Uncategorized Archives - Page 49 of 53 - Raiz Invest

By Clayton Daniel

Creating
wealth is a long-term process, and in the same way that being a small degree
off-course can have a huge impact while navigating a long journey, small
effects add up to big outcomes over long-term investing.

As
such, tax efficient investing creates better returns for no extra investment
risk. For example if you built two identical portfolios in two separate
entities, with the only difference being the tax rate applied to the earnings,
the result will be better returns for the entity with the lower tax
environment.

With
that in mind there is a tax structure in Australia you can build assets in, so
tax efficient it makes seeking a tax dodging strategy like an offshore bank
account in the Isle of Man redundant.

Why
risk either being ripped off or going to jail by siphoning your money offshore
to avoid tax, when there is a perfectly legal way to reduce your tax right now?

Very
few people understand how attractive this tax vehicle is, as it has a very
boring and bureaucratic name. Considering the advantages of ending up with more
money in your pocket over the long term, it’s strange you never see this tax
structure up in lights.

However,
for those in the know, it has such unbelievable advantages that the government
built restrictions on how much you can put in. They did so to stop those who
bother to wade through the technical data from pouring as much money in as
possible.

Lucky
for you, I’m going to save you the hassle of peeling through hundreds of pages
of dry government fact sheets, and instead put all the tax benefits here for
you in plain English.

The
crazy thing is, you would already have heard of this tax structure before,
probably even own one, but found it to be as stimulating as a Top 40 dance
track from the 1990’s (Except The Prodigy, they were awesome, and I won’t hear
another word about it.) It’s called Superannuation.

The
misconception about Superannuation is that it’s an investment. It isn’t. It’s a
tax structure. Think of it as a car. Just as you can put almost any kind of
person in a car, you can build almost any kind of investment portfolio inside
of Superannuation (restrictions exist: here for summary, here for in-depth).

It
will save you money right now today, save money every year, and save money in
retirement. Put simply, with the choice to build an investment portfolio in
your own name, compared to building an identical portfolio in Superannuation,
you can ensure a better after-tax result by using a tax-efficient entity while
not taking on additional investment risk.

1)
SAVE MONEY TODAY

As
an ex-tax accountant, I can’t tell you how many people ask this question around
tax time: ‘What can I do to reduce my tax?’ Most people hate paying more tax
than they must, and will do anything to reduce it. Think Negative Gearing, the
purposeful loss in income to pay less tax.

What
if there was a way to reduce your income, but rather than losing your money
through Negative Gearing, you kept the money instead?

This
strategy is called salary sacrifice. It is redirecting a portion of your salary to Superannuation and is taxed at 15% (for incomes <$300k). For example, if
your salary is above $180k, you pay close to half your income in taxes and
levies. By redirecting a portion of your salary to long-term investments, you
immediately save over 30% in tax.

2)
SAVE MONEY EVERY YEAR

Investments
should earn the investor income every year. If you hold investments in your own
name, this income goes on top of your salary. For example, if you earn $80,000
per year from employment, and a further $20,000 per year in investment income,
the investment income is taxed at almost 40%.

If
instead, you earned the $20,000 investment income inside of a Superannuation
tax structure, you would have only paid 15% tax. Saving over 20% tax on your
investment returns every year of your wealth creation is going to have a
substantial positive effect on your long-term results. Also, as franked
dividends are taxed at 30%, and the tax environment for Superannuation is only
15%, you’re able to claw back the other 15% tax from the government. Imagine
that! The government paying you tax instead of the other way around!

3)
SAVE MONEY IN THE FUTURE

The
benefits of the Superannuation tax structure are impossible to beat once you
hit the age you are finally going to start using your asset base for the
purpose it was designed for: to pay you an income when you no longer work. It
is impossible to beat because these three points have a tax rate of 0%. And you
can’t beat 0% tax. It’s truly an offshore bank account within our own borders.

3a.
SELL ASSETS FOR 0% CAPITAL GAINS TAX (CGT)

When
a couple in their sixties is sitting in front of me and about to declare
retirement, they often tell me with pride the size of the investment portfolio
they have built up over the last forty years in their own names. Properties,
shares, managed funds etc.

The
pain in their eyes when I tell them the size of their tax bill because of their
success has stayed with me. It’s not fun learning you have to pay the
government hundreds of thousands of dollars just as you’re about to start
surviving on the spoils.

If
they had only known about the ability to transfer assets held inside of
Superannuation into tax-free environments before selling, they could have
avoided every cent of tax payable.

As
soon as you ‘flick the switch’ on the Superannuation tax structure from
‘accumulation’ to ‘pension’, every asset immediately becomes tax-free (assuming
your super account allows this).

3b.
TAX ON EARNINGS DROP TO 0%

For
the entire wealth creation journey inside of Superannuation, you only pay 15%
tax on all earnings by investments. And it gets even better from there. Once
you hit pension phase, the tax then becomes 0%.

From
the moment you start receiving income from your assets, your investment
portfolio will live in an entirely tax-free environment, never to pay tax on
investment earnings again.

3c.
INCOME FROM SUPERANNUATION IS TAXED AT 0%

And
finally the last benefit of reaching pension phase and having your assets
inside of a Superannuation tax structure, is the income you draw down to fund
your ideal lifestyle when you no longer work is taxed at 0% also (Only after
age 60. From age 55 – 60 the income is taxed Marginal Tax Rates less 15%. This
age 55 access is only available to those born before 1 July 1960. Sounds
complicated but it isn’t. If you are under age 50 now, you have to wait until
you’re 60.)

From
the benefits above, you can see the Superannuation tax structure is the best
entity for you to build an investment portfolio in the short term as you pay
less tax today, the medium term as you pay less tax every year, and the long
term when all assets and income become tax-free.

Now
consider the only ‘downside’ of using Superannuation to build an investment
portfolio: you can’t spend the funds until you reach retirement. But investing
is a long term endeavor, so I have no qualms in putting forward the merits of
Superannuation.

So
how do you get money into your superannuation? Firstly you can use Salary
Sacrifice to get pre-tax money in there. This can be helpful to save tax today,
but it has low thresholds (found here note this limit includes your mandatory
super contributions from your employment).

You
can also simply deposit money into super from your bank account as it is
after-tax money and the threshold is much higher (found here), however when was the last time you did
that?

Raiz
again have come to the rescue by bringing this valuable tax entity to the
fingertips of the money-smart. All you have to do to start being proactive in
using this tax effective vehicle to build your long term asset base is 1) click
Settings, 2) click Super Fund and follow the prompts. The simplest way I’ve
seen to start using the benefits already afforded to you under law.

Disclaimer:
While deep diving into topics and education is great, we have a responsibility
to ensure you don’t make any mistakes so please read this statement first:

Superannuation
is not an offshore bank account, and the term is used as an entertainment
analogy only. Thresholds and super laws are notorious for changing, and the
rules change frequently. As such, Clayton Daniel nor Raiz cannot be held responsible
for the validity of the information contained in this article, nor the outcome
you achieve with this information. This article gives an overview of the tax
benefits of superannuation, but it does not reference the returns of the
investments within any Superfund. It neither takes into consideration your
personal situation or your needs. Therefore the information is general in
nature. This article – and indeed any article – is not capable of being used as
personal financial advice nor is it intended to be. If this isn’t clear enough,
before taking any action with superannuation, get professional advice first.
More information can be found here.

Clayton
Daniel is a financial commentator best known for reducing decision fatigue
through financial automation. He is the author of upcoming book Fund Your Ideal Lifestyle.

Don’t have the Raiz App?

Download it for free in the App store or the Webapp below:

 

Important Information

The information on this website is general advice only. This means it does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the product.

A Product Disclosure Statement for Raiz Invest and/or Raiz Invest Super are available on the Raiz Invest website and App. A person must read and consider the Product Disclosure Statement in deciding whether, or not, to acquire and continue to hold interests in the product. The risks of investing in this product are fully set out in the Product Disclosure Statement and include the risks that would ordinarily apply to investing.

The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.

Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.

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Trump
has won, so what happens now. The sun will come up tomorrow. Mums and Dads
still go shopping. Children go to school. Workers still go to work and business
continue to trade. So economically, nothing has changed and
the economic fundamentals of the US economy are fine and improving.

Social policies will change, as the Republicans have not only won the
Presidency but also the House and the Senate. In fact, the Republicans tend to
introduce very favourable business policies. Some of the policies will seem
strange to Australians (like winding back Obama care) but It is unlikely
Republicans Senators and Congressmen, no matter how much they dislike Trump,
will block his proposed tax cuts or pro-business policies.

Stock markets don’t trade on social policy they worry about economic policies
and very few saw a clean sweep for the Republicans in this election which means
a very pro-business government in the USA.

America, however will become more protectionist and more withdrawn. This was
the outcome regardless of a Democratic or Republican win. This may mean that
their foreign policy will become withdrawn with less direct international
interference. This may cause Australia to be drawn closer to Asia as trade
blocks deals like the TPP (Trans-Pacific Partnership), which pivoted on US
involvement, looks now likely fail. This could end up being good for Australia
especially as the UK will also be looking for new trading partners.

Don’t panic. Stick with your investment strategy. We know this is easier said
than done and we know it is time & experience that helps with this. We hope
the Raiz App can assist you in learning this.

The markets will now focus on the next move from the Federal Reserve which we
expect to be a hike in the December. Especially as the FED will now worry about
the possible Republican inflationary policies. But more on this in the coming
weeks.

Don’t have the Raiz App?

Download it for free in the App store or the Webapp below:

 

Important Information

The information on this website is general advice only. This means it does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the product.

A Product Disclosure Statement for Raiz Invest and/or Raiz Invest Super are available on the Raiz Invest website and App. A person must read and consider the Product Disclosure Statement in deciding whether, or not, to acquire and continue to hold interests in the product. The risks of investing in this product are fully set out in the Product Disclosure Statement and include the risks that would ordinarily apply to investing.

The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.

Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.

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By Clayton Daniel

Do
you know what investing is? Confusing.

To
circumvent that issue, you can do what most people do – learn.

Ahh
yes. Learning about investing. Such a fantastic topic isn’t it. Perhaps, the
more you learn, the better returns you’ll get? Maybe outperform the market?
Maybe find the NBT (Next Big Thing)?

I
know. I started on this journey over a decade ago. Read a bunch of books. Went
to a few classes at uni. Even got a degree! Worked in tax, super, investments,
cash flow. Opened up my own shop. Clients came in. I researched portfolios. We
discussed those portfolios. These portfolios had ‘Foreign Exposure’ with
‘Counter-Cyclical Hedges’, ‘Active Managers’ that would use ‘Dynamic Asset
Allocation’ to ensure ‘Market Trends’ were taken advantage of.

Oh
God. It hurts even just to write it all down.

Here’s
the thing. The world of investing has taken something that is honestly quite
rudimentary and fluffed it up to be something it isn’t. Or to put simply, we
spend 80% of our time, effort and resources aiming for that last 20%.

What
do I mean?

I
mean, it’s not a surprise to anyone in the greater investment industry to spout
off this fact ‘the majority of active managers underperform the benchmark’. Now
what that financy-pants language means is that the majority of
professional investment teams do worse than if they had just
done nothing.

That’s
right.

For
all the posturing, all the research, all the education, all the fanfare, all
the talk, all the mumbo-jumbo………………. Most of the time it’s not only for naught,
but detrimental.

That’s
a pretty condemning statistic. Could you imagine if the medical industry had
these kind of results? Could you imagine if ‘go home and rest’ had a higher
chance of survival for cancer patients than having treatment? We would be up in
arms.

But
the investment community has a different opinion. And that is because everyone
is convinced they can pick that top 20%. And so that is what everyone is aiming
for. To ‘beat the market’ by being smart enough to get in the top 20%. It makes
sense. Everyone has an ego. And everyone has hubris – especially when it’s
other people’s money…

But
here’s the thing. What if you said ‘no more’. What would happen? What if you
stepped out of the hustle and bustle of trying to get that last 20% and were
happy with the 80%. What kind of world would that look like? What kind of
research, education, monitoring and ongoing effort would that require from you?

Or
put simply, how much of your attention would you have to give your investments
if you were happy with 80% of the possible returns?

I’m
sure you’re probably anticipating the answer to be 20% of the effort. I mean,
that’s how it normally goes doesn’t it. Well not quite. It’s less than that.

How
about one percent?

One
percent effort is all you need. And even that is pushing it. If you’re happy to
just go along with the ups and downs of the market, you don’t have to do
anything. At all. Once the purchase has been made, there is zero upkeep for
you.

Let
me explain how this works.

Like
everything else in finance, the solution comes in the form of an acronym.

ETF
– Exchange Traded Funds. Really simply, ETF’s are an algorithm that trades
stocks. Sounds complex, but it isn’t. Most ETF’s have a VERY simple trading
strategy. The algorithms aren’t looking for undervalued hidden gems, or for
promising speculative mining stocks. They aren’t looking what pays a good
dividend, or any other investment strategy.

All
they do is blindly buy what they are programmed to buy. And while these
algorithms are starting to get more complex, the majority of money invested in
ETFs are in the S&P 500 (http://etfdb.com/compare/market-cap/).

And
what is the S&P 500? It’s the top 500 publicly traded companies in the
States. That’s it. The algorithm simply buys the biggest 500 companies. If
company 500 drops down to 505 it’s sold. If company 550 goes up to 400, it’s
purchased. Simple. Indiscriminate investing. The Aussie version is called the
ASX200. So instead of the top 500, it’s the top 200.

Now,
this is why I like ETF investing.

It
takes 1% knowledge and effort to get in, and the algorithm ensures you’re only
ever invested in the top companies. Even in 20 years from now, say if 50% of
the companies that are currently in the S&P500 or the ASX200 were to go
bankrupt and fall off the face of the world – you don’t have to know about any
of it, and you don’t have to take any action.

The
ETF trading formula does it all for you.

In
addition, as this is the simplest, easiest to monitor trading strategy that
takes so little money to run, it is by far the cheapest way to invest.

So
the easiest way to invest, is also the cheapest way to invest. Winning.

But
not only that, this whole easy/cheap way of investing is backed up with a Nobel
prize. If you want to look into it more, it’s called Modern Portfolio Theory (https://en.wikipedia.org/wiki/Modern_portfolio_theory)

Like
all theories, it absolutely has it’s detractors, and the detractors have a
point. But I’m not suggesting this passive ETF investment strategy because I
think you’ll get the best returns. Absolutely not. This article is all about
80/20, and while you’ll never get in the top 20% of investment returns with
this long term investment strategy, do you really want to
spend 80% of your time, money, resources etc. going after that last 20%.

Nope.
Not me.

I
have exited my ego stage left when it comes to investing. I used to think I
could out-perform the market, and at times I absolutely have, but to do it
consistently is nigh on impossible.

And
here is why you shouldn’t be looking for that last 20% either – because it’s
just not a good use of your time or your headspace. I’ve written extensively on
decision fatigue (http://www.fundyourideallifestyle.com.au/decision-fatigue/),
and I’m a big proponent on the less you try to think about money, the better
you do in every other area of your professional and personal life.

So
how do you get your hands on these ETF’s? Well you can go out and open a
brokerage account, go online and find a risk profiling tool to see what mix of
ETFs you should have. Then decide which ETF you should buy, save up at least
$500 for each ETF, go back to your broker, pay the brokerage fee, and have a
portfolio you can log on to once every six months to look at.

Or
you can download the Raiz app, go about your day, spend your money, and have
the roundups get invested for you. For more information on Raiz fees, click here.

You
decide.

By
Clayton Daniel

Financial
commentator and author of upcoming book Fund Your Ideal Lifestyle.

Don’t have the Raiz App?

Download it for free in the App store or the Webapp below:

 

Important Information

The information on this website is general advice only. This means it does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the product.

A Product Disclosure Statement for Raiz Invest and/or Raiz Invest Super are available on the Raiz Invest website and App. A person must read and consider the Product Disclosure Statement in deciding whether, or not, to acquire and continue to hold interests in the product. The risks of investing in this product are fully set out in the Product Disclosure Statement and include the risks that would ordinarily apply to investing.

The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.

Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.

Read Post

By Ash McAuliffe

Q:
How do you eat an elephant? A: One bite at a time

It’s
a dad joke but a good one none the less, and it stems from a quote attributed
to Creighton Abrams: “When eating an elephant, take one bit at a time”.
Not only is this one of my favourite quotes, but it is one of the
underlying philosophies of the financial advice that I give my clients.

“In
my time in helping people hit their financial goals, one trend that stands out
is what I call the ‘Back-Burner effect’.”

The
conversation that I had this week with a new client was typical of so many
conversations that I have had with my clients over the years. He had a
financial goal and we were discussing the best way to get there and how this
goal should be prioritised against his other goals.  This was his biggest
goal, and thankfully had the longest time frame attached but as my experience
tells me, this meant that this was the goal that he was least likely to
achieve.

“Letting
a big important goal sneak up on you is a Financial FAIL.”

In
my time in helping people hit their financial goals, one trend that stands out
is what I call the ‘Back-Burner effect’.  This is where the less immediate
goals lose significance because they’re off in the distance, and regardless of
their importance, they don’t get the attention that the immediate
‘in-your-face’ goals do so the result is that these big, important, long-term
goals are neglected…. Which allows them to sneak up on you.

Letting
a big important goal sneak up on you is a Financial FAIL.

Back
to my conversation with my client… his exact words were “this is 15 years away
so I think I’ll sort these other things, get them out of the way, then in about
5-10 years, I’ll really smash this one”.  It’s safe to say that he wasn’t
really ready for my reaction (truth be told, neither was I) I stood up and at
the same time I slammed my hand on the table and said “NO WAY!…  This is
an elephant, you need to take your first bite now”

“what
is underestimated is the power of developing a habit of chipping away at your
goals”

He
had absolutely no idea what I was talking about… but who could blame him?

The
$100 per month that this guy can put towards his big, long-term goal (aka: the
elephant) today, is so much more powerful than the $500 per month that he will
maybe put towards it in 10 years.  This is because of the magic of
compound returns, but what is underestimated is the power of developing a habit
of chipping away at your goals.  Taking one bite at a time.

What
I tell my clients… repeatedly… is that whatever their goal, they
need to start now, even if it means starting small.

There
are so many cliché quotes/examples that I can give… “a journey of 1,000 mile
starts with a single step”.. ‘be the tortoise, not the hare’… give your goals a
‘death by a million cuts’, but the lesson remains….start.

Start
now, start small if you have to, but take one small step towards your goal
every single day.  You will get there sooner, I promise.

Ash McAuliffe CFP

The Asset Lab

Don’t have the Raiz App?

Download it for free in the App store or the Webapp below:

 

Important Information

The information on this website is general advice only. This means it does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the product.

A Product Disclosure Statement for Raiz Invest and/or Raiz Invest Super are available on the Raiz Invest website and App. A person must read and consider the Product Disclosure Statement in deciding whether, or not, to acquire and continue to hold interests in the product. The risks of investing in this product are fully set out in the Product Disclosure Statement and include the risks that would ordinarily apply to investing.

The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.

Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.

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 1.      An active
Acorns Grow Australia Account must be held (account balance greater than $5). Acorns account holders hold valid
accounts as set out in the product disclosure statement found on the website: www.acornsau.com.au.

2.     
Entries open Thursday 13^th October 2016 at 5pm and entries close Thursday 20^th  October 2016 at 5pm. To enter one must comment
on the designated post with the “reason why they are saving.” The finalists
will be selected by an independent adjudicator.

3.     
Four of the finalists will receive a $50.00 credit in their active Acorns Grow
Australia Investment Account. The winner from the five finalists will receive
$300 invested into their Acorns Account.

4.     
Finalists will be announced on Friday 21st of October 2016 and the Grand Prize
winner announced on Friday 28th of October. Winners will be announced directly
through Facebook.

5. Finalists must contact Acorns
via madison@acornsgrow.com.au
with the email address connected with their personal Acorns account. The prize
amounts will be made available in their Acorns within 3 days of this date.

6.     
The permit number in the format “NSW Permit No. LTPS/16/08287.”

7.     
This promotion is in no way sponsored, endorsed or administered by, or
associated with, Facebook. 

8.     
The competition is promoted by by Acorns Grow Australia Limited, Level 11/2
Bulletin Place Sydney 2000 NSW, 1300 754 748. ABN 26 604 402 815, who is the
Authorised Representative of AFSL 434776. The Acorns product will be issued in
Australia by Instreet Investment Limited (ACN 128 813 016 AFSL 434776) and
promoted by Acorns Grow Australia Limited (ACN 604 402 815). A Product
Disclosure Statement dated 27 May 2016 for this product is available on the
Acorns website and App. A person should read and consider the Product
Disclosure Statement in deciding whether or not to acquire and continue to hold
interests in the product. The risks of investing in this product are fully set out
in the Product Disclosure Statement, and include the risks that would
ordinarily apply to investing.

9.     
“Acorns” and “Invest the Change” are registered trademarks
of Acorns Grow, Inc. 

NSW Permit No. LTPS/16/08287

It’s
looking less and less likely as time goes on, but we have been thinking a bit
about what might happen in the markets if Donald Trump were to be elected
President of the USA.

He
hasn’t exactly inspired investors, and indeed the markets seem to be reacting
positively as his chances of being elected diminish. But are they making a
mountain out of a molehill? A good place to start is by looking at another big
political event in 2016, Brexit.

When
Britain voted to leave the European Union in June this year, the markets were
sent into panic mode. We saw the markets fall, then for a relative short period
movement up and down, as investors decided how they felt about Brexit. After
this period, everyone seemed to realise that Britain wouldn’t leave the
European Union any time soon, that a Brexit takes time, and that the world wasn’t
really burning down. The markets settled back and even rallied higher than the
pre-Brexit levels and calmness was restored.

Why
is this important?

Whilst
Donald Trump becoming President would certainly cause some uncertainty, it is
unlikely that he will be able to dramatically affect the USA or business as
many seem to predict. He does not have control of congress, he does not have
support of much of his own party and as President Obama found out, it is
difficult to enact significant changes or allocate funds for new projects –
such as building a wall between Mexico and USA – with this dynamic.

So
expect some short term volatility if the unlikely happens and Donald Trump
becomes President, but as we always remind Raiz investors, remain calm
and stick to a disciplined investment strategy!

Don’t have the Raiz App?

Download it for free in the App store or the Webapp below:

 

Important Information

The information on this website is general advice only. This means it does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the product.

A Product Disclosure Statement for Raiz Invest and/or Raiz Invest Super are available on the Raiz Invest website and App. A person must read and consider the Product Disclosure Statement in deciding whether, or not, to acquire and continue to hold interests in the product. The risks of investing in this product are fully set out in the Product Disclosure Statement and include the risks that would ordinarily apply to investing.

The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.

Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.

Read Post

By Clayton Daniel

I
was in South America a month ago visiting Machu Picchu with my dad. The bloke
is a mad dog old school traveller but was recently diagnosed with Parkinson’s.
As such we made plans to tick off the final item on his bucket-list together.

It
was awesome. Although between the both of us we have nearly seen every corner
of the globe, we had never travelled together. It meant a lot to both of us,
and I hope we get to do it again.

Now
before you hit the edge of the Amazon jungle and start the journey to the
mountain top ruins, the last main city you come across is Cuzco. Cuzco is a
strange melting pot of traditional Peruvian life, significant religious
influence and tourists.

And
even though there are tourists, the good news is the city doesn’t bend its own
culture to appease us like Thailand or Bali. As such it still seems
authentically Peruvian. It’s mostly safe (although I was robbed there five
years previously on a backpacking sojourn under a higher level of inebriation –
I consider it my own fault), and many of the buildings are from Inca times or
early Spanish settlement.

I’m
trying my best to set the scene because there was one massive difference
between this visit and my first visit five years ago – large numbers of people
standing in one corner of the town all on their phones.

Okay,
so I’m sure you’ve heard of this Pokemon game. It took something like a week to
become the most downloaded mobile game of all time. And I’m all for a video
games getting people out of the house. The only problem was, I didn’t see
anyone interested in their surroundings, all I saw was people looking down to
an item right in front of them.

This
event didn’t really impact me as it was the first time I had seen it, and
thought it was a weird Peruvian anomaly. Alas, when I turned up in New York
only a couple of weeks later I saw the exact same thing – just more people this
time.

As
I walked up to the south western entrance to Central Park, I noticed I was
surrounded by hundreds of people staring at their phone. In disbelief I
realised that again, everyone was playing Pokemon.

In
my first ‘senior moment’ as a thirty-three-year-old, I pushed a small amount of
air out of my nose which can only be described as respiratory disdain and
thought to myself ‘why are these people so focused on the small thing in front
of them, when they have all of this to experience’?

“The
issue is what is constantly being taught by formal education, and by the media
is that you have to ‘pay attention’ to your money” 

Thankfully
as I choose not to hold grudges towards large non-descript masses of people
casually enjoying their lives, I was easily able to continue with my
exploration plans, but I did take away this story as it works so wonderfully as
an analogy for how we interact with money.

The
issue is what is constantly being taught by formal education, and by the media
is that you have to ‘pay attention’ to your money. Staring at the amount in
front of you is more important than the bigger picture – the outcome of your
money. The passive point being, the more attention you pay to your money, the
better you will be with it.

“Of
course if you pay attention to your money you will be better with it…. The big
trick. The point every financial commentator misses is this: you don’t have to”

Now,
caveat. This is actually correct. I can’t claim otherwise
because I would be lying. Of course if you pay attention to your money you will
be better with it. I’m a perfect example of this. Ten years ago I knew nothing
about money. I dedicated my life to understanding it, and now I’m here.

But
guess what. The big trick. The point every financial commentator misses is
this: you don’t have to.

My
entire life for the last decade has been dedicated to understanding money. I
did an accounting degree, worked as an accountant before turning to financial
advice. A decade later, I know a thing or two about dollar signs followed by
numerals.

I
had the type of personality to do so. But what if you don’t? What if you don’t
want to pay attention? Does this have to mean you won’t be successful with your
money?

“Thinking
about money all the time on top of thinking about your career, your family, and
your own personal goals adds up. It’s called decision fatigue and is the plague
of our generation.”

I
no longer subscribe to the concept you have to become a monetary version of a
Pokemon player. To have your head down, only concentrating on the thing in
front of you. And the reason is, you probably find it all sensationally boring.
And that’s okay.

Thinking
about money all the time on top of thinking about your career, your family, and
your own personal goals adds up. It’s called decision fatigue and is the plague
of our generation. In fact unless you work with money, you should be doing
whatever you can to put as much distance between you and it so you can focus on
things that are important to you.

Money
is simply a facilitator of what you want out of life. What you want out of life
– your ideal lifestyle – should be the focus. Your money will ultimately fill
in the spaces to meet the direction you want to go.

If
you want a family, mortgage, a new car on lease – you will get that.

If
you want time to tick off a bucketlist with your old man before he shakes down
the mountain – you will get that.

If
you want to become rich at the sacrifice of family and time to yourself – you
will get that.

“Whatever
you choose to do with your life, the good news is you do not need to understand
money as well as Warren Buffet in order to wield it….There are shortcuts”

We
can’t have everything – you only get one life after all – but I’m a big
believer in everyone getting what they want out of life. There’s no right, and
no wrong, there is only those who have sat down to think about it, and those
who let the decisions happen to them without much thought.

Whatever
you choose to do with your life, the good news is you do not need to understand
money as well as Warren Buffet in order to wield it. You don’t need to dedicate
a decade of your life. You don’t need to stare at a screen infront of you and
miss the bigger picture. There are shortcuts.

Firstly,
decide what you want out of life. That’s a big point in a small sentence I know
– but it still deserves your time. If you don’t, the easy and default answer is
simply ‘more’.

Second,
put aside an amount for yourself to spend each week to fund your ideal lifestyle
today.

Lastly,
put aside an amount for yourself to spend later in life when you no longer
work. Medical science is getting quite good, so you’re not going to die anytime
soon. You’ll want some money to fund your ideal lifestyle in the future also.
And the best way to invest is low cost/low tax environments – but that’s an
article for next time.

Clayton Daniel author of upcoming book Fund Your Ideal
Lifestyle 

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Important Information

The information on this website is general advice only. This means it does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the product.

A Product Disclosure Statement for Raiz Invest and/or Raiz Invest Super are available on the Raiz Invest website and App. A person must read and consider the Product Disclosure Statement in deciding whether, or not, to acquire and continue to hold interests in the product. The risks of investing in this product are fully set out in the Product Disclosure Statement and include the risks that would ordinarily apply to investing.

The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.

Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.

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I
have a confession. Even though I’m a personal finance guy – I still waste
money.

Okay,
that actually feels quite good to say out loud.

I
mean, I do fairly well with my money management, but I am no Patron Saint of
Savings.

I
did however meet one last night. And while in some quarters this may be seen as
a laudable pastime, I have to say by the sounds of it, the juice just isn’t
worth the squeeze.

Let
me share with you a conversation I had over dinner last night. As a bunch of
guys in our late twenties / early thirties, the topic of money came up as we
critiqued the latest (and greatest) iteration of my upcoming book’s cover. With
that came questions about what my career has been in the personal finance space
over the last few years, and then one of them casually popped out this
sentence:

‘I
save 75% of my after tax income’.

What?
Excuse me? As the rest of us queried his definition, I sat in disbelief.

How
can someone in their late twenties, living in a capital city in Australia,
survive on 25% of their after tax income? But despite our best efforts to get
him to ‘fess up to his obviously incorrect calculations, he stuck by it. He
said his goal was to retire by 40, in which case he had 12 years to put money
aside.

Now,
I for one am not going to diminish his efforts. To his credit, he was the only
one not to join us at Baxter’s Inn later that night, so perhaps he
wasn’t facetious, but I will question one thing – his intention of retiring
at age 40.

It’s
this part of the story which makes the least sense to me. As someone used to
teasing out lifestyle plans, and bringing to light the inherent conflicts which
exist for everyone, I found the concept of someone young and full of ambition
putting forward the goal of ceasing to work as young as possible to be a
complete non-sequitur.

And
here in lies why money management is far more important than money itself. The
uncomfortable truth is – it’s only those who can work hard enough and smart enough,
and are successful enough at an early age are able to retire at age 40. And if
I was to present to you the exact type of person who doesn’t want to sit around
all day doing nothing – well it’s the exact same type of person.

So
this young gent, earning lots of money, hard working, and not spending any
money is going to probably achieve his goal of retiring early. The only problem
is, when he gets there – he’s not going to want it. There will be too many well
ingrained habits of early mornings and full days for him to simply wave goodbye
to it all.

I
don’t mean to call this guy out all alone, he is just another one of us. He’s
caught up in the emotional effects of money, has chosen a direction, but hasn’t
really played the end scenario out in his mind. At some point he learned of the
concept of an early retirement and had been impressed with the idea. As anyone
does, he would have went about figuring out how to achieve it, and set the
process in motion.

But
it’s a half baked idea. Early retirement is certainly not what it’s cracked up
to be. Infact most people are forced into retirement, they aren’t looking for
it. Generally, people want to do whatever they can to stay active, stay
important, and be productive as long as possible.

If
your goal is to ‘own 150 properties’ by the time you’re 50 so you can retire
early – you can do it. Vendor leasing isn’t exactly a dark art and I’m sure you
can figure it out. If your goal is to continuously travel the world and never
get swept up in the stress of city living – you can do it. There are endless
ways to make a few bucks online these days.

Whatever
your plan is – that’s great – just make sure your behavior and lifestyle
adjustments match the outcome. For our young and successful hero who wants to
retire at age 40, all that is going to happen is he is going to miss out of
some pivotal life stages with friends while his asset base grows, only to find
it wasn’t worth it when he gets to age 40.

So
what does your ideal lifestyle look like? What is it you want to build an asset
base for? Knowing this, and thinking it through clearly will not only give you
a target to hit, but ensure you are spending your time as well as your money in
a way that benefits you the most.

First
thing is to decide what you want out of life without any external pressures
pushing you in any direction. Then you figure out what to do with your money to
make it happen.

And
building a large asset base will absolutely be a part of ensuring you live your
ideal lifestyle in the future also, so how do you go about doing this.

Well,
once there was a time where you needed a real estate agents, solicitors, stock
brokers, or financial planners to invest.

These
days you need a smart phone and the Raiz app.

One
is expensive, time consuming, inaccessible, and overly complicated.

One
is cheap, quick, transparent, and easy.

I’ll
let you decide which one’s which. For more information on Raiz fees, click here.

–
Clayton

Author
of upcoming book Fund Your Ideal Lifestyle

www.fundyourideallifestyle.com.au

Important Information

The information on this website is general advice only. This means it does not consider any person’s investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the Raiz product.

The information in this website is confidential. It must not be reproduced, distributed or disclosed to any other person. The information is based on assumptions or market conditions which change without notice. This will impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz.

Past return performance of the Raiz product should not be relied on for deciding to invest in Raiz and is not a good predictor of future performance.

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As
we enter the 3^rd week of August,
the Northern Hemisphere is on holiday and it is no surprise that the markets
are confounding investor expectations, as they are meant to do in August.

In
the current low interest rate environment, it is all about yield!

Yield
is the income return on an investment, such as interest, a bond coupon, or a
dividend from and equity investment.

Negative
yield in debt means that the holder of a bond loses money on their
investment. With the amount of debt in negative yield
now at a staggering $13tn, it is no wonder that the main driving force for
equities will be the global hunt for yield. Which in turn is seeing increased
investment into the local Aussie market.

Thanks
to years of continued investor activism, top Australian companies pay higher
dividends and help produce one of the highest yielding markets in the world.
Compared to the S&P 500, which yields about 2.3%, the yield from ASX 200
companies is attractive, resulting in foreign inflows and leading Australian
companies being included in global yield ETFs listed in the US.

…and
it’s not just equity yield that is attractive in Australia, with AAA-rated
government bonds producing significant yield when compared to negative yields
you would receive from both countries and corporates with lower ratings.

Foreign
investment in the Australian market are also having an effect on the Aussie
dollar, which is on the rise despite the RBA cutting rates to record lows in
August. This rise in the dollar, coupled with mortgage lenders not passing on
the full rate cut to borrowers, has seen the RBAs recent decision completely
wasted. If it is a weakening in the dollar that the RBA are interested in, then
they may think twice about cutting again.

Investors
will be keeping a keen eye on the Australian employment report this week for an
indication to the strength of the economy!

Important
Note: The information is general advice and does not take into account any
person’s particular investment objectives, financial situation or investment
needs. If you are an investor, you should consult your licensed adviser before
acting on any information contained in this website.

Investors
only: The information in this Document is confidential it must not be
reproduced, distributed or disclosed to any other person unless it is part of their
statement of advice. The information may be based on assumptions or market
conditions and may change without notice. This may impact the accuracy of the
information. In no circumstances is the information in this Document to be used
by, or presented to, a person for the purposes of making a decision about a
financial product or class of products.

General
advice warning: The information contained in this Document is general
information only. It has been prepared without taking account any potential
investors’ financial situation, objectives or needs and the appropriateness of
this information needs to be considered in that context. No responsibility or
liability is accepted by Instreet or any third party who has contributed to
this Document for any of the information contained herein or for any action
taken by you or any of your officers, employees, agents or associates.

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