Spring Newsletter 2010 Money Works Financial Planning Pty Ltd
September 2010
A Word from Chris Ever wondered why you receive a newsletter?
Inside this issue: A word from Chris
1
Cardiovascular Disease
2
Superannuation
3
Rates Stay on Hold 3 Money Works
4
Let family and friends know about us Cambodia Rotary Club to Visit
4
Well actually, not all our clients receive our quarterly newsletter. We only send this publication out to our top clients, so if you are now reading this please understand that we truly value your custom and I also appreciate the relationship we have. I find that by writing this general communication document, it helps you and other valued clients look at what is happening, in the world today, financially speaking. If you would like to add a comment on any article by me or any other professional who help put this together, or if you wish to notify other like minded clients of a service you have, please let us know. There would be no cost for you to present an article and as it is circulated amongst over 200 like minded individuals you may benefit. So what is happening out there? The big question which a lot of you are asking is “will there be a Double Dip?” Let me be quite honest here, I don’t know! I think there is a 50/50 chance, but although I will not be taking action on my own personal investments, I am a “High Growth” investor, unlike many of you.
I appreciate market adversity and volatility, I invest for the long-term and view this as just a market hiccup similar to 1997. If there was any “double dip” it would be due to a self fulfilling prophecy. OCT 1997 – You may recall this being the 10 year anniversary of the 1987 October Crash. There was much said about the market falling at the 10 year anniversary of the 87 crash. Well like all “False Evidence Appearing Real”, the F.E.A.R hit the market and it did fall however, only briefly as it recovered very quickly (within 6 weeks), passing it’s high prior to the fall. It is hard trying to “time” the market because if you decided to get out, my next question would be “when would you plan to get back in?” Here are some tips to help should you decide that you want to “hedge” in case of this “double dip”. 1. Firstly think before you sell everything in the equity markets, sell a percentage that you feel comfortable with. 2. Speak to your adviser to determine which shares you sell. 3.Finally don’t try to work out the “bottom of the market”, instead arrange with us a 6-8 month
Regular Investment Plan from your Working Cash Account to buy back the funds you sold out of. Once again equal amounts per fund. This takes into account the dollar cost averaging, and helps add value to your investments. Phone me if you wish to discuss this further as I am always glad to discuss strategies with any of our top clients.
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Cardiovascular Disease Cardiovascular disease a major threat to Australian women:
Heart disease kills four times as many women as breast cancer
Cardiovascular disease is a major threat to the health of Australian women, according to a new report released today by the Australian Institute of Health and Welfare. The report Women and heart disease: Cardiovascular profile of women in Australia was funded by the National Heart Foundation of Australia and shows that cardiovascular disease (CVD) is the leading cause of death among women and was responsible for over a quarter of years of life lost to premature death among women. In 2006, more than 24,100 women died of CVD this was more than one-third of all women who died that year, said Susana Senes of the Institute s Cardiovascular, Diabetes and Kidney Unit. Cardiovascular disease, which includes coronary heart disease (CHD), stroke and heart failure, is a highly preventable and treatable group of diseases. In many ways, CVD is seen as a man’s disease, however the overall risk of developing CVD is only slightly lower in women than in men, Ms Senes said. About 2 million Australian women have CVD. Of these, about 226,000 women have CHD, 168,000 have had a stroke and 176,000 have heart failure. The impact of CVD on women and on the health system is clear.
About $2,683 million was spent in 2004 05 treating CVD in women. In 2007-08, about 2 million women filled 36.5 million prescriptions for cardiovascular medicines through the Pharmaceutical Benefits Scheme and the Repatriation Pharmaceutical Benefits Scheme. This accounted for over half of all users and over half of all prescriptions for these medicines that year. CVD is also responsible for a significant proportion of general practitioner workloads GPs treated CVD problems at one in every five visits with women in 2007-08. More than 90% of Australian women have at least one modifiable risk factor for CVD, and half of all women have two or three. What is concerning is that many of these risk factors are already common among young women. From as young as 35-44 years, it is more common for women to be overweight or obese than to have a healthy weight, and one in five women aged 20-29 years smoke daily, Ms Senes said. There is enormous potential to improve the risk profile of Australian women and thus reduce the number of women and families affected by CVD. Canberra, 28 May 2010 Further information: Ms Susana Senes, AIHW, tel. (02) 6244 1171, mob. 0400 344 572
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Superannuation You and your super: For many of us, our superannuation may be the biggest investment we will ever have. It will also play a significant part in determining the sort of lifestyle we enjoy when we do decide to retire. For that reason, our superannuation is more than just a fund we contribute 9% of our salary to. It’s an investment in our future, and one that is very much affected by how engaged we are in it. Think ahead: Your superannuation is usually a long-term investment, which means it’s a good idea to think about what you can do now to make sure you have enough later. Here are a few things to consider: 1: Consolidate your super - if you’ve had more than one job in your life, then there's a good chance that you have more than one super fund. But having more than one super fund can end up costing you money in the long run. By consolidating your super into one account, not only do you avoid paying multiple administration fees, but it means you have less paperwork to manage. (A) 2a: Top up your super with after tax contributions making additional contributions to your super fund can have a significant impact on how much you have in retirement. Consider the following example. If you had an initial super balance of $10,000 when you were 25 years old and left it alone until you were 65, you would have a total $217,245. But if you started with the same $10,000 balance topped it up with $1,000 each year, then you would have $476,302 that’s a difference of $259,057.(B)
2b: Salary Sacrifice - an easy way to top up your super is by “salary sacrificing”. Salary sacrificing lets you make additional contributions to your super fund from your pre-tax salary. Not only can this boost your retirement savings, it can also be a useful taxeffective investment strategy if your personal income tax rate is higher than 15% since contributions are usually taxed at just 15%. 3: Get up to $1,500 (C) a year extra - if you are a low income earner, currently under the governments co-contribution scheme, you can get up to $1,500 a year extra when you ay into your super fund using your own after-tax money. 4: Find any lost super - there is an estimated 6.4 million lost super accounts in Australia holding around $13 billion in unclaimed super money. If you think you might have some lost super, the easiest was to search for it is via Superseeker, the ATO’s online search tool. Using your Tax File Number, Superseeker will look for your lost superannuation and instantly provide you with possible matches. (A) There is no charge for accepting rollovers, however before requesting the rollover it is a good idea to let us check with your other fund(s) to determine whether there are any exit fees for moving your benefit, or other loss of benefits such as any insurance cover.
Your superannuation is usually a long-term investment
(B) Figures based on annual returns of 8% pa reinvested. No allowances have been made for inflation, taxation, fees or expenses. (C) Conditions apply. Based on the taxable income and amount of after -tax contributions Taken from BT Financial Group Ltd financial information pack.
Rates Stay on Hold Good news for everyone with a variable rate mortgage. The RBA has continued to play it steady. Essentially they are waiting for signs of either rising inflation or a slow down before they make a move with the cash rate. Now that we've had five months in a row without a change to the cash rate, I thought it might be a worthwhile exercise to find out where each of our major banks think the RBA will go from here.
I'm hoping Westpac are right. Wishful thinking I know, but if Westpac are correct most of us will be paying a variable interest rate of just 7.25% in twelve months time. Having said that, another variable has recently been thrown into the interest rate equation. A number of bank officers have been commenting on the rising cost of their wholesale funding sources. This cost has apparently increased by approximately 0.30% over the last 12 months. Put simply, the banks are likely to raise their variable interest rates outside the RBA cash rate movements. Potentially this could add a further 0.25% and see us paying around 7.50% (based on Westpac's RBA cash rate forecast).
Interestingly, whilst most people have kept their eyes firmly fixed on the RBA cash rate most three year fixed interest rates have been quietly dropping. The following chart shows the dramatic three year fixed rate decline across the five major banks. Whilst the average three year fixed rate across our five majors is now 7.03%, one of our "non bank" financial institutions is currently offering 6.75% (and this lender allows additional repayments without penalty (unless fully paid out)). Nice to see competition flowing back into the mortgage market. From our Mortgage Broker friend in Port Lincoln David Stoeckel
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A Word from Vicki re The Rotary Club of Kent Town On Thursday November 11th, Rotarians from Kent Town Rotary Club will join other Rotary Club members from the Rotary Club of St Peter’s as they embark on a trip to Cambodia. Although we would all relish an overseas holiday at this time of year to relieve frayed nerves and tired eyes, these wonderful people are not heading to Cambodia for pleasure. At their own cost, they will be escorting and unpacking 2 containers of much needed medical supplies headed to Battambang Hospital. Here is a quick rundown of their expected trip:- They will fly into Phnom Penh via Kuala Lumpur. In the capital they will visit the Killing Fields Memorial and see some of the sights, then travel to Battambang by bus which is about 4 hours northwest. When they arrive, they will work in the eye clinic in Battambang for the first couple of days. Here they will be trained to examine the eyes of the local people and to then direct those with suspected problems to the medical team on hand. This may require them to go to some outlying villages to ensure people are tested. During this time the containers from Adelaide will either still be on route to Cambodia or hopefully will have arrived and be en route to the hospital. From the eye clinic they will focus on the hospital by preparing for the new equipment. This will mean moving old bits and pieces out of the hospital and cleaning hospital rooms and other equipment. The team are hopeful the shipping container will arrive in a timely manner allowing them to fulfill their goal to unpack it. They have reminded themselves however that should it not arrive in time, they are still doing important work at the hospital preparing it for the arrival of the goods and acting as goodwill ambassadors for Rotary. I hope you will all join with me in wishing Chris, and both Kent Town and St Peter’s Rotarians involved, a safe successful, and fulfilling trip. Vicki Harris - Office Manager