Investment returns – some other considerations

Investment returns – some other considerations

Investment returns – some other considerations

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When we invest whether it be in Superannuation Funds or Pension Funds or just Ordinarily Taxed investments clearly we want to have a good return on our monies commensurate with the risk we are taking. CLEAR and SIMPLE.

In our chase for returns we can sometimes miss other side issues that can take the gloss off a good return or enhance a return. Remember that just a small increase in TOTAL RETURN of even 1% per annum can have significant impact on the end result. Simplistically something earning 7% per annum (income and growth) will take a bit over 10 years to double whereas something earning 9% per annum will only take 8 years to double in value.

We would always advocate in principal that your return on investment is the main goal.

The purpose of this article is to highlight a few other considerations when doing some financial planning/investing whether it be a lump sum amount or just regular monthly amounts like for instance our employer superannuation contributions and/or a regular bank account deductions for investment in a “savings plan/portfolio”.

 Other considerations to assist in total return might be:

  • Do I want to invest with a view to having some franking credits involved. Can up to 1.50% to 2% return depending on circumstances.

  • Is the management fee over 1%. If so it might be a bit rich.

  • If the investment is earmarked specifically for retirement then super taxed at maximum of 15% might be best.

  • Am I approaching age 60 then Super then eventually Pensions might be the go as all tax free.

  • In light of fees charged are Exchange Trade Funds (ETF’s) a better option than Managed Funds.

  • I am a retiree – have I maximised my Centrelink – Age Pension with this choice of investments. For those around the mark you will be surprised what can be done. To highlight – every $10,000 less in assets that count means $780 per annum more age pension. A 7.80% return on your money.

  • Internet savings accounts far outweigh day to day bank accounts with almost all the same facilities. 5% versus 1% is common.

  • I am on a high marginal tax rate can I get the same or similar investment by way of an Investment Bond taxed at lower rates.

  • Should I consider a GEARED portfolio for some of my investments to have more monies working for me.

At Plus1, we are available at any time to discuss issues of this nature, with due regard to your investments or financial planning generally.

Need more help or information?

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It’s a New Year, Start 2024 with a Financial Plan & Start Growing Your Wealth

It’s a New Year, Start 2024 with a Financial Plan & Start Growing Your Wealth

It’s a New Year, Start 2024 with a Financial Plan & Start Growing Your Wealth

Businessman analyzes profitability of working companies with digital augmented reality graphics, positive indicators in 2024, businessman calculates financial data for long-term investments.

From fluctuating fuel prices to managing cash flow and planning for retirement, Plus 1 Group has helped countless truckies, couriers, and logistics professionals take control of their finances and drive towards a secure future.

Why Should You Invest in a Financial Plan in 2024?

A well-crafted financial plan is like a GPS for your finances, guiding you to your destination and helping you avoid costly detours. Here’s how having a plan with Plus 1 Group can benefit you in 2024:

Maximise Your Profits: We’ll analyse your expenses, identify areas for optimisation, and implement strategies to boost your bottom line. Think fuel cost savings, tax efficient structures, and smarter investment choices.

Grow Your Wealth: Forget just making ends meet; we’ll help you build a solid financial foundation with tailored investment plans, asset protection strategies, and retirement planning solutions.

Reduce Stress and Uncertainty: The transport industry is inherently unpredictable, but your finances don’t have to be. Our comprehensive plans provide clarity and peace of mind, allowing you to focus on what you do best – keeping the wheels turning.

Navigate Industry Changes: From new regulations to technological advancements, the transport industry is constantly evolving. We’ll keep you informed of relevant changes and help you adapt your financial plan accordingly.

Plus 1 Group: Your One-Stop Shop for Financial Planning in Shepparton & Beyond

We offer a comprehensive range of services tailored to the needs of the transport industry, including:

Business tax advisory: Minimise your tax burden and maximise your return with expert advice and strategic planning.

Personal financial planning: Build wealth, plan for retirement, and protect your loved ones with personalised financial solutions.

Superannuation advice: Make the most of your superannuation and ensure a comfortable retirement by choosing the right fund and maximising your contributions.

Estate planning: Safeguard your assets and ensure your wishes are carried out with comprehensive estate planning strategies.

Stop Waiting, Start Planning for Your Financial Future Today!

Don’t let another year pass you by without taking control of your finances. Let Plus 1 Group, your experienced financial planning and business adviser in Shepparton, be your reliable navigator on the journey to financial success.

Here’s how to get started:

Book a free consultation: Discuss your financial goals and challenges with our friendly experts.

Remember, it’s never too late to take the wheel of your financial future. Contact Plus 1 Group today and let’s hit the road to your financial goals in 2024! Email or call our friendly team at Plus 1 Group on (03) 5833 3000 and we’d be happy to answer your questions and arrange a no obligation consultation.

Need more help or information?

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Key Insights into Australian Financial Planning for 2023

Key Insights into Australian Financial Planning for 2023

Key Insights into Australian Financial Planning for 2023

transport truck

Set out below are a few statements, figures, and facts which are not necessarily well known.

• 80% of Australians will at some stage of their lives be on a partial Centrelink Age Pension.

• Any Capital Gain from the sale of shares or property etc. is discounted by 50% when the investment/item is held for more than 12 months. This means, at the very most (depending on all else), that any capital gain income tax will never be more than 23.50% (half of the top marginal tax rate of 47%). Often, the tax is significantly less when employing other strategies.

• Low-income earners can receive a government co-contribution to their superannuation of up to $500 each year by contributing $1,000 of their after-tax income to their superannuation, subject to certain conditions.

• Superannuation pensions received from age 60 are tax-free, including any lump sums for retired persons.

• Certain pensioners/seniors can earn approximately $33,000 per annum and pay no personal income tax.

• Fully franked share dividends can add close to 2% per annum to your overall investment return, depending on the percentage of the share dividend.

• With Exchange Traded Funds (ETFs), investors can gain access to the shares/companies of the World for as little as $1,000 and can add small amounts monthly by regular debit to their bank account.

• Term Deposits are now paying interest of up to 5%, depending on the term and amount. Internet Savings accounts are paying similar interest.

• For risk-averse investors, their Superannuation and/or Pensions can be invested solely in Cash and Term Deposits.

• The Age Pension full amount available is now $41,000 (couple) and $27,000 (single person), subject to the usual Assets and Income Tests. Receiving this full amount equates to approximately 60% of the average living expenses.

At Plus1, we are always available to discuss matters related to your investments or financial planning.

Need more help or information?

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Investing for the grandkids – Something different

Investing for the grandkids – Something different

Investing for the grandkids – Something different

transport truck

Invariably grandparents want to assist their grandchildren with their general wealth creation knowledge and experience as well as where possible and affordable to do so then assist with some actual dollar investing for their future.

The following come quickly to mind:

  • Setting up a special bank account investment account (internet style hopefully) – earmarked for the new born grandchild when they are age18/21/25. Medium/Long term stuff.
  • Investing a lump sum and/or regular amount at say age 18 for assistance in next 10 years for a home deposit etc. Typically a growth type portfolio invested in Managed Funds or ETF’s. Medium/Long term options.

Now here is something a bit different.

Say the grandchild leaves school at age 18 and is going to university for 4+ years, if you really want to do something very long term (they will be forever thankful when they are retiring) then why not take advantage of some very early superannuation contributions for them.

Assuming they are doing some part time work while at university then perhaps invest $1,000 each of the 4 years into superannuation for them. These are referred to as Non Concessional Superannuation Contributions and therefore the grandparent can do the amounts on the child’s behalf. Of course provided the grandparent has the availability of the cash and a willingness to do.

Importantly for the $1,000 the Government will match this amount with a $500 amount what is called a Government Co Contribution. That represents a 50% return on the investment even before it is invested by the Super Fund. Not bad!

A couple of pieces of criteria for eligibility are:

  • The child must be doing some part time work and has employment (self or employee) type income of at least 10% of total taxable income in each of the say 4 years.
  • Grandchild must complete a tax return even if there will be a nil outcome.
  • Total Taxable income for any year must be below $43,445 (indexed annually)

We would recommend a 100% Growth Portfolio as the monies are preserved until at least age 60.

Now the good bit – with the power of compound interest and an average return of say 9% per annum that $6,000 (4 years at $1,000 plus 4 lots of $500) would be worth $159,000 in 40 years. Then of course the grandchild will have their own superannuation as well when fully into the work force after university.

Something to think about. They will thank you in 40 years – trouble is the grandparent most probably won’t be around to get the big hug – sadly.

We are available at any time to discuss issues of this nature with due regard to your investments or financial planning generally.

Need more help or information?

Click the link below to contact us at Plus 1.

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The Age Old Argument – Property VS Shares

The Age Old Argument – Property VS Shares

The Age Old Argument – Property VS Shares

Market Volatility

Well if ever there was a TIME to revisit the same age old argument of Property versus Shares then since this time a year ago – this is a TIME to do that.

In respect of what effects Growth Assets (Property and Shares) we have had:

  • Inflation somewhat out of control – worldwide.
  • Residential property values generally dropping in light of rising loan interest rates as well as an out of the normal (well above long-term averages) capital growth spurt in the last few years.
  • Shares (and hence superannuation funds/superannuation pension funds/ordinary taxed investments that have some exposure to these growth investments) experiencing some severe volatility especially shares in the Tech space.

Questions such as:

  1. The typical 60/40 type portfolio (being 60% Growth Assets and 40% Defensive Assets) portfolio is DEAD as a strategy?
  1. Will the technology companies share prices come back after huge growth in previous years then a substantial drop in values (some over a 60% drop) in 2022.
  1. Property – new purchases – how long to wait before the down turn settles?

are regular questions being canvassed.

All good questions. WE ARE NOT IN THE PREDICTING BUSINESS.

What do I run to?   Firstly, just don’t run.

Well let us firstly go back over the pros and cons of property versus shares. 

RESIDENTIAL INVESTMENT PROPERTY – The Negatives and Positives

  • Requires a large investment to start.
  • Probably need to borrow to start.
  • Can have difficult tenants.
  • It’s yours, you can to do what you want to your property – paint the door pink or the roof purple for example.
  • You cannot get little bits of capital out of the investment. It is all or nothing – you cannot just sell the laundry.
  • Can get called out (as the landlord) in the middle of the night to fix for example the hot water system.
  • You are invested in one street in Australia – don’t have access to the wealth of the world.
  • Cannot do in superannuation or pensions unless setup a SMSF.
  • Can get some taxation benefits of gearing.
  • High entry and exit costs
  • If handy can renovate and hopefully get more capital gain from your “own” work when selling.
  • Ongoing expenses including maintenance/insurance/agent costs.
  • When the asset is held for more than 12 months then Capital Gains taxed at a maximum tax rate of 23.50%. For most people considerably less, depending on circumstances.

SHARE BASED INVESTMENTS – The Negatives and Positives

  • Can start with as little as $1,000.
  • Can get exposure to the wealth of the world.
  • Low entry costs.
  • Low exit costs.
  • Loss of control – must rely on management of various companies being competent/efficient/ethical etc.
  • Very liquid – monies generally available within a few days.
  • More volatile than investment property.
  • Profits of companies (and hence share prices) subject to a lot of factors around the world – lack of control by yourself.
  • Ongoing fees – minimal
  • Can get access to various investment themes/regions – e.g. financials/tech companies/Asia/Gold/US shares etc.
  • Partial withdrawals of any magnitude.
  • Companies can go broke.
  • Can do for superannuation funds/pension funds or just ordinary investments.
  • When asset held for more than 12 months then capital gains taxed at a maximum tax rate of 23.50%. For most people considerably less depending on circumstances.

Moreover, how have they performed? Well for the 10 years ending 30 June 2022 for every $1,000 invested on 30 June 2012 to 30 June 2022 then the $1,000 would have grown to:

  • Australian Shares – ASX200 Index – $2,444 (income and growth) being 9.35% compound rate of return per annum over the 10 years.
  • Residential Investment Property Index (All Australia Residential Property) – $1,755 (Growth only) being 5.79% compound rate of return per annum over the 10 years. Add to this rental return on average of 5% per annum less general expenses of say 1% being gross rental return. So total return of approximately 9.79% per annum (5.79% plus 4%).

The rental return will of course depend on how the property is funded (geared – negative, neutral or positive).

Thus 9% to 10% per annum total return on average, from either Australian shares broad market or residential investment property across Australia which is consistent with long term returns for other various periods.

In all likelihood for a lot of us (especially the wealth creators) then having a range of various types of investments is a good strategy. The prospect of good capital growth is a key as is the importance of liquidity depending on your stage of life and perhaps the need to draw down on your investments.

Ultimately the decision will come down to personal preference, with the need to keep in mind the main points of diversity and liquidity in investments. 

At Plus1 we are available at any time to discuss issues of this nature with due regard to your investments or financial planning generally.

 

Matt – Financial Advisor

wealthadvisors@plus1group.com.au

03 5833 3000

Need more help or information?

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My Retirement Savings

My Retirement Savings

My Retirement Savings

Market Volatility

SUPERANNUATION – we automatically think of superannuation when it comes to discussing retirement. And rightly so as it is the preferred method of government strategy to address incomes in retirement other than the Centrelink – Age Pension system. Besides all that superannuation is very tax effective.

Of course our retirement assets (for living expense drawdowns) can come from a range of asset sources not just superannuation holdings but investment property, shares, managed investments, term deposits/sale of business/home downsizing etc.

However, for a lot of employed Australians their superannuation will be the majority of their retirement monies.

Some of the frequent questions when discussing saving for retirement include:

  • How long will my superannuation and everything else I have as investment assets that I can draw on last me in my retirement?
  • What does my planned retirement look like in so many years’ time?
  • How much should I put into superannuation above what is government mandated or legislated?
  • How often and how do I receive an income in retirement for my daily/weekly/yearly living expense needs and those special one off expenditure needs?
  • What will I get from the government’s Age Pension system?

Firstly, for all employees it is very important to be aware (and engage in it) that your compulsory employer contributions actually are and what is planned for down the road.

All employers are required to contribute 10.50% of salary /wages of their employees to the superannuation system. This percentage is planned to increase to 12% over the next few years.

How Much is Enough at Retirement

For the purposes of illustration only, if a person’s circumstances were as follows:

  • Salary was say $80,000 per annum
  • The future compulsory employer contributions of 12% was paid into superannuation for 40 years from say age 25 to age 65
  • CPI Inflation averaged 3% per annum (salary increases)
  • Investment Return say a net 6.00% per annum

then their projected superannuation at the end of 40 years would be estimated to be approximately $1.9 million through the marvellous workings of regular contributions and compound interest. Bringing this back to present day value (excluding inflation) then the figure is approximately just over $600,000.

Assuming a couple for some partial Age Pension entitlement purposes from age 67 then this amount of investment capital, with initial living expenses of $65,000 pa (in today’s dollars) – indexed to inflation of 3% pa, could be expected to last to a couples late mid-eighties.

Obviously we are living longer and working on longevity to say age 92 the  amount of superannuation investment capital needed would be approximately $2.9 million (in future dollars but 40 years away) and $900,000 (in today’s dollars).

As a rough guide if individuals topped up their superannuation by just 3% of salary over the whole 40 years used in this example then through the power of compounding and hopefully regular CPI salary increases at least then these sort of goals can be achieved.

It is fairly universally accepted that 14% – 15% of salary or other going into superannuation over a full working life will be sufficient to provide a lifestyle of approximately 65% – 70% of your last salary earnings as living expenses in retirement. For those of us with less than a 40 year period remaining then you need to run some numbers depending on existing holdings and time frame remaining before you expect to stop working.

At Plus1 we are available at any time to discuss issues of this nature with due regard to your investments or financial planning generally.

Matt – Financial Advisor

wealthadvisors@plus1group.com.au

03 5833 3000

Need more help or information?

Click the link below to contact us at Plus 1.

Open Hours

Monday to Friday
8:00am to 5:00pm

Closed Public Holidays

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If you need to get us documents quickly, access remote support, or the MYOB Portal click the button above.

Contact Us

27 Welsford Street
Shepparton, VIC 3630

T: (03) 5833 3000
F: (03) 5831 2988
Email Us