Tag Archive for: Retirement planning

SMSF Investments

Recently I’ve had a number of clients enquire about the pros and cons of setting up a Self-Managed Super Fund (SMSF). They have an instinct to get more control over their investments in Super. But they’re hesitant about the additional work involved in running a SMSF and are unsure of the costs.

There’s no perfect answer to the question, assuming one has sufficient funds to make it cost-effective. Anecdotally, I have seen a broad range of SMSF outcomes.

Some are pretty dysfunctional. Large long-term cash allocations, a jumble of different assets cobbled together over time, or speculative investment properties in far flung mining towns that are well underwater.

Conversely, some are fantastic. Low relative administration costs, a thoughtful spread of investments, and a clear strategy that is able to differentiate from the increasingly herd-like solutions being offered by the big retail and industry super funds.

Three reflections I have from seeing successful SMSFs in the wild:

1. Have a plan:

Running a SMSF well requires careful planning and a clear investment strategy. This is the cost of admission to the wide-world outside the walls of the retail/industry superfunds. A clear plan is crucial for SMSF trustees to help with consistent, long-term decisions, particularly in difficult investment markets.

2. Utilise the flexibility:

The main structural benefit of a SMSF is that it opens up the potential range of investment options available to you. SMSF trustees are able to invest in a much wider range of listed investments, real property, and alternative assets. This is increasingly attractive to many in a landscape of low yields and volatile equity markets.

3. Collaborate:

Finding the right professional team to help manage the administration and strategy of the SMSF can make all the difference between building a sustainable fund, and getting burnt out by the increased complexity. While some trustees are die-hard DIY’ers with a focus on reducing fees at all cost, most will benefit from working with a professional team of accountants and advisers.

SMSFs can be a great structure for investors wanting to get more control over their retirement savings. The added responsibility of running a SMSF can be challenging, but it can also serve as a good reminder that our retirement savings are real-life investments, and we will buy our groceries from their returns at some point (if we aren’t already).

Need some help?

PJ Cameron - Financial Adviser Launceston Tasmania
Peter-James (PJ) Cameron
Financial Adviser

PJ provides proactive, strategic advice to help you invest with confidence, structure your affairs intelligently, and get the most out of your unique circumstances.

Based in Launceston, PJ provides financial advice across the whole of Tasmania. Contact us today to arrange a meeting.

Contact us

Peter-James Cameron is a Sub-authorised Representative (#1266801 ) of Synectic Wealth Pty Ltd (ABN 24 615 317 194) which is a Corporate Authorised Representative (#1250871) of Alliance Wealth Pty Ltd (ABN 93 161 647 007 | AFSL 449221) www.centrepointalliance.com.au. Synectic Wealth Pty Ltd is the financial services division of Synectic. Learn more here.

This information has been provided as general advice. We have not considered your financial circumstances, needs or objectives. You should consider the appropriateness of the advice. You should obtain and consider the relevant Product Disclosure Statement (PDS) and seek the assistance of an authorised financial adviser before making any decision regarding any products or strategies mentioned in this communication.

Inflation outlook and your portfolio in 2022

Inflation in the US hit 7% in the last month of 2021, closing out the year with the highest annual increase in consumer prices since June 1982. The Federal Reserve has signalled their intention to increase interest rates this year, suggesting they might hike rates three times or more if necessary, and begin Quantitative Tightening (QT) in an effort to normalise interest rates in the bond market.

These macro factors will have a significant impact on the performance of investment portfolios in Australia and around the world, and investors are grappling with the potential impacts of rising inflation and interest rates after a period of government stimulus and easy money.

While it’s tempting to apply a simple narrative (for example, inflation is going up, which means rates will go up, which means investment markets will fall off a cliff), reality is always more complex and context dependent than we instinctively think. It pays to take a consistent, disciplined approach in the face of uncertainty, and there are a few simple questions that can help us make progress.

Where are we?

There’s no avoiding the uncomfortable fact that investment markets are moving through uncharted territory in 2022. The good news is that this is always the case, every year, and while history doesn’t repeat, it often rhymes. Some of the key points to consider are outlined below:

  • Australian and global interest rates are at historic lows (effectively 0 in Australia and the US). 
  • Many share markets around the world are at historic highs, particularly in the US.
  • Property markets around the world have also had an amazing run, with property values around Australia increasing by over 20% in 2021.
  • Bond markets have performed very well over the last 30 years (since interest rates fell from over 15% to 0.10%) but have struggled over the last year or so as investment markets begin to anticipate rising interest rates.
  • Inflation is starting to rise, particularly in the US. Concerns are growing that it may spread globally and stick around longer than expected.

In this environment, investors can get caught in the ‘TINA’ (There Is No Alternative) dilemma, where they feel uncomfortable keeping their money in the bank earning nothing and are pushed into riskier asset classes like property and shares to earn a return above the rising rate of inflation. This is the uncomfortable scenario facing all investors, but we are not entirely helpless. There are always a set of opportunities and risks to be navigated.

Investing in 2022: keep it simple, it won’t be easy

The most important thing to remember is that we need to stick to our long-term investment plan and not get overly distracted by fears around rising inflation and interest rates. It is entirely possible that inflation settles down over the year once supply chain issues are resolved and interest rates only rise moderately in response. This would be a benign environment that would likely benefit growth assets.

A second comment would be that we need to embrace some discomfort at both ends of the risk spectrum to navigate this market well.

Firstly, we need to accept the discomfort of earning less than we want from our defensive assets. Cash and short-duration fixed interest investments will likely go backwards relative to inflation over the next few years, but they play an important defensive role in a diversified portfolio that can help us get through potential periods of negative return without having to sell our growth assets at the bottom.

Secondly, we need to accept the discomfort of investing in equity and property markets that are at all-time highs. These growth assets remain the engine room of our portfolios and are important weapons against rising inflation. Real assets (property, commodities, gold) and Shares have traditionally fared well relative to inflation over the longer term, and there are plenty of technological and structural reasons to support ‘new normals’ when it comes to equity market valuations over time.

Conclusion

We have enjoyed strong market returns over the last 12 months. The next 12 months may not be so easy. The main risk, in our view, is becoming complacent and expecting more easy money to be made this year. This might tempt us to go too far out along the risk-spectrum in search of greater returns, while increasing risks within our portfolio that may not align with our longer-term strategy. The second biggest risk is becoming too fearful and holding too much cash as we wait for a market correction. History shows that timing market cycles in this way is a mug’s game, and it’s a certain way to experience the full force of inflation, whatever that may end up being.

A diversified portfolio remains the best way to navigate market uncertainty, growing wealth above inflation while protecting capital. Paying attention to what you own is critical in this environment, particularly when a lot of the broad market indexes are concentrating around a few, highly valued companies. Risks are elevated, but the time-tested approach of making long-term investments in quality assets at reasonable prices remains a sound approach and the best defence against potential inflation.

Need some help?

PJ Cameron - Financial Adviser Launceston Tasmania
Peter-James (PJ) Cameron
Financial Adviser

Contact us today and ask to speak with PJ.

PJ provides proactive, strategic advice to help you invest with confidence, structure your affairs intelligently, and get the most out of your unique circumstances. 

Contact us

Peter-James Cameron is a Sub-authorised Representative (#1266801 ) of Synectic Wealth Pty Ltd (ABN 24 615 317 194) which is a Corporate Authorised Representative (#1250871) of Alliance Wealth Pty Ltd (ABN 93 161 647 007 | AFSL 449221) www.centrepointalliance.com.au. Synectic Wealth Pty Ltd is the financial services division of Synectic. Learn more here.

This information has been provided as general advice. We have not considered your financial circumstances, needs or objectives. You should consider the appropriateness of the advice. You should obtain and consider the relevant Product Disclosure Statement (PDS) and seek the assistance of an authorised financial adviser before making any decision regarding any products or strategies mentioned in this communication.

COVID-19 Stimulus & Support Update

The federal government continues to release a range of measures to support both business and individuals as a result of COVID-19.

This update primarily focuses on the government’s second round of stimulus measures. We also outline key concessions announced to date by major banks and provide a brief update on state government announcements.

Read more

February 2019 Newsletter

This month we have some simple tips to get the cash flowing in your business, and an update regarding Single Touch Payroll. Vaughn shares his thoughts on Artifical Intelligence and how it might impact our personal lives, and we ask you to think about where your superannuation death benefits will go when you pass away (it’s probably not your favourite topic, but it might be simpler to deal with than you think).

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A simple way to get the best rate for your term deposit

Term Deposits are a low-risk investment option, with a fixed rate of return, allowing you to make plans for the interest you will earn. But finding the best interest rates, worrying about re-investment dates and wading through paperwork can be a real hassle!

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Switching or consolidating super funds can be risky business

Super fund members are regularly encouraged to consolidate their super accounts into one account to reduce paperwork and avoid paying multiple administrative fees and charges for accounts they don’t need.

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Six tips for SMSFs investing in property

As a Self-managed Super Fund (SMSF) trustee you might, at some stage, want to invest in property as part of your fund’s investment strategy.

Before you do, you should fully consider the risks associated with property investment. Holding a “real property investment” can affect other aspects of your fund, such as benefit payments, and any investment must comply with superannuation laws.

Here are 6 issues to consider before your SMSF makes a property investment:

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October 2018 Newsletter

In this month’s newsletter we share the first in a series of highlights from our team’s attendance at Xerocon2018. Always an exciting conference for industry innovation, this year gave us some particularly thought-provoking takeaways. We also discuss an interesting strategy for business owners who have an SMSF. And we dig into how one organisation is adapting to the NDIS.

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Transferring Business Property into Your Self-Managed Super Fund

If you are a business owner with a self-managed super fund (SMSF) there are plenty of reasons why you might consider transferring your business property into your SMSF.

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Personal superannuation changes you need to know about

Let’s talk about superannuation – it’s one of our favourite topics!

Okay, you might not get as excited about superannuation as we do. But there are a number of recent changes to the tax treatment of super that we think you should be aware of.

To help you get the most out of your retirement savings and avoid any unexpected pitfalls, we’ve outlined some of the major developments here.

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