Financial Independence Retire Early (FIRE)
Financial Independence Retire Early (FIRE) is a growing movement that challenges the conventional idea of retirement. While traditional retirement often happens in your 60s, FIRE poses a question: “Why not much earlier?” Based in frugality and strategic investing, FIRE shifts the focus of work from being a lifelong necessity to a temporary means to an […]
The Nastiest Problem in Finance: Retirement Drawdown
Nobel Prize-winning economist Bill Sharpe famously described the decumulation of assets in retirement as the “nastiest, hardest problem in finance”. Whilst accumulating wealth largely depends on a few straightforward factors, how much you save and the length of your investment timeframe, managing drawdowns in retirement is far more complex and uncertain. The risks related to […]
SMSF vs Industry Fund: Fees
There is significant debate about when a Self-Managed Super Fund (SMSF) becomes cost-effective compared to low-cost industry funds. Unfortunately, unbiased analysis on the topic is rare. Proponents of SMSFs often exaggerate the costs of industry funds by focusing on their relatively more expensive blended investment options. Conversely, advocates of industry funds tend to inflate the […]
The Randomness of Investment Returns
Diversification is known as the cornerstone of successful investing. The logic is straightforward: by spreading your investments across multiple sectors, you can reduce the impact of poor performance in one area, creating a smoother overall return. What is less widely appreciated, however, is the sheer unpredictability of returns within a diversified portfolio. While many investors […]
Equal Weight ETFs
The growing concentration of index funds into the largest companies has drawn increasing criticism, particularly from proponents of active management. This critique echoes familiar arguments about an “index investing bubble,” a topic we’ve explored previously. As with any perceived problem in finance, there is of course a product to solve it. For concerns about concentration […]
Retiring Into a Crash: Sequencing Risk
“Shares perform at around 8 – 10% per annum over the long-term” While broadly accurate, and perhaps even understated in recent years, this statement can give future retirees a false sense of security. Investors generally understand that share markets don’t move in a straight line; instead, their performance is marked by cycles of booms and […]
Industry Fund Insurance
Industry super funds manage the majority of Australians’ retirement savings. With low fees and generally good performance, it’s hard to argue for an alternative option for most people. They also fulfil the insurance needs for many Australians as well. Specifically, they offer Life, Total & Permanent Disability (TPD), and Income Protection cover. For many who […]
Is Index Investing a Bubble?
The performance of actively managed equity funds has consistently failed to lure investors away from low-cost passive strategies. This is hardly surprising, given that roughly 90% of active funds underperform their benchmark index over the long term. But, of course, it can’t be the strategy’s fault. No, the market itself must be the issue. Some […]
Redraw Facility vs Offset Account
While both options reduce the interest on your loan, the similarities stop there. Offset accounts and redraw facilities operate very differently from one another and using the wrong one can have serious consequences. Many in the finance space will use these terms interchangeably and suggest that there is little difference between using one instead of […]
What is a Separately Managed Account (SMA)?
According to data from State Street, separately managed accounts (SMAs) are now used by the majority of financial advisers (56%). The use of SMAs represents a significant change from the historical service provided by advisers, which was formulating and managing a portfolio for their clients. An SMA allows an adviser to outsource this function to […]
Buying Property to Save Tax: Depreciation
Depreciation schedules are a key marketing tool for property developers, often highlighted to attract buyers seeking significant tax deductions. The appeal is clear: compared to established properties, new properties often offer thousands of dollars in additional tax benefits each year, thanks to higher depreciation rates. For investors, this can seem like an opportunity to reduce […]
What is a Wrap Platform?
A wrap platform is the financial adviser’s most utilised tool. It allows them to build portfolios for their clients, both for superannuation and personal investments. Conveniently, it also allows for smooth processing of the annual fee deductions that form the lion’s share of an adviser’s revenue. Anyone who has seen an adviser will likely have […]
Family Trusts: Are They Worth It?
A family trust can be a powerful tool for managing and protecting your family’s assets, but it’s important to weigh the costs before deciding to use one. At its core, a family trust is a type of discretionary trust used to hold assets for a family. A discretionary trust is so named because the trustee […]
Superannuation Death Tax
It’s generally well known that Australia doesn’t levy any form of tax on inherited estates. It is one of the few OECD countries not to do so. There is one exception, however. Superannuation. Certain beneficiaries of a superannuation payout can often pay 17% tax upon some of the funds that they receive. This article reviews […]
The Investment Property Trap
It’s rare for a first home to become your forever home, especially in today’s property market. Most buyers treat their first home as a stepping stone toward their dream home—whether it’s a small apartment in the city or a place in a less than ideal suburb. For many first-time homebuyers, this approach makes sense and […]
Should We Feel Sorry for Active Fund Managers?
Funds management is undeniably lucrative. A 1% fee on billions of dollars in assets quickly adds up, and better still, that fee gets collected even in years of severe underperformance. It’s almost as if fund managers exist in a golden industry where poor performance isn’t met with a corresponding dip in revenue, so long as […]
The Paradox of Bitcoin Investing
This article explores an apparent paradox between the underlying motivations for investing in Bitcoin and the justifications commonly offered by investors when discussing their choices. While many claim to support Bitcoin for its revolutionary potential, the reality of their investment motivations may tell a different story. These competing reasons may ultimately cancel each other out, […]
The Tax Problem with Industry Super Funds
The superannuation of most Australians sits within an industry fund. There are numerous benefits to this; low fees, generally great returns and access to multiple investment options. However, they have a problem. It’s a problem that is relatively unknown but could have a large impact on the future income you may be able to draw […]
Investment Bonds and Overhyped Tax Benefits
Investment bonds remain a relatively niche product for Australian investors. However, this is not due to a lack of effort from those with vested interests. In particular, some financial advisers have been highlighting their supposed benefits extensively on social media. The benefits being proposed are very attractive and may seem a no-brainer for a non-informed […]
Index Funds vs Active Funds
This article is an introduction to the concepts of index and active investing and how they differ. This will serve as a basis for future articles that explore these areas in greater detail and with more editorial leeway. The debate between index investors and active investors has raged since the invention of the index fund […]
