lifestyle? Finally, and in my opinion most importantly, where will this income come from?

The first 2 of those questions are quite ambiguous and a bit of an unknown, particularly for a 24-year-old. So, I’ll use myself as an example. I have no idea when I would like to retire exactly. By that I mean I do not know the age when I would like to walk out of works door for the last time. I love my job, and hope to forge a long and successful career as a Financial Planner, however, we all must stop at some point, I am mindful of that. One goal of mine is to volunteer 2-3 days per week of my time in helping 2 charities very close to me: MND Australia/Fight MND and the Epilepsy Foundation. I would like to be able to retire at an age when I can be of some real value when I am volunteering my time assisting these great organisations; whatever age that is, I am not sure at this moment.

I also have no idea how much income I will need to support my desired retirement lifestyle. The obvious answer you may be thinking is ‘as much as possible’. True, but let’s be realistic. I would like to have the affordability to travel overseas on an annual basis. Treat myself to some luxuries in life. Hopefully by then I will have a lovely family to spoil; maybe help pay the grandkids school fees; spend time tending to a little hobby farm I hope to one day have. Most importantly, I do want an absence of financial worry, an income stream I can’t outlive and I would be content if I could leave a meaningful legacy to those whom I love. Funnily enough, this is the definition of the term ‘wealth’ here at Income Solutions.

Now question three, where from? This one is considerably less ambiguous and unknown because I have the capacity to be able to influence this variable of my future now. I do know that to be able to achieve my goals, I need to be in receipt of a passive income stream – preferably one that is reliable, replenish-able and in an ideal world, growing. So, as a prudent 24-year-old, I began to contemplate the best way I can generate the passive income I will need in retirement. To do this I decided to educate myself on the 3 true asset classes available to us all: cash, property and shares.

The old folklore is that cash is safe. It can’t go anywhere; $100,000 today is $100,000 in 10 years. You may have lovely memories of Grandma or Grandpa telling you to put all your cash under the mattress and leave it there. The thing is that inflation ruins this because $100,000 today simply does not have the same purchasing power in 10 years. Plus, everybody knows how mediocre interest rates are now. This interest is the income produced by your cash. It is small, tax ineffective and can only grow if you contribute more cash to your account. This asset option is out.

Then we have the Great Australian Dream: Property. This country is internationally notorious for being obsessed with property. Why? Because we can see and touch it every day. (The GFC was actually caused by the domestic property market in the US – not shares. I recommend you watch The Big Short if you haven’t already) We can drive our friends past our investment properties. We have a perception that because we can touch and feel them it is a safe investment. This is quite deceptive, however, due to the hidden costs associated with this asset. I recently attended a very well run property investment seminar just outside Geelong to educate myself on the stats. A $470,000 investment property in the estate had an average rental yield of about 4.4%. I also learned that for my property to have the best chance of being tenanted I needed to have things like 900mm benchtops, a 1 metre wide fridge space, a sound dishwasher, a microwave compartment and good-quality blinds. These might seem standard for a home, but I learned that without them potential tenants can walk away – which means no rental income for the investor and no passive income. Then, once you have found a tenant, you must hope they pay their rent on time for you to be paid your income. You must hope the hot water system and that sound dishwasher do not break because as the landlord, that’s coming out of your pocket. And in 10-15 years down the track, the walls need to be painted, the carpet updated and the oven replaced. There are types of insurances available to cover these, but, again, these are simply another expense. This asset is asking you to pay for it, rather than it paying you! Most importantly, the rental income you receive – like bank interest – is tax-ineffective. Once you deduct all those expenses from the rent, you need to pay tax on the balance at your marginal tax rate. These are all headaches I do not want to have whilst I am volunteering at one of my charities, or spending a few weeks away escaping the Victorian winter whilst I am retired.

You might be reading this and are thinking to yourself something like ‘The capital growth seen with property over the past few years has been off the charts, why hasn’t he mentioned that?’ Good question. Yes, the capital growth of property is going bananas at the moment. Corresponingdly, as is the rapid rise in household debt. A home is worth what a buyer is willing to pay for it, which means whatever sum the bank are willing to loan to them. What happens when these record-low interest rates (which are already increasing) go up 1 or 2%? People are willing to pay less because the bank will give them less. So you’ll see a drop in the perceived capital value of property. Also, you cannot spend capital growth unless you sell. This brings in market timing risk, loads of transactional costs and is an issue I do not want to be worrying about when I need some cash fast.

This asset option is out.

Lastly, we have shares. Thanks to our friends in the media, the populous of this country have an ingrained fear of shares. ‘Share market crash’, ‘Sell while you still can’ and ‘Billions gone’ are all quotes you may have heard about the share market. The media paint horror stories out of anything to sell newspapers and increase viewership. Admittedly, the capital value of shares is volatile in the short term. We can thank the media again for that. If we can ignore this, and simply focus on the long-term and the income generated by shares – not their capital value – we start to see the true value they hold.

Having attended Common Sense Investing at Income Solutions, I learned the Australian share market has returned an average of about 12.5% over the past 100 years. Last financial year, it returned closer to 14%. This was the same year we saw Trump elected president, potential nuclear war in North Korea, Brexit and continuing warfare in the Middle East. All the while, the companies of this country endeavoured to carry on business as usual, and made a lot of corporate profits. As a shareholder, these profits are distributed to you in the form of a dividend. You did not need to worry about the air conditioner at your investment property breaking. How enjoyable does getting a call on Sunday afternoon to fix a front window or the hot water service sound? Or having to make a call to your property manager asking why rent hasn’t been paid for 3 weeks. You simply lived your life as you would, and relied on the businesses of this country living theirs. This sounds like passive income to me. The clients that Gareth Daniels looks after, shared in over $850,000 of investment distributions this past financial year. Without putting in an ounce of effort or worrying about the state of their investment property.

These investment distributions are a result of people paying their utility bill, filling their car up with petrol, shopping at Coles and even making the monthly trip to Bunnings to buy something to fix an issue at their investment property. All these things contribute to company profits. Most importantly, the income received as dividends is tax effective thanks to Paul Keating implementing the Franking Credit system. This is a real trump card for retirees; as they do not pay tax from an account-based pension in retirement!

Now the prudent 24-year-old in me is thinking that this asset sounds good. It does sound like a passive income stream that is generated by human consumption and endeavour. If businesses in this country keep on keeping on, human consumption and endeavour will never stop. The only thing I need worry about in retirement is where in the world do I want to go to next?

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.
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Why Do Women Retire With Less?

Elise Ryan is an Authorised Representative, GWM Adviser Services Limited, Australian Financial Services Licensee

Women are multi-taskers, we are terrific at juggling a family and career and we find it hard to say no when someone needs help but we often forget to ask for help ourselves.

Essentially, women are living longer and spending more time in retirement than generations gone by. The time spent working in the last century has not changed dramatically, we are spending approximately 40 plus years working towards retirement. However, we are living longer and spending twice as long in retirement than our predecessors, so we have to stretch our retirement funds and superannuation for 35 plus years.

Women also tend to have less in super when we reach retirement, this is due to a number of factors such as:

  • The pay gap
  • Time taken off work to have a family
  • Time taken off work to care for elderly parents
  • Returning to work part-time or not all

But it’s not all doom and gloom, there are strategies that we can put in place to help us build a strong retirement fund and a passive income that will see us through our retirement.

We believe education is the best place to start, attending one of our Income Solutions for Women events is a no obligation information evening that will show you some of the tools that can be put in place to achieve this goal.

Any advice in this publication is of a general nature only and has not been tailored to your personal circumstances. Please seek personal advice prior to acting on this information. The information in this document reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Opinions constitute our judgement at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Before making a decision to acquire a financial product, you should obtain and read the Product Disclosure Statement (PDS) relating to that product.
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