IF YOU CAN’T GET INTO PROPERTY…

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Consider these investment alternatives and you may just end up being better off.

Buying a home has been hailed for generations as an essential part of the Australian dream. But with house prices increasing faster than earnings, getting into the property market seems more like an impossible dream for first home buyers. You may even be better off renting in the meantime before attempting to get into the property market.

Australian capital city house prices soared by almost 8 per cent in 20141 while wages growth fell to 2.5%2 ―a record-low.

Consider these investment alternatives and you may just end up being better off.

…move into other areas

If property seems out of reach for you at the moment, consider investing in other assets instead of buying a home now or in the future―or to save a home loan deposit more quickly.

You can aim to build wealth with shares, managed funds or a fixed-term investment. And if you’re saving a deposit, some investments could give better returns than a basic savings account.

Some investment options

Consider these options and remember that all investments involve some risk. Explore our investor style calculator so you can understand your own attitude to risk.

1. Shares

When you buy shares―which you’d normally do through a stock broker or online stock broking service―you’re essentially buying part of a company. You can normally buy and sell shares anytime with no minimum time limit imposed on the investment term.

Building a portfolio of shares in different companies and industries can be financially rewarding. But because markets go up and down there are risks―your investment balance is likely to either increase or decrease, and so on throughout different market cycles.

Start by gaining an understanding of share market cycles and your own attitude to the risks they present.

2. Managed funds

When you invest in a managed fund, your money is pooled with other investors’ and managed by an investment manager. The manager buys and sells shares or other assets on your behalf that ideally increase in value. The fund then distributes income―often called distributions―at predetermined intervals.

Managed funds can be offered by managers specialising in a particular investment technique or industry (sector). They can provide access to assets and markets normally unavailable to individual investors. And you can often invest with a relatively small amount of money and make regular contributions to build your investment over time. See how investing bit-by-bit can make a big difference using our dollar cost averaging calculator.

Some managed funds specify a minimum investment term, although investment returns and risk levels cannot be guaranteed.

3. Fixed-term investments

Rather than investing for an undefined period, you may want more certainty.

Fixed-term investments offer opportunities for predetermined periods at declared rates of interest so you know exactly how much you’ll end up with at the end of the term. The downside is you’ll generally earn less than you would with other types of investments and if you withdraw your money before the end of the agreed term, a penalty will apply.

Fixed-term investments can include unlisted debentures, secured or unsecured notes, bonds and term deposits. Each type will offer specific terms, conditions and investment characteristics, normally outlined in a prospectus.

4. High-risk investments
High-risk investments can be complex, even for the most experienced investor. It’s important to consider the potentially high levels of risk before investing in assets like exchange traded products, futures, options, warrants, hedge funds and others.
Some high-risk investments are offered with the potential for higher returns, which can be tempting for investors aiming to make money in a short period of time. The reality is that you can lose money very quickly.
What’s right for you?

Investing to build wealth or buy a home can be rewarding. Whatever you choose to invest in, make sure you seek professional help beforehand. At Tailored Lifetime Solutions, our Financial Planners specialise in helping people match their investments to their personal risk preferences. Call us on (03) 9851 0300 to arrange an appointment.

1 ABC News, 2 Jan 2015, http://www.abc.net.au/news/2015-01-02/home-prices-rise-nearly-8pc-in-2014-boosted-by-strong-december/5996972

2 Business Insider Australia, http://www.businessinsider.com.au/wages-growth-in-australia-is-at-2-5-the-lowest-since-records-began-2015-2

Article originally published by AMP Ltd.

A WILL CAN SAVE MORE THAN YOUR MONEY

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With an up to date will you can make sure your money goes where you choose…

A recent news story reminded me of the importance of having an up to date will.

Like me, you may have read that the Sydney Swans club is arranging a memorial plaque for one of its long term supporters—a man named Royce Skinner who died in 2014.

What makes the story so interesting is that Mr Skinner had no direct family and he chose to bequeath what is believed to be a six-figure sum to the Sydney Swans Foundation.

The thing is, without a formal will in place—and no immediate next of kin, there’s every chance Mr Skinner’s wealth could have ended up in the hands of the state government. But by choosing to make his wishes known in a formal will Mr Skinner has not only provided a valuable legacy to the club he loved, he will be acknowledged for many years to come through the memorial plaque.

It could be a very different story for some 45% of Australians who don’t have a formal will.

When we die intestate (without a will) we can leave behind a mess for families, friends and even business associates to sort out. And if things turn nasty, as they can do, the people who matter most to you could face years of legal wrangling as its left to the courts to sort out who inherits your estate.

All this can be avoided by having a will drafted by your solicitor. It will set out what you want done with your property and possessions after your death as well as making provisions for all your dependents including elderly relatives. It gives you peace of mind and provides certainty for family members.

Yes, you can write a will yourself and there’s no shortage of online will kits that cost next to nothing. However it’s not something I usually recommend. For the cost of around a few hundred dollars I think it’s preferable to employ your solicitor to prepare a will. This should ensure it’s written up properly and more likely to withstand legal challenge.

If you already have a will in place, take a few minutes to think about any significant changes to your life over the last year—like the purchase of additional assets, the sale of old ones, or even a shift in your relationships, and consider if your will should be updated in light of these.

If you would like to know more about wills or discuss your estate planning needs contact us on (03) 9851 0300 to arrange a meeting with one of our financial planners.

Originally published by AMP Ltd.

IS GREECE PULLING BACK FROM THE BRINK?

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It’s now coming up to six years since Greece first revealed that it had understated its true level of public debt. And this is the fourth year in which it has seemingly held global financial markets to ransom as a result of its excessive public debt level. To be honest it’s becoming a bit of a drag. Greece should never have made it into the Euro, but of course getting it out again is easier said than done. Greece is now rapidly approaching another moment of truth, and this has been causing increasing angst in investment markets with the risk of more to come. This note looks at the key issues.

TAX CONCESSIONS AND TAX REFORM IN AUSTRALIA

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Tax reform is a hot topic in Australia with lots of strongly-held views. There are three main reasons. First, despite the tax reforms of the 1980s, 1990s and 2000s the Australian tax system is still far from ideal. This is highlighted by the Government’s Tax Discussion Paper. Second, some see tax reform as a way to plug the budget deficit; in other words tax reform is actually a euphemism for boosting the tax take. Third, some see various aspects of the tax system as being significant causes of problems in the economy.

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THE AUSTRALIAN ECONOMY – SEVEN REASONS NOT TO BE TOO GLOOMY

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Ever since the mining boom ended around 2011/2012 there have been constant predictions of doom for Australia. Foreign commentators and investors seem to have been particularly bearish on this front. I seem to constantly come across an ad on the internet titled “Australian Recession 2015 – Why it’s coming, what to do and how you can profit. FIND OUT MORE”. Never mind that last year the same ad referred to 2014! The mining collapse is still unfolding and growth has not been great, but the bust for the Australian economy many have been foreshadowing has not occurred. This note looks at the latest growth figures and seven reasons not to be too gloomy.

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DUST OFF THE HISTORY BOOKS – IT’S BACK TO THE PAST TO CONTROL THE PROPERTY CYCLE

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The past few weeks have seen banks tighten up lending conditions for property investors – either charging higher interest rates or imposing lower loan to valuation ratios or both. There is even talk of lenders managing their exposure by focussing on postcodes. This is all in response to increasing pressure from the banking regulator APRA (the Australian Prudential Regulation Authority) demanding that the 10% cap on property investor lending growth that it announced last December be adhered to.