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It is simple… but it is not easy!

Warren Buffet

The above quote by Warren Buffet is expanded upon by John Bogle in his book titled ‘The Little Book of Common Sense Investing’. The opening line of this book clearly noting that “successful investing is all about common sense”.(1)

This statement is not a theory but has proven to be a fact by using simple arithmetic and share market performance history. Key to the financial strategy that both Warren Buffet and John Bogle outline is buying a fund that holds an all-market portfolio ~ an indexed fund, and then holding on to this fund for the long term, maybe forever, creating an option for inter-generational wealth.

When explaining an indexed fund, the analogy of a Basket is used for a Portfolio and Eggs for Shares. The Portfolio is the basket that holds the eggs ~ the shares! An index fund has shown to make up for its lack of short term excitement with its truly exciting long term gains (1).

The risk associated with investing in an indexed fund is kept to a minimum as you do not have the risks of individual stock performance, market sector variables and reliance on an individual financial manager selecting the best performing investments. Only the risk of the overall stock market remains.

Spreading your risk by investing in an indexed fund will not stop you from losing money in a down market, however it will ensure you lose less of it, and while it works over time it does not work every year. Hence, the importance of applying this strategy for the long term.

The question can be asked “Why then is this simple and proven investment strategy not easy?” The problem is our behaviour follies that propel us to:
– Buy high and sell low
– Look at what has only recently happened to predict the longer-term future
– Sell winning stable investments and put money into speculative investments that invariably turn out to be losers.

The above are just a few of the mistakes that can make us our own worst investment enemies.

“There seems to be some perverse human characteristic that likes to make easy things difficult.”
Warren Buffet

At Income Solutions the principals of the above investment philosophy is applied when advising both new and existing clients to ensure this successful strategy is both simple, and with the right financial advice… easy!

1) The Little Book of Common Sense Investing, John C Bogle.

Dividends Are the Investors (Best?) Friend

While Marilyn Monroe clearly states that ‘Diamonds are a girl’s best friend’, John Boyle in his highly praised book ‘The Little Book of Common Sense Investing’ makes clear that ‘Dividends are the Investors best Friend’. He details the importance of investors focusing on dividends rather than volatility of stock price fluctuations.

A dividend is a cash distribution by a company to its shareholders and is pivotal to the long-term returns generated by the stock market. In fact, when we look at the figures, we can see firsthand the impact dividends make to stock market returns (2):

Without Dividends: An initial investment of $10,000 in the S&P 500 on January 1 1926 would have grown to more than $1.7 million as 2017 began.

With Dividends Reinvested: The initial investment of $10,000 in the S&P 500 on January 1926 would have grown to $59.1 million as 2017 began.

With dividends reinvested they are able to be put to good use by the long term benefits of compounding interest. Further reflected in the above figures is the relative stability of corporate dividend payouts that over this 90 year time span have been impacted by only three significant drops:

1. A 55% decline during the first years of the Great Depression 1929 – 1933
2. A 36% decline in the Depression’s aftermath in 1938
3. A 21% decline during the global financial crisis of 2008-2009

And while the 500 Index fell from $28.39 in 2008 to $22.41 in 2009, it reached a new high of $45.70 in 2016, 60% above the earlier peak of 2008!(2)

When providing advice to both new and existing clients over the last 34 years, the above figures continue to inform and reinforce the Income Solutions proven investment philosophy.
(2) The Little Book of Common Sense Investing, John C Bogle

Don’t look for the needle, buy the Haystack……

Quote: John C Boyle
Little Book of Commonsense Investing

The ‘haystack’ that J.C Boyle refers to in this quote is a stock market portfolio that is available through an indexed fund. This strategy of investing is a passive option that focuses on returns while minimizing buying and selling (1). Even Warren Buffet, one of the world’s richest people and best known for being one of the world’s most successful investors, left instructions in his will that in managing his wife’s trust he directed 90% of assets to be in an Indexed Fund ~ he brought the haystack rather than looking for the needle (2).

The concept of ‘looking for the needle’ is more aligned to active investing, where fund managers are paid to predict and anticipate expected increases and returns pertaining to individually listed companies, often buying and selling in the short term to make a profit. Research has shown that only 13% of active fund managers have been able to successfully compete with Indexed Funds over the last five years (1). This is a low figure when taking into account the higher fees and charges that active fund managers charge.

“Remember, O reader, that arithmetic is the first of the sciences and the mother of safety.”

Justice Brandeis

However, when you ‘buy the haystack’ you are purchasing a collection or group of companies, an Indexed Fund, that allows you to earn your fair share of whatever returns – positive or negative – the stock prices and dividends deliver.

In summary, Clifford S. Asness, managing and founding principal of AQR Capital Management, adds his own wisdom, expertise and integrity: “Market-cap based indexing will never be driven from its deserved perch as core and deserved king of the investment world. It is what we should all own in theory, and it has delivered low-cost equity returns to a great mass of investors…. The now and forever king of the hill”. (2)

For over 34 years at Income Solutions, the investment philosophy of ‘owning the haystack’ rather than ‘looking for the needle’ continues to deliver solid, consistent and reliable investment returns for our clients that provides them with a long-term passive income into the future and a foundation for intergenerational wealth.


(2) The Little Book of Common Sense Investing, John C. Bogle

Create a Personal Mission Statement


Here at Income Solutions our organisational mission statement reads:

Income Solutions mission is to create wealth for our clients.
Wealth is the absence of financial worry, an income you do not outlive,
and a meaningful legacy to those whom you love.

This Mission Statement provides Income Solutions with a clear vision to ensure our efforts and time stay focused and offers a clear organisational course of action for the Income Solutions Team.

While an organisational Mission Statement can provide clarity to business goals, a Personal Mission Statement can bring focus to individual goals and objectives.

A personal mission statement will help you direct time and efforts towards the goals that are central to your core values and assist you with identifying stated goals that are no longer important to you. After all, why spend time on a stated goal or objective that is no longer central to what you value, when you can direct your efforts towards achieving what you care most about?

Key to writing your Personal Mission Statement is:

· Mission: Defines your purpose and is quite specific.

· Vision: Is more values driven and states how this applies to your mission.

Some of the questions that may be helpful in defining your Personal Mission Statement is:

1. What is important to me?

2. How do I want my future to look both personally and career wise?

3. What does ‘living my best life’ look like to me?

4. How do I want the people who are important to me to see me?

5. What kind of legacy do I want to leave behind?

A simple and short statement is all that is needed, and while it is your own personal statement do not forget to evaluate the impact of your Mission on others. Once completed, there is an option to share your stated Mission with your family and friends and get their feedback and maybe even inspire them to begin the process of coming up with their own Mission Statement.

A personal Mission Statement will help you define you own goals according to your values and how you wish to live rather than simply adopting a set of goals that may no longer suit who you are and how you want to live into the future.

The following links provide further details for defining a Personal Mission Statement:

Teaching Children Financial Literacy

Children and young people can gain economic independence, freedom and responsibility when they are provided with the building blocks of financial education and inclusion*. Growing up today they are part of a broader complex financial landscape and understanding the principals of financial responsibility can become core to children’s developing and long-term general wellbeing.

Financial education can empower and motivate children and adolescents to evaluate and change financial behavior. Using financial knowledge and understanding, young people are provided with the tools to master such operational skills as setting and monitoring a budget and achieving savings goals.

Assisting the young people in your life with acquiring the skills to navigate and establish their financial future will provide them with a sound financial foundation in which to build the lifestyle they choose and achieve the goals they set themselves.

Some educational strategies provided on the federal governments ‘Moneysmart’ Website include:
Talk to children about money; begin teaching them the concept that money is not a finite resource and careful decisions need to be made about what to spend it on.
How to earn money; let children know the money you spend you earn when you get paid. This money then gets spent on food and housing and you choose the most import things you need to spend your money on.
Needs vs Wants; ensure children understand the difference between what you ‘need’ and what you ‘want’. Use examples that help them explore this important financial concept.
Track Spending; adolescents when they get their first job are often tempted to spend everything the earn ~ show them how to track their spending to see where their money is going.
Tap & pay; explain to children when you tap your card it talks to your bank and take money out of your account. Each time you tap you have less money in your bank account.
Shopping; while shopping teach children how much things cost. Get them involved comparing deals and prices of similar items.
Paying Bills; show young people an electricity bill and outline how many hours or days you have had to work to pay this bill. This will assist them to make the connection between work and the cost of things.

The above information is provided in greater detail on the Moneysmart website along with a full range of age-appropriate activities to help you increase the financial literacy of the young people in your life; Money Smart Website Teaching Kids about money


* (1)

Women, Work, Family & Finances

The arrival of a new baby into the household can bring not only a change in lifestyle but also a change in family finances. These changes can impact the short-term financial situation of the household together with a long-term financial impact to the person taking time out of the workforce to go on maternity leave – usually the woman!

Women generally retire with 47%* less superannuation than men, and time out of the workforce is a major contributor to this fact. There are options and choices that can be made to lessen the impact of this statistic that include continuing to make superannuation payments a priority with maternity leave payments and if the option is available income splitting superannuation with your partner at the end of the financial year.

On the work skills front decide to ‘keep your hand in the game’ for at least a few hours a week. This can be achieved through a quick hand over at the end of the day when your partner comes home or using family support or childcare for a few hours. This time could be used to further develop your workplace skills, network or further training. A few hours spent each week undertaking a work-related task can also assist in lessening the disorientating effect of returning to work after what can be many months or even years absence. ‘Keeping in touch’ days are built into the government’s Paid Parental Leave scheme for this reason.

When planning your household budget, you may need to adjust to living on a single or reduced income. A good strategy to achieve this and save for a baby fund buffer is to commence living on your single or reduced income as soon as you are pregnant and still working, this way you can get accustomed to any adjustments you may need to make while saving the remainder of your income for a ‘baby cash fund’ to deal with cash emergencies that may arise.

Know in advance what your maternity leave entitlements will be and plan a budget accordingly. Take time to understand such variables as to whether you are eligible for Paid Employer maternity leave and/or 18 week parental leave from the government. While you may have a tight budget with a focus on essentials such as mortgage payments, insurances and utilities don’t forget to include concessional superannuation contributions.

While the above may be a lot to consider and implement, in the world of welcoming a new baby to your household planning your finances for this exciting and wonderful event might just be the easy bit…



The good news is that investing doesn’t need to be hard. The basic rules of investing are surprisingly simple and timeless.
In fact, according to a study by US fund manager, Fidelity Investments. A review of clients over a decade found the best performing accounts were for investors who were dead! Next best were investors who had forgotten they had accounts. The thing both groups had in common was that they were not actively trying to time the market.
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