By Tony Kaye, Senior Personal Finance Writer, Vanguard Australia

Elon Musk, the 49-year-old founder of U.S.-listed electric vehicle maker Tesla, generated global headlines once again last week when he achieved the status as the world’s richest person.

As Tesla’s share price continued to surge, Musk’s personal wealth surged along with it to a staggering $250 billion, eclipsing that of Amazon founder Jeff Bezos ($234 billion).

Yet, in reality, Musk’s “overnight” wealth milestone was a success story a good two decades in the making.

It stems back to the launch of Tesla back in the early 2000s, the company’s progressive growth to become the biggest automotive group by market value in the world (Musk owns 20 per cent), and to windfall gains he has achieved previously from selling well-known businesses, such as PayPal to eBay in 2002 for US$1.5 billion.

That’s really the key financial lesson for 2021 and beyond, because history shows us that overnight investment success rarely happens.

Starting up a business venture, and turning it into a profitable enterprise (if that ever occurs), can take many years.

It’s the same with building investment wealth. It’s invariably a very long-term, disciplined process. In fact, the keyword here is discipline.

In 2020, for example, many investors were treated to a rollercoaster ride as the impact of COVID-19 and other events saw global financial markets plunge from record highs to decade lows in just days. Personal wealth levels fell sharply with them.

But, by the end of 2020, markets had mostly recovered – and the U.S. market had reached a new record high – restoring and even increasing the investment portfolio balances of many investors.

Those that had stayed on the early 2020 investment terror ride, so to speak, were relatively unscathed compared to those that opted to jump off.

The 2021 outlook and beyond

Predicting how markets will behave and perform over the short term is impossible, as we witnessed last year.

Our recently released Vanguard Economic and Market Outlook report paints a mixed picture for global economic growth in 2021, which reflects the ongoing uncertainty around health outcomes linked to the virus.

However, focusing on the longer-term investment outlook has more relevance in the context of portfolio construction and expected returns.

Vanguard’s financial modelling projects that global equity returns will be in the 5 per cent to 7 per cent over the next decade. Australian equity returns are projected to be in the 5.5 per cent to 7.5 per cent ranges over the same time frame.

Meanwhile, low interest rates will remain a feature in 2021, and we expect bond portfolios of all types and maturities will earn yield returns close to current levels for quite some time.

Look back to plan ahead

Hoping for, or even expecting quick investment gains and “overnight” wealth success in 2021, is an endeavour best left to speculators with a high-risk tolerance.

On the other hand, taking the safer investment road makes better sense, as it’s easy to see where that’s come from and is likely to go.

While past investment returns cannot be used to predict the future, they are a useful roadmap.

Vanguard’s 2020 annual index chart shows that a $10,000 investment made into Australian shares in 1990 would have achieved an 8.9 per cent total return per annum over 30 years, with the reinvestment of all distributions, and grown to $130,457 by 30 June 2020.

Over the same period and using the same strategy, a $10,000 investment into the broad U.S. share market would have delivered a 10.3 per cent per annum return and worth $186,799.

The 2021 Vanguard Index Chart will be released later this year, and is likely to show a continuation of the trend – that is, that returns from most asset classes increase steadily over time based around a strategy of making regular investments and through the power of compounding returns.

The interactive Vanguard Index Chart can be accessed by clicking here, and can be used to track the performances of different assets all the way back to 1970.

The big tips for 2021

At the start of a new calendar year, it’s customary to make resolutions and to look ahead to better times.

On an investment level however, there is no visible line in the sand. Apart from a short pause due to public holidays, financial markets continue uninterrupted.

Investment strategies shouldn’t necessarily change either, unless there is very good reason.

Whatever 2021 holds, the best pathway is to stick to your strategy. It’s fine to review to it, and to make adjustments, but having a strategy based around your longer-term investment goals is essential.

Don’t count on rapid gains, and always expect some market volatility. Stay focused on your end game, not current events, and maintain financial discipline.

They are among the key investment principles that will help you achieve investment success in 2021 and into the future.

Please contact us on Phone: 07 5641 4134 to learn more. 

Source: Vanguard January 2021

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2021 Vanguard Investments Australia Ltd. All rights reserved.

Important: Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Are you keeping the right records for your business? The new year is a great time to check.

Our record keeping evaluation tool only takes about five minutes to use and helps you assess how well you’re keeping your business records.

Simply choose what applies to your business and the kind of records you keep, and you’ll get a report based on the information you’ve provided. We can’t access the information – so only you will see if you’re doing well or if there’s room for improvement.

Remember the rules of good record keeping:

• keep all records that are relevant to your business’s tax and super affairs

• safely store your records in a way that protects them from being changed or damaged

• keep most records for five years

• you need to be able to show us your records if we ask for them

• they must be in English or easily converted to English.

Records you may need to keep include:

• BPAY or PayPal records

• tax invoices for purchases over $82.50

• stocktake records

• a list of creditors and debtors

• wages records (including directors’ fees)

• Super guarantee contributions paid to each employee and how they were calculated.

Please contact us on Phone: 07 5641 4134 if you seek further assistance on this topic.

Source: ATO January 2021
Reproduced with the permission of the Australian Tax Office. This article was originally published on https://www.ato.gov.au/Newsroom/smallbusiness/General/New-year,-new-habits/.

Important:
This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. 

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

By Tony Kaye, Senior Personal Finance Writer, Vanguard Australia

In just over two months from now, the oldest millennials will be turning 40.

It’s an interesting milestone in the sense that parts of what some still refer to as the “younger generation” are not so young anymore.

In fact, many older millennials may have already been working for more than 20 years, as opposed to those at the bottom end of this generational cohort who are still aged in their early twenties.

The widely accepted age definition for millennials (also known as Gen Ys) covers people born between 1981 and 1996, making the youngest 24 years-old. Next year, they’ll be turning 25.

Because of this wide age variance, there is likely to be a large variation in accumulated investment wealth across the millennials spectrum.

Where this all comes together from an investment perspective is in recent research conducted by Vanguard in the United States.

Vanguard surveyed more than 850 millennials in the U.S. currently aged 24 to 39, who make at least US$50,000 per year, as part of a broader study on how people across different generations feel about retirement, investing, and financial advice during market volatility.

The survey was active during May – the period when financial markets were staging a strong recovery after their sharp falls in February and March.

Views on investing

The events during the first quarter would have been the first experience for many millennials of a major correction on equity markets.

When describing their feelings towards investing at the time of the survey in May, almost half of millennials said they were cautious (46 per cent), and used words such as fearful (28 per cent), and sceptical (27 per cent).

This compared with before the COVID pandemic when millennials were understandably less cautious (32 per cent) and had a much higher leaning towards other words such as optimistic (29 per cent), and motivated (23 per cent).

That said, 74 per cent said they were interested in learning more about investing. That included 43 per cent who said they were somewhat interested, and 32 per cent who were very interested.

Vanguard’s U.S. research ties in with the findings from the recently released 2020 ASX Australian Investor Study.

The ASX found that over the next few years the number of younger Australians actively investing will continue to rise. Intending investors have an average age of just 34, with 27 per cent aged under 25.

Among the “next generation investors”, as the ASX refers to them, 41 per cent list building a sustainable income stream as their top investment goal. Maximising capital growth was the next highest selection (25 per cent), followed by achieving a balance between capital growth and investment risk (16 per cent).

Views on retirement

On paper, the millennials generation is a long way from retirement.

But the reality is that a high percentage of millennials are actively thinking about retirement.

More than six in 10 U.S. millennials (61 per cent) said they plan to retire before age 65, and 22 per cent plan to retire before age 60.

According to the Australian Bureau of Statistics, the average retirement age in Australia is 55.4 years.

Nearly two-thirds (63 per cent) of those surveyed by Vanguard defined a successful retirement as being able to do what they want when they want.

That loosely fits in the Association of Superannuation Funds of Australia’s “comfortable lifestyle” retirement standard, which factors in the ability to enjoy a good standard of living and make regular discretionary purchases.

ASFA’s current budget calculations are that a single would need $43,687 a year to live a comfortable retirement lifestyle, and a couple $61,909 a year.

Almost 70 per cent of the U.S. millennials surveyed were confident they were putting away enough money to be financially secure in retirement.

However, once they reach retirement age, 39 per cent said they intended to pursue a new career at “retirement”, and 35 per cent planned to start a business.

The top reason for planning to continue to work was “to stay active and alert” (50 per cent), followed by “I enjoy what I do” (46 per cent), and “to have a sense of purpose” (43 per cent).

Conclusion

There’s no doubt that when it comes to both investing and retirement, there’s a lot of diversity across the millennials generation.

Older millennials, certainly in some cases, will be actively thinking about retirement already because they may even be considering retiring within the next 20 years.

Many will already own a home, have a family, and will have had the benefit of close to two decades of accumulated investment returns.

Younger millennials, on the other hand, may only be taking the first steps in their career, have limited assets, and have different investment objectives to their millennial elders.

Yet there are likely to be many commonalities, especially given the fact that almost three-quarters of the U.S. survey respondents, covering millennials of varied ages, said they were keen to learn more about investing.

In Australia, that relates back to around 70 per cent of next generation investors wanting to build sustainable income and maximise capital growth.

Yet, irrespective of generation, the fundamental principles around investing remain the same.

They revolve around setting appropriate investment goals that are measurable and attainable; having a well-diversified asset allocation strategy; controlling investment costs to maximise returns; and maintaining perspective with patience and discipline, regardless of short-term events.

Please contact us on Phone: 07 5641 4134 if you seek further assistance on this topic.

Source: Vanguard October 2020

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2021 Vanguard Investments Australia Ltd. All rights reserved.

Important: Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

If you’re overwhelmed by having different debts in different places, a debt consilidation loan might be the answer.

Why is it so hard to pay off my debts?

Let’s say you have a regular credit card, and you’ve also taken out a store card to buy a new laptop with 12 months interest-free.

You decide to concentrate on paying off your credit card, because you have a whole year to worry about the store card, right?

Flash forward to the 12 month mark. You’ve just had to replace your hot water system and had an expensive dental bill. Your credit card’s maxed out, and the store card’s high interest is starting to kick in.

One repayment’s due on the 15th of each month, another on the 20th. By the time one comes around, you can’t afford the other. It’s spiralling out of control.

While these purchases can be justified and were affordable at the time, this is where things get hard to handle. And when debt starts to stress you out, it’s time to take back some control.

What’s a debt consolidation loan?

A debt consolidation loan is a way to bring together all your debits – credit card, student debt, store card etc. – into one so you’ll be making payments in the one place.

It also means no multiple annual fees, and one regular repayment, with one interest rate.

Interested to know what it could look like for you? Check out our debt consolidation calculator. It’s a fantastic tool that’ll show you how much your minimum repayments – and monthly interest – can change.

Of course, it doesn’t mean you’re instantly on easy street – you still have to pay off the loan. But what it does mean is that you can take a breath and take back some control.

Why consolidate my loans?

Having one debt consolidation loan usually outweighs the benefits of having a heap of little debts.

• It can save you money, either by having less interest or fewer fees to pay (or both).

• One loan’s much easier to manage than multiple loans – just one monthly repayment.

• Because there’s only one loan, setting up a repayment plan is easy – you’ll have a better idea of when you’ll be debt free.

• Having one, easy-to-manage debt is a good way to improve your credit rating.

How do I consolidate my loans?

While it’s a pretty straightforward process, you should do some homework before you apply.

1. See how much your new loan repayment will be over different loan terms (or periods) with our debt consolidation calculator.

2. Check out several lenders’ debt consolidation personal loan offerings, and then use our loan comparison calculator.

3. Once you’ve consolidated your debts, this is the time to review your finances and get on top of them.

Please contact us on Phone: 07 5641 4134 if you seek further assistance on this topic. 

Source: NAB https://www.nab.com.au/personal/life-moments/manage-money/manage-debt/consolidation

Reproduced with permission of National Australia Bank (‘NAB’). This article was original published at https://www.nab.com.au/personal/life-moments/manage-money/manage-debt/consolidation

National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686. The information contained in this article is intended to be of a general nature only. Any advice contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice on this website, NAB recommends that you consider whether it is appropriate for your circumstances.

© 2020 National Australia Bank Limited (“NAB”). All rights reserved.

Important: Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

By Tony Kaye, Senior Personal Finance Writer, Vanguard Australia

The Spanish writer Miguel de Cervantes Saavedra isn’t widely regarded as a renowned investment strategist.

But it’s in his most famous literary work Don Quixote, published in 1605, that one of the quintessential investment phrases, still widely used today, first emerges.

Through the novel’s central character, he advises that it’s never wise to put all your eggs in one basket.

Diversification, spreading your money across a range of different assets rather than putting it all into one place, is one of the core principles of investment risk management.

That’s because investment returns from different assets are never consistent.

Let’s take a look at some of the asset returns from the 2019-20 financial year. The best-performing asset was United States listed shares, which returned 9.6 per cent. The worst-performing asset was Australian listed property, which fell 21.3 per cent. Australian shares fell 7.2 per cent.

But if you compare those results with the previous year, it was a very different story. Australian listed property was the best performer, gaining 19.3 per cent. US shares delivered 16.3 per cent, and Australian shares 11 per cent.

When we reach the end of June this year the returns from equities are likely to reflect the strong rebound on share markets since the first quarter of 2020.

In other words, asset class returns are ever-changing. So, having your investment money in several asset pots, instead of just one, will invariably smooth out your overall returns over time.

The Australian story

There are various research reports and data sources that provide an indication of the diversification of Australian investors.

Data from the 2020 ASX Australian Investor Study shows around nine million Australians hold investments outside of their home and superannuation.

By median dollar value, according to the Australian Securities Exchange (ASX) data, residential investment property on average accounts for the biggest amount of total investor assets ($338,261). Other types of investment property account for a further $207,347.

Straight away, it’s evident there is a definite investment preference towards physical properties.

About 6.6 million Australians do have market-listed investments, but the median-value holding of shares (outside of superannuation) is much lower than in investment property at just under $42,000.

The vast bulk of these are direct shareholdings in Australian-listed companies. Many investors have little, or no, exposure to global companies.

The median amount held in shares is also slightly lower than the $43,000 median amount invested in term deposit savings accounts.

Interestingly, the ASX research found that only three in 10 investors rated diversification among their key investment considerations, and many admitted their portfolios were not well diversified.

Another good diversification indicator is data from the Australian Tax Office that shows the investment allocations of self-managed superannuation funds.

The latest data available up to 30 June 2020 shows SMSFs had about 26 per cent of their total assets ($191 billion) in Australian shares.

They also had just over 21 per cent of their assets ($156 billion) invested in cash and term deposits, which at current interest rate levels is earning a return of between 0 per cent and 1.5 per cent.

Unlisted trusts, which by and large represent unlisted property securities, are third-highest in terms of total SMSF assets, accounting for around $86 billion of capital (11.7 per cent).

A third diversification indicator is monthly data from the Australian Prudential Regulation Authority.

It shows Australian households collectively have a massive $1.1 trillion deposited in savings account products, with the majority of that held by the country’s four biggest banks earning very low returns.

Alternative asset allocations to savings accounts that typically earn higher returns include managed cash funds and fixed interest (bonds).

Getting the best mix

How you allocate your investment capital is one of the most important, and often difficult, decisions.

Your asset allocation strategy should always be in tune with your investment goals and your tolerance for taking risk.

Rather than trying to do it themselves, more and more people are investing across different asset classes such as Australian and international shares, listed property, fixed interest and cash using listed exchange traded funds (ETFs) and unlisted managed funds.

There are also pre-set diversified funds that cover multiple asset classes, which can be readily accessed on the ASX.

Like most things in life, successful investing is all about balance.

As we head further into 2021, why not review your investment balance to make sure you are not too heavily tilted towards one particular area (with too many financial eggs in one basket)?

Spreading your investments across a wide variety of assets creates a diversified portfolio, can help reduce the risk of loss, and creates a much smoother investment experience.

Diversification means you don’t have to worry about trying to time the markets for the right time to invest, because you are always invested across a range of different assets.

An iteration of this article was first published by Canstar on 14 January, 2021.

If you’re unsure of whether you do have the right assets mix, please consult us on Phone: 07 5641 4134 for some professional guidance.

Source : Vanguard February 2021 

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2021 Vanguard Investments Australia Ltd. All rights reserved.

Important: Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Take some of the guesswork out of planning for the future. Work out how much super you’ll have when you retire, and if it will be enough to fund the lifestyle you want.

It’s never too soon to start planning for a better financial future.

Estimate how much super you’ll have

You probably know how much super you have now, but do you know how much you’ll have when you retire?

Use the Moneysmart retirement planner to estimate:

• how much money you’ll have to spend each year once you retire

• how fees, investment options and contributions will affect your retirement income

You can also use the planner to test out different scenarios and work out how to grow your super.

How much super you’ll need when you retire

The amount of super you’ll need when you retire depends on:

• your big costs in retirement, and

• the lifestyle you want

Most people can now expect to live well into their eighties. This means that if you stop working at 65, you’ll need retirement income for 20 years or more.

Your big costs in retirement

Think about any big costs that might be part of your retirement plans. For example:

• paying off your mortgage

• rent

• renovating your home

• travel

• medical costs

The lifestyle you want

Think about how you plan to spend your money in retirement. If you own your own home, a rule of thumb is that you’ll need two-thirds (67%) of your pre-retirement income to maintain the same standard of living in retirement.

The Association of Superannuation Funds of Australia (ASFA) provides an industry retirement standard. This estimates how much money you’ll need, depending on your lifestyle.

Source: ASFA, September quarter 2020

ASFA estimates that the lump sum needed at retirement to support a comfortable lifestyle is $640,000 for a couple and $545,000 for a single person. This assumes a partial Age Pension.

ASFA estimates that a modest lifestyle, which covers the basics, is mostly met by the Age Pension. They estimate the lump sum needed to support a modest lifestyle for a single or couple is $70,000.

Build up your super

Many things contribute to your income in retirement, including investments outside of super and assets such as your home, especially if you downsize.

If you decide it is important to build your super, there are some actions that can make a big difference over time. Think about:

• consolidating your super into one account so you pay fewer fees

• making extra contributions to grow your super

• changing your super investment options

If you don’t have as much as you’d like, it’s never too late to build up your super to boost your retirement savings.

If you need financial advice

Planning for your retirement is complex, and everyone’s situation is different. To help you plan ahead, call us on Phone: 07 5641 4134 today. 

Source: Moneysmart .gov.au 
Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/grow-your-super/how-much-super-you-need

Important note: This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.  Past performance is not a reliable guide to future returns.

Important
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

By Tony Kaye, Senior Personal Finance Writer, Vanguard Australia

COVID-19 has completely, and mercilessly, dictated the direction of economies and financial markets through most of this year.

So, as we rapidly approach the end of an extremely unpredictable and volatile year, what’s in store for 2021?

It should come as no great surprise that the global economic outlook and the likely behaviour of financial markets remain hinged to COVID-19, and more specifically to health outcomes and responses.

That’s a key finding from our just-released report: Vanguard Economic and Market Outlook 2021: Approaching the dawn.

Authored by senior economists and investment strategists from across Vanguard, the VEMO 2021 report highlights that the pace of economic recovery ultimately will be driven by the rate at which populations develop COVID-19 immunity.

As the human immunity gap narrows, the current reluctance gap – the fear of spending – will also narrow, leading to stronger economic growth.

Room for economic optimism

With the rollout of COVID-19 vaccines increasing, there is room for optimism.

In the VEMO report, we outline our base case that major economies will achieve infection immunity (when the person-to-person spread of COVID-19 becomes unlikely) by the end of 2021.

This would result in economic activity normalising by the second-half and output reaching pre-pandemic levels by the end of 2021. If infection immunity does not occur, economies may only see marginal progress from current levels.

But assuming immunity rates do rise, unemployment levels are set to fall, and a cyclical bounce in inflation is expected to occur around mid-year. This brings some risk that markets could interpret higher inflation with a more pronounced, but unlikely, inflation outbreak.

However, overall, there’s more upside than downside to our economic forecast based on vaccine developments.

Country-specific economic growth rates will be varied, with our base case forecast for Australia at 4 per cent. This will trail the United States and the euro area, which are both forecast to grow at 5.4 per cent in 2021.

The strongest forecasts are for the United Kingdom at 7.4 per cent, albeit from a low base, and for strong growth of around 9 per cent in China due to its more successful navigation of COVID-19.

The outlook for markets

The key investment lessons to absorb from 2020 are that it’s vital stay the course with your strategy and not become distracted by short-term market events, no matter how severe they are at the time, and that portfolio diversification will ultimately smooth out volatility.

The benefits of diversification played out over the most recent market cycle where investors holding a global equity portfolio would have outperformed someone holding an all-Australian equity portfolio by about 5 per cent in year-to-date terms.

In the period ahead, Vanguard predicts the Australian market should slightly outperform globally as economic conditions improve.

Vanguard’s Capital Markets Model projections for global equity returns are in the 5 per cent to 7 per cent over the next decade, and in the 5.5 per cent to 7.5 per cent ranges for Australia over same period.

Although below the returns seen over the last few decades, equities are expected to continue to outperform most other investments and the rate of inflation.

In Australia, equity prices have rebounded roughly 40 per cent from the trough in March and valuations are considered to be in the middle of their fair value band.

US and China valuations are not overly stretched but at the higher end of their value bands given the recent stronger rebounds in those markets.

Despite rising equity valuations, the outlook for the global equity risk premium is positive and has increased since last year given record low bond yields.

Low interest rates will remain a feature in 2021, and Vanguard expects bond portfolios of all types and maturities will earn yield returns close to current levels.

But we continue to believe in the diversification properties of bonds, particularly high-quality bonds, even in a low or negative interest rate environment.

An investor holding a diversified portfolio (60 per cent equity and 40 per cent fixed interest) during the most recent market sell-off in March would have fared better than someone with an all-equity portfolio.

Rather than used as a returns enhancer, bonds are a risk reducer to balance out cyclical risks in portfolios.

In 2021, it will be important for investors to remain disciplined and focused on long-term outcomes, and to accept that current macro-economic events may mean medium-term investment returns will be lower than those recorded over recent decades.

Please contact us on Phone: 07 5641 4134 if you seek further assistance on this topic.

Source : Vanguard December 2020 

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients’ circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.

© 2020 Vanguard Investments Australia Ltd. All rights reserved.

Important: Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Figuring out how to maintain and develop your employees’ careers will yield better outcomes and retention. So how can you up your company’s game in career development?

It’s no surprise to business owners that the process of hiring and retaining high quality staff is listed as one of the most stressful company processes and one which requires specific attention if it’s to be done right.

It’s also fair to say that in order to succeed in attracting the right staff to your company, businesses must compete with each other to be the most attractive option to employees. In the lead up to COVID-19 ‘recruitment competition levels had hit an all-time high (according to Forbes), meaning even mid-size businesses need to look further than free coffee and gym memberships if they want to appeal to high quality, career minded employees.

And while recruitment competition may have eased as a result of the pandemic, businesses still need to consider how to retain and enhance their employees’ experience as it’s much more cost effective than trying to continually hire new staff.

While the concept of a ‘job for life’ is long gone and the traditional career path has been done and dusted, studies still show that one of the most appealing ‘perks’ a business can offer to their existing and potential employees is a clear, supported pathway to career development and advancement.

Benefits of focusing on career development

There are many benefits a company receives when supporting their employees with career development.

Most employees do not expect a company to manage their career path for them, but they do like to feel that the business is taking an interest in them personally, and providing them with the necessary support for them to advance.

This support produces a more engaged team who are enthusiastic about their work and willing to go the extra mile when needed. In addition, research has shown that people whose career development is being supported by their existing employer are far less likely to seek a role with a different company.

Another benefit of working closely with your employees to explore their career advancement is the potential to uncover specific interests, skills, talents and attributes that staff may possess, and which have remained unused in their current role. This not only improves their individual capabilities, but enhances the capability of the overall company.

In the ever-changing world of business, and as we have seen with the effects of COVID-19 in 2020, many companies find that they have to change, grow or pivot certain aspects of their offering overnight. This means that the skills your employees have now, may not be the only skills you require them to have in the future.

By working with staff to upskill and develop related interests, you may find that when changes are needed, your existing staff already possess the required acumen to propel your business forward without delay and to gain you an upper hand over your competitors.

When it comes to hiring, having a clear career development program for your existing staff will actually help you attract new talent. While many businesses discover that career development programs help them fill roles internally, it’s inevitable that the need to recruit will arise at some point.

All businesses attach their reputations to any job vacancies, and if word gets around that your company is developing its teams seriously, you are much more likely to attract high quality, effective staff that will stay with you for the long term.

Consider what training options are available

To develop and advance the careers of your staff, it is essential that they receive training and/or mentorship to help them develop their knowledge and skillset. In large corporations, this is usually conducted via internal programs or specific HR hosted learning teams.

For mid-sized businesses, it’s not always as straightforward and budgets do not always allow for such an in-depth approach. Thankfully, there are many training companies who have recognised this and have developed a range of training and mentorship programs that can be outsourced.

Industry Associations, for example, The Public Relations Institute of Australia or the Law Society of NSW, offer regular training programs specifically designed for employees of that industry, and which will develop, enhance or provide new skills for your staff. The AI Group is another organisation that offers some great training opportunities for those in bigger businesses as well as Skill Finder, which recently launched to offer free digital skills training for Australians.

More generally, sites like LinkedIn offer a huge range of digitally delivered short-form training courses on their LinkedIn Learning platform. These short courses cover a range of topics, industries and skill levels and can be undertaken at a time convenient to both employee and employer.

For more personalised and hands-on training options, there are a huge range of experts who offer in-house training programs and mentorships in specific areas or industries. These can be found on sites such as Leadership Directions or EventBrite and should be backed by recent and relevant industry testimonials.

Don’t say “set and forget” rather “never rest”

Formal career progression talks usually take place with staff once per year, but it’s essential to understand that the training itself is a yearlong commitment and requires a sustained effort.

You should be consistently reviewing and monitoring employees’ goals and objectives, enrolling your staff in relevant training and learning opportunities, encouraging in-company mentoring and job shadowing and where beneficial, event rotating employee roles.

Career development consists of, on average, 70 percent ‘on the job’ training and having a clear plan that you discuss with your employee throughout the year will ensure that they are aware of the bigger picture, they understand the program you have in store for them and they feel supported in their career path.

Source : MYOB October 2020 

 Reproduced with the permission of MYOB. This article by Renae Smith was originally published at https://www.myob.com/au/blog/career-development-for-your-company/

Important: This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Houses and units seem easier to understand than many other types of investments.

However, it’s important to understand how investing in property works, to decide if it’s right for you.

Pros and cons of investing in property

Property investment is often seen as being less risky than other forms of investment. However, while it may seem more straightforward, there are pitfalls to be aware of. Here’s what you need to consider about investing in property.

Pros

• Less volatility – Property can be less volatile than shares or other investments.

• Income – You earn rental income if the property is tenanted.

• Capital growth – If your property increases in value, you will benefit from a capital gain when you sell.

• Tax deductions – You can offset most property expenses against rental income, including interest on any loan used to buy the property.

• Physical asset – You are investing in something you can see and touch.

• No specialised knowledge required – Unlike some complex investments, you don’t need any particular specialised knowledge to invest in property.

Cons

• Cost – Rental income may not cover your mortgage payments and other expenses.

• Interest rates – A rise in interest rates will mean higher repayments and lower disposable income.

• Vacancy – There may be times when you have to cover the costs yourself if you don’t have a tenant.

• Inflexible – You can’t sell off a bedroom if you need to access some cash in a hurry.

• Loss of value – If the property value goes down you could end up owing more than the property is worth.

• High entry and exit costs – Expenses such as stamp duty, legal fees and real estate agent’s fees.

There are restrictions on buying property through a self-managed super fund (SMSF). See SMSFs and property for more information.

Diversify your investments

Invest in more than just property so your money isn’t all in one market. If you invest in one market, it’ll increase your risk and means your portfolio isn’t diversified. See choose your investments for how to find other investments to help you reach your goals.

Costs of investing in property

Buying, managing and selling an investment property can be costly and will affect your overall return.

Cost to buy and sell

Some of the costs involved to buy and sell a property include:

• stamp duty

• conveyancing fees

• legal costs

• search fees

• pest and building reports

If you sell your property, you will have to pay agent’s fees, advertising costs and legal fees. You may also have to pay capital gains tax if the property has increased in value.

Borrowing money to buy

If you borrow to invest, you will have to pay the property mortgage. Don’t rely on rental income to cover the mortgage – there may be times when your property is empty.

Many people buy investment property with interest-only loans, but remember the interest-only period will end after a certain time. This means your repayments will increase to pay the amount borrowed, plus the interest. See interest-only home loans to find out how they work.

Interest-only mortgage calculator

See what an interest-only loan will cost you.

Costs to own an investment property

Ongoing costs of investment properties include:

• council and water rates

• building insurance

• landlord insurance

• body corporate fees

• land tax

• property management fees (if you use an agent)

• repairs and maintenance costs

Tax on your investment property

Although you may be able to claim tax deductions on expenses, you’ll still have to pay them up front. For positively geared investments, you may pay tax on your rental income.

Visit the Australian Taxation Office (ATO) for how tax works for investment properties.

What to consider when buying an investment property

Once you have a property in mind, compare the income you expect to your outgoing expenses. If there is a shortfall, consider whether you can cover it long-term. Also, work out whether you could cover all expenses short-term if you had no tenants for a while.

Research the property market to decide how to get an investment property. Where and what you buy will affect your return on investment.

Where to buy

• Areas you’re familiar with will take time to research.

• Look for areas with high growth, higher rental yield and low vacancy rates.

• Find out about proposed planning changes in the suburb that may affect future property prices.

What to buy

• Look for properties with appealing features like a second bathroom, a garage and access to schools, shops and transport.

• Consider maintenance costs based on property type, age and features.

How to buy

• Be wary of property investment advice from groups of service providers. Property developers, accountants, lawyers and mortgage brokers might recommend each other’s services.

You may have heard of property investment seminars promising to make you a fortune. These events often use high-pressure sales tactics to rush you into making big property investment decisions. Find out how to spot the warning signs of a dodgy investment seminar.

Overseas property investment

Investing in overseas property is more risky than investing in property in Australia. It’s harder to manage a property from afar and there may be costs that you haven’t thought of.

Here are some things to consider before you invest:

• Distance – Good tenants and property managers are hard to manage when you’re so far away

• Renovations and repairs – You can’t supervise repairs or know who does the work

• Extra costs – You must factor in Australian tax laws, local property taxes, insurance, management costs, and ongoing repairs. If you buy through a promoter, there may be other hidden costs

• Exchange rate – Changes could affect the amount of income you receive

Case Study

Simon and Tiana consider an investment property

Simon and Tiana are considering buying an investment property. They spot a unit that ticks all of their boxes: it’s close to a train station and is a 10 minute walk to restaurants and shops.

The property price is $550,000 with buying costs of $23,000. They have a deposit of $150,000 so they will need to borrow $423,000 to complete the purchase. Their monthly income and expenses are expected to be:

Simon and Tiana can cover the monthly shortfall with Tiana’s salary, which they currently save. They also have an emergency fund they can draw on if they were suddenly without tenants for a while.

 Please contact us on Phone: 07 5641 4134 if you seek further assistance on this topic.

Source : Moneysmart.gov.au January 2021 

Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://moneysmart.gov.au/property-investment

Important note: This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.  Past performance is not a reliable guide to future returns.

Important Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

In a year where simply keeping the doors open was a challenge for many businesses, finding the funds for tech upgrades might feel like a daunting prospect. The good news is, the consumerisation of information technology and the digital revolution have slashed the cost of IT products and services.

Cloud computing means you no longer have to invest big bucks upfront on hardware and software. And there’s been an explosion in the number of low-cost apps that even the smallest of enterprises can use to automate some operations.

On top of this, there’s a compelling business case for investing in information and communication technology (ICT): companies with the largest increase in ICT spending grow their revenue up to three times faster than companies that spend the least, according to Xero research.

So how should small businesses be investing their ICT budgets in 2021? We asked Xero Small Business Advocate Angus Capel for some tips. Here are his top five priority areas.

1. Online and cashless payment technology

If you don’t already have them in place, implementing an online gateway and contactless payment technology should be top of your tech to-do list this year, Capel says.

He argues that customers are voting with their (electronic) wallets, and businesses that aren’t able to accept online and digital payments are at growing disadvantage.

“We’re starting to see people walking out of shops if they see a ‘cash only’ sign,” he explains. “We also know that businesses that offer online invoice payments are paid twice as fast as those that don’t.”

It’s a view backed up by data. According to NAB’s Cashless Retail Sales Index October 2020, COVID-19 has accelerated the flight from cash, with cashless retail sales showing year-on-year growth of 17.5 per cent. Meanwhile, the Reserve Bank’s Consumer Payments Survey 2019 found just under a third of in-person payments were made in cash that year.

NAB’s Guide to Online Payment Gateways for small businesses provides guidance on implementing a gateway that can help you process transactions and accept payments securely via your web site.

2. Cloud accounting

It’s difficult to run a successful business if you rely on a stack of receipts in a shoebox or a collection of spreadsheets to monitor your incomings and outgoings. Switching to a cloud accounting solution can help you more effectively take control of your financial position and manage your inventory, invoicing and cash flow.

“By automating your ‘finance department’ you can eliminate repetitive manual processes and the double and triple handling of data,” Capel says.

“And with a cloud accounting and payroll solution as your foundation, it’s easy to add other apps that can help you become more efficient in other areas, such as inventory and expense management.”

3. People management technology

If you’re in expansion mode, or hiring for the first time, ensuring you comply with industrial relations legislation and paying your team correctly is critical. Getting it wrong can result in legal and regulatory action, reputational damage and, if you’re found to have underpaid employees, a bill for the difference, Capel points out.

Workforce management software can help you create and distribute rosters, manage timesheets and onboard new starters. Popular solutions such as Tanda, Deputy and Employment Hero integrate with leading accounting and payroll platforms. Using one of them can help to ensure you’re doing things properly, Capel believes.

“It’s important to have the right technology in place so you can focus on growing your business with confidence,” he says. “For anyone with employees, or looking to take them on, it’s definitely worth looking into one of these solutions or asking your adviser about them.”

4. An online presence

Finding a website, a social media presence and a string of good reviews when they google your business name is as reassuring for customers as a word-of-mouth recommendation used to be. If there’s nothing to see, they’re less likely to stop and spend.

Ensuring you have a strong online presence is critical, Capel says.

“Making sure you’re visible, and in a beautiful way that gives customers the confidence to engage with you, is massive now. Companies that aren’t online risk losing a lot of business to competitors that look slicker and more professional.”

A basic website can be had for as little as $500, while social media marketing can cost as little, or as much, as you’re willing to spend.

“If that’s where your customers are, then that’s where you need to be,” Capel says. “Start small, tailor your campaign and measure the results.”

5. Cybersecurity

The threat posed by cybercrime is real and rising – so much so that the Federal Government last year announced it would invest an additional $1.67 billion over the next decade to help businesses protect themselves against attack.

Taking sensible measures to reduce your risk of falling victim is vital. If you’re not sure where to start, Capel suggests talking to your accountant, bookkeeper or business adviser.

“An adviser can provide insight into best practice for your industry or connect you with a specialist, if necessary,” he says.

NAB’s cyber safety hub for small businesses provides guidance and advice about common threats and actions small businesses can take to strengthen their defences, including encrypting data and employing multi-factor authentication to reduce the risk of identity theft.

Practising good cyber hygiene – think installing software updates promptly, changing passwords regularly, running scheduled back-ups and training staff to be alert to phishing scams – will also help you protect your business.

Source : Nab December 2020 

Reproduced with permission of National Australia Bank (‘NAB’). This article was original published at https://business.nab.com.au/starting-strong-your-2021-tech-to-do-list-43827/

National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686. The information contained in this article is intended to be of a general nature only. Any advice contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice on this website, NAB recommends that you consider whether it is appropriate for your circumstances.

© 2020 National Australia Bank Limited (“NAB”). All rights reserved.

Important: Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.