Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 138

A lifetime of investing insights

Looking back over the last quarter of a century, the main theme – despite the enormous changes during the period – has been history repeating itself. Bust follows boom, boom follows bust, and today’s investment fashion is quickly replaced by another.

In fact, when I was at the State Library of Queensland researching newspapers back to 1988, I was struck by how often the same headlines kept popping up.

But there are two crucial factors that are unique to the world we live in today – rising life expectancies and record low interest rates. It is the perfect storm, because people retiring now face the daunting prospect of making their money last as long as they do. Many are averse to growth assets like property and shares, which they regard as ‘risky’, but the grim reality is that sticking with low-earning cash may be the riskiest strategy of all over the long-term.

By 2017 a couple with assets in excess of $823,000 (excluding the family home) will not be eligible for the aged pension. Yet, if all they have is $900,000 in bank accounts, their income may be just $18,000 a year – not much more than half the aged pension that is paid to a couple with no assets. And running down capital to become eligible for the aged pension is a dangerous strategy indeed. The present rate of aged pension is unsustainable in the long term, which means further tightening of pension eligibility is a certainty. There may well come a time, sooner rather than later, when the question will be asked “Why should a couple with $500,000 of financial assets be eligible for welfare?”

And there’s more. Already there are moves to remove the asset test exemption for the family home currently enjoyed by age pensioners, to bring in universal land tax on the family home, and to tinker with superannuation even further. These ideas will gather momentum as the number of retirees grows, and government budgets come under further pressure. All spell tougher times for senior citizens.

Fortunately, there are lessons to be learned too: one for each main stage of life.

If you are young it is surely obvious that you will need to rely on your own investments when you retire; governments around the world are running out of money. Understand that you have one unique advantage – time – and start a savings and investment programme now to give compound interest time to work its magic.

If you are middle-aged, medical advances sure to occur in the next 30 years make it an odds-on bet that you will make it to 100. Therefore, it makes sense to form a relationship with a good financial adviser as a matter of urgency and get yourself a quality growth-orientated portfolio. It is my strong belief that shares are the only asset that will give you the returns you are going to need and the sooner you get acquainted with them, the less scared you will be when markets go through their regular down periods and the papers have a field day with scary headlines.

If you are elderly, dramatic medical advances may come too late for you. It is quite likely that you will face the challenge of running two homes, with one partner in care. It’s natural to dodge this issue of accommodation but the sooner you face it the better you may be able to cope. Home care is becoming the norm and will be much easier if your home is able to be equipped for people who need assistance.

For everybody, building or retaining wealth is an important part of achieving a comfortable family lifestyle now and in the future. This means being aware of probable futures and having the resources to cope with whatever challenges lie ahead. It is my fervent hope that my new book will make a significant contribution to helping you take control of your future, and achieve your goals.

 

Noel Whittaker has been a great supporter of Cuffelinks since the day we started. He ran his own financial advice company, Whittaker Macnaught, for 30 years, and in 2011, he was made a Member of the Order of Australia for raising awareness in personal finance. For more than 25 years, his articles have been published in leading newspapers and journals. He has personally selected his highlights and brought them together in one book, ’25 years of Whitt and Wisdom’, which can be ordered on the link here.

 

RELATED ARTICLES

OK Boomer: fessing up that we’ve had it good

Time to build a super system fit for retirement

There’s more than one way to fund a retirement

banner

Most viewed in recent weeks

Lessons when a fund manager of the year is down 25%

Every successful fund manager suffers periods of underperformance, and investors who jump from fund to fund chasing results are likely to do badly. Selecting a manager is a long-term decision but what else?

2022 election survey results: disillusion and disappointment

In almost 1,000 responses, our readers differ in voting intentions versus polling of the general population, but they have little doubt who will win and there is widespread disappointment with our politics.

Now you can earn 5% on bonds but stay with quality

Conservative investors who want the greater capital security of bonds can now lock in 5% but they should stay at the higher end of credit quality. Rises in rates and defaults mean it's not as easy as it looks.

30 ETFs in one ecosystem but is there a favourite?

In the last decade, ETFs have become a mainstay of many portfolios, with broad market access to most asset types, as well as a wide array of sectors and themes. Is there a favourite of a CEO who oversees 30 funds?

Betting markets as election predictors

Believe it or not, betting agencies are in the business of making money, not predicting outcomes. Is there anything we can learn from the current odds on the election results?

Meg on SMSFs – More on future-proofing your fund

Single-member SMSFs face challenges where the eventual beneficiaries (or support team in the event of incapacity) will be the member’s adult children. Even worse, what happens if one or more of the children live overseas?

Latest Updates

Superannuation

'It’s your money' schemes transfer super from young to old

Policy proposals allow young people to access their super for a home bought from older people who put the money back into super. It helps some first buyers into a home earlier but it may push up prices.

Investment strategies

Rising recession risk and what it means for your portfolio

In this environment, safe-haven assets like Government bonds act as a diversifier given the uncorrelated nature to equities during periods of risk-off, while offering a yield above term deposit rates.

Investment strategies

‘Multidiscipline’: the secret of Bezos' and Buffett’s wild success

A key attribute of great investors is the ability to abstract away the specifics of a particular domain, leaving only the important underlying principles upon which great investments can be made.

Superannuation

Keep mandatory super pension drawdowns halved

The Transfer Balance Cap limits the tax concessions available in super pension funds, removing the need for large, compulsory drawdowns. Plus there are no requirements to draw money out of an accumulation fund.

Shares

Confession season is upon us: What’s next for equity markets

Companies tend to pre-position weak results ahead of 30 June, leading to earnings downgrades. The next two months will be critical for investors as a shift from ‘great expectations’ to ‘clear explanations’ gets underway.

Economy

Australia, the Lucky Country again?

We may have been extremely unlucky with the unforgiving weather plaguing the East Coast of Australia this year. However, on the economic front we are by many measures in a strong position relative to the rest of the world.

Exchange traded products

LIC discounts widening with the market sell-off

Discounts on LICs and LITs vary with market conditions, and many prominent managers have seen the value of their assets fall as well as discount widen. There may be opportunities for gains if discounts narrow.

Sponsors

Alliances

© 2022 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.