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Friday, 21 January 2022
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There are plenty of voices on both sides of the inflation argument, but the ultimate impact of COVID should be deflationary. Australia is one of the last places to expect worrying signs of inflation rising.
The impact of the pandemic on Australia's debt and deficit has forced the government into borrowing on a scale unimaginable at the start of 2020. What are the implications, and what is even more important?
The 60/40 diversified portfolio has been the mainstay of the superannuation industry for decades. But it is built on a fundamental principle of defensive bond returns, and its time is nigh.
Going back to June 2019, investors would have questioned the logic of diversifying away from outperforming growth assets. But when markets feel at their best, it is paramount to keep a perspective on long-term goals.
Do you think investors can only lose heavily on bonds if the credit defaults? When bondholders accept 0.88% for 100 years, there is great potential for serious pain somewhere along the journey.
Australian bond rates are now lower than during recessions and depressions of the past, but it's not driven by local fundamentals. The world of interest rates is in a place it's never been before in history.
We like a good debate, and when two opposing views argued about the role of government bonds in a diversified portfolio, a veteran of 30 years in fixed interest stepped in as referee.
Government bonds do not feature in most retail portfolios, but they carry defensive qualities with income to offset the higher risks in other asset allocations. Are they always worth including?
Government bonds produced good returns last year, but at the current starting position of lower rates, the cost of defensiveness is probably a limited payoff.
Bonds have performed well for most of the last 30 years with a tailwind of easing liquidity, but the current high prices makes them vulnerable to losing their protective qualities.
Argentina's economic history shows there's no room for complacency, as the markets often lose their ability to judge risks in the wild search for performance.
A sign that the strong credit cycle is ending is the funding of some emerging market governments that are more than likely to default, but demand is driven by desire for yield regardless of risk.
Most people entering retirement do not see a financial adviser, mainly due to cost. It's a major problem because there are small mistakes a retiree can make which are expensive and avoidable if a few tips were known.
Eligibility for the Commonwealth Seniors Health Card has no asset test and a relatively high income test. It's worth checking eligibility and the benefits of qualifying to save on the cost of medications.
The focus is on Magellan for its investment performance and departure of the CEO, but Douglass says the pandemic, inflation, rising rates and Middle East tensions have not played out. Vindication is always long term.
This is our annual checklist of what retirees need to be aware of in 2022. It is a long list of 25 items and not everything will apply to your situation. Run your eye over the benefits and entitlements.
The Warren Buffett/Charlie Munger partnership is the stuff of legends, but even Charlie admits it is coming to an end ("I'm nearly dead"). He is one of the few people in investing prepared to say what he thinks.
Depending on personal circumstances, it may be time to rethink the bias to paying down housing debt over wealth accumulation in super. Do the sums and ask these four questions to plan for your future.