Articles - True Financial

December 16, 2011 by John Duncan

Things Change

It’s that time of again, when harried finance editors ask reporters to call investment professionals and cobble together top predictions for the coming year. These are fun to write. But for readers, they’re more entertaining a year later.

Take the late 2010 Barclays Capital Global Macro Survey of more than two thousand institutional investors. The pick for the best performing asset class in 2011 was equities (with 40% support), followed by commodities (34%) and bonds (less than 10%).¹ The consensus prediction was a 15% gain in the US S&P-500 for the year to around 1,420.

As we now know, the truth turned out to be rather different. To the beginning of December and using broad indices, diversified fixed income was the best performing asset class of the year, followed by government bonds. Returns from commodities and equities were negative. The year-to-date return for the S&P-500 was close to zero. (And remember, these are the forecasts of big institutional investors.) [Read more…]

August 10, 2011 by John Duncan

Living with Volatility

The current renewed volatility in financial markets is reviving unwelcome feelings among many investors—feelings of anxiety, fear and a sense of powerlessness. These are completely natural responses. Acting on those emotions, though, can end up doing us more harm than good.

At base, the increase in market volatility is an expression of uncertainty. The sovereign debt strains in the US and Europe, together with renewed worries over financial institutions and fears of another recession, are leading market participants to apply a higher discount to risky assets.

So developed world equities, oil and industrial commodities, emerging markets and commodity-related currencies like the Australian dollar are weakening as risk aversion drives investors to the perceived safe havens of government bonds, gold and Swiss francs.

It is all reminiscent of the events of 2008 when the collapse of Lehman Brothers and the sub-prime mortgage crisis triggered a global market correction. This time, however, the focus of concern has turned from private sector to public sector balance sheets.

As to what happens next, no-one knows for sure. That is the nature of risk. But there are seven simple lessons that individual investors can keep in mind to make living with this volatility more bearable. [Read more…]

May 31, 2011 by John Duncan

Tax planning is essential to minimize your tax bill

It is no use getting to the accountant in September and asking them to save you tax. While they can claim all you’re entitled to, they can’t take advantage of things you could have done to reduce your tax.

There are a number of aspects to tax planning, including:

• Deferral of income
• Splitting of income to take advantage of lower tax rates and tax offsets
• Bringing forward expenses to the current tax year

We have broken tax planning down into 3 categories. [Read more…]

April 12, 2011 by John Duncan

Try our Solar Calculator

The Government grant for solar installation will be reduced by 20% in July 2011 (an approximate reduction of $1200). This reduction in government support will mean that solar will become more expensive to install after 1 July 2011. The rebates will continue to decrease until 2015 when rebates will no longer be offered, as the Government believes solar prices will have decreased enough to be affordable.

To make your life easier in deciding what system is suitable for you and in fact whether you feel it is a worthwhile investment, we have created a solar calculator that takes into account your changing electricity consumption or production and the financing costs of installing. We have built the solar calculator so you can estimate what you think will be the increase in the cost of electricity into the future. The higher you think electricity prices will increase the more you will benefit by installing solar. [Read more…]

March 8, 2011 by John Duncan

The Forest and the Trees

Many investors cherish the notion that if they only had instant access to the information sources of market professionals—the stock research and broker calls and economic forecasts—their wealth-building dreams would be much further advanced. So, what if you had acted on those big professional calls in the past year?

Financial information group Bloomberg¹ recently carried out an analysis of broker recommendations for stocks in the US equity benchmark, the S&P 500 index. It found that the companies that analysts recommended most highly rose by 73 per cent on average in the period from the trough of the market in March 2009 until early 2011.

That sounds pretty good until you realise that the index itself rose by 88 per cent in the same period. Now, compare the performances of the most loved stocks against those with the fewest buy recommendations in the Bloomberg survey. This latter group rose by 165 per cent on average during that period, or more than twice as much as the “top” stocks.

Why analysts get it so wrong can be easily explained: [Read more…]

March 4, 2011 by John Duncan

Medical Tax offset

Did you know that you can claim your medical tax offset for medical expenses paid for or on behalf of dependants in your tax return? A medical tax offset can be claimed for you, your spouse, your children and even possibly an invalid relative.

The medical tax offset is calculated based on your net out of pocket expenses. That is your total medical expenses less any refunds that either yourself or your dependants have received or are entitled to receive. This includes refunds from both Medicare and your private health insurer.

You can claim the following for your medical tax offset: [Read more…]

January 20, 2011 by John Duncan

The Price of Bad Advice

Question: How to compare the price of a client-centred fee-only financial advisor with the “free” services supplied by a broker?

Answer: In the second instance, the bill comes much later and at potentially far higher cost.

Pursuing sales people masquerading as advisors has been a major focus in the past year for the Australian Securities and Investments Commission, a watchdog which shares this column’s view about the risks of investing “outside the flags“.

In one of its most high-profile recent actions, ASIC instigated court proceedings against the promoter of a fraudulent investment scheme that robbed hard-working Australians of more than $100 million in retirement savings.

[Read more…]

January 20, 2011 by John Duncan

Education Tax Refund

Ensure you get the most back at tax time.

Eligible parents can claim the Education Tax Refund (ETF) in their individual tax returns. The ETF is a fully refundable tax offset that will be paid as part of your tax assessment. (For those not required to lodge an income tax return, a stand-alone claim form can be used).

The maximum you can claim is 50% of eligible expenses up to:

$780 for each eligible student in primary school – that is, a refund of up to $390
$1,558 for each eligible student in secondary school – that is, a refund of up to $779.

If the expenses exceed your refund for the financial year, you can carry forward the excess expenses from one year to the next, for one year only (as long as you are still eligible).

Eligible education expenses that you can claim include:

[Read more…]

September 22, 2010 by John Duncan

Investing in Gold

Gold digging

“Gold gets dug out of the ground in Africa, or someplace,” Warren Buffett once said. “Then we melt it down, dig another hole, bury it again and pay people to stand around to guard it. Anyone watching from Mars would be scratching their head.”

The price of physical gold has risen five-fold since 2001 and continues to reach new heights. There is significant interest in gold today as a means of possibly hedging against depreciating global currencies and inflation. The concern now is that for those investors who choose to load up on gold today may be placed in a disadvantageous position if history repeats itself. After gold hit a then-record high in 1980 of US $850 an ounce, it fell and failed to recover for more than 20 years. [Read more…]

August 18, 2010 by John Duncan

Housing affordability

The residential property market in Australia is easily the most favored asset class by Australian Investors. Residential property is a tangible asset that people can see and experience. Most Australian property investors experience from the past 10 years has given the investor the inner belief that by holding the asset they will reap incredible rewards well into the future. They believe they understand the asset class and will benefit similarly into the future by holding the asset. Most of the last 10 years have been an extraordinary time for property investors with property returning well into the double digits. Rents have also risen at astonishing rates making negatively geared properties cash flow positive after only a few short years. What were the main factors driving property prices so high and in my view highly overvalued by historical standards? [Read more…]