Financial PlannersNews Standrads in Investment Property Home Loans

Loans Harder to Come By for Property Investors

Financial advisors in Perth and across Australia are working even harder lately, thanks to the Australian Prudential Regulation Authority (APRA). In December 2014, the APRA announced that measures would be implemented to decrease the ratio of investment property home loans to owner-occupier home loans. *

The response for many lenders has been to make the standards for investment property home loans tougher, using tougher income tests and lower loan to valuation ratios. In addition, even though the Reserve Bank of Australia (RBA) cash interest rate is at an all time record low, most major banks are raising the interest rate for home loans on investment properties.*

Dr Shane Oliver, Chief Economist and Head of Investment Strategy for our parent company, AMP Capital, recently gave his opinion on what this means for the property markets and for small property investors. Here are some of the highlights.*

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Financial PlannersNewsWealth Protection Emergency Buffer Fund - Financial Planners Perth

How Large is Your Emergency Buffer Fund?

We have provided financial planning for a lot of your Perth neighbours; our financial planners have more than 40 years’ combined experience. When we are getting to know your financial situation, we like to find out what your assets and liabilities are so we can devise a way to get you to where you want to be when you want to be there.

One of the questions we like to ask is, “How much money do you have set away as an emergency buffer fund?”

Emergency Buffer Fund?

We know that getting through life to the next paycheck is tough for a lot of people. That’s why we feel it is important to have money stashed away in case things go awry. We are not allowed to provide any individual advice on this blog. If you want individual advice, you have to come in for a consultation. Everyone’s finances are different and blanket statements aren’t always valid for everyone.

That being said, a good “rule of thumb” is that three months’ worth of income is a good “buffer” to have in case of emergency. There are many factors that can affect how much of a buffer is appropriate for you. Some of those factors include, excessive debt, one income supporting a household, self-employment, an old car for transport or living expenses that exceed 50% of your take-home pay.

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Financial PlannersInvestment Planning Handling a Volatile Investment Market

Tips for Handling a Volatile Investment Market

Financial advisors, in Perth and across the world, are expected to make sense of what can sometimes be a volatile market for investors. At Approved Financial Planners, we have been a trusted name in the Perth market since 2005. We are now backed by parent company AMP Capital, giving us even more resources and information to help investors weather “storms” or volatile periods in the markets.

One of those resources is Dr Shane Oliver, who is the Chief Economist and the Head of Investment Strategy and Economics at AMP Capital. Recently, on the AMP Capital blog, Dr Oliver provided tips for investors during times of volatility. We would like to share them with you.

Expect Volatility

According to Dr Oliver, one should expect the market for shares to be volatile. He sees it as “the price you pay” for the eventual long term gains that shares typically produce. For example, Dr Oliver sees recent global volatility as “just a correction” that won’t affect long term returns.*

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Mortgage BrokingNews Real Estate Investment Trusts Popular In Perth

Why Real Estate Investment Trusts are So Popular

Some financial planning professionals in Perth are recommending real estate trusts as an investment vehicle. Recently, the Head of Listed Real Estate for AMP Capital, Mark Ferguson, wrote an article for the AMP Capital blog, called “Australian real estate investment trusts—the right time to invest?”*

The article referenced the fact that Australian Real Estate Investment Trusts (REITs) on the S&P/ASX 200 A-REIT list have delivered a three year return to investors of 18.4$ in the three years ending 31 July 2015. Past performance is not indicative of future performance. They listed four main reasons for investing in REITs.*

Strong Risk-Adjusted Returns

The REIT sector is now seen as a “defensive” investment that offers a high yield. They became popular as a defensive investment shortly after the Global Financial Crisis (GFC). Mr Ferguson expects the market to “be more discriminating,” making the highest quality property portfolios managed by the most conservative capital policies more popular.*

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Financial PlannersNews Teach Children To Save - Financial Planning Perth

Teaching Children a Lifetime of Good Financial Habits

Any Perth financial planner can tell you that it’s never too early to start saving money, but we are serious about it. We believe that children should be taught good financial habits as early as possible. MoneySmart, the website of the Australian Securities & Investments Commission (ASIC), agrees with us.

Recently, we spent some time on the ASIC website and looked at an article called “Teaching Kids About Money.” According to ASIC, it is more important to teach kids about money now than in any previous generation. They believe that teaching kids about money will help them make better decisions as adults.

Budgeting, Spending and Saving: Crucial Skills

ASIC recommends teaching children how to budget, spend and save money as early as possible. They see it as a vital part of a child’s development. They have a video on the website called “Teaching kids how to budget to become financially savvy.” We recommend this video to children. Not only does it do exactly what it says, it also tells children about two MoneySmart apps: Budget Planner and TrackMySpend.

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NewsWealth Protection Start Protecting Your Hard-Earned Money

Is it Time to Start Protecting Your Hard-Earned Money?

Wealth protection is an important component for those planning their financial futures. We have helped many Perth residents do just that since 2005. When helping our clients save and produce income for their retirements, we see protecting that money as equally important. So do our friends at the Financial Planning Association of Australia (FPA), who recently wrote an article called “You’ve worked hard for the money, now it’s time to protect it.”*

According to the FPA, statistics indicate that Australians approaching retirement can expect to spend an average of 23 years between retiring and passing on. For some, their money could run out in as little as ten years, forcing them to rely on age pension as their sole source of income.*

According to the FPA, saving for retirement should be a “fundamental financial priority,” but so should protecting that income, especially for those in their “last few years in the workforce.” Many who are in their last few years of working aren’t as healthy as they were when they were younger and may not have enough sick leave to cover illness.*

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Financial Planners Active Asset Allocation Must Be Done Correctl

Why Active Asset Allocation Must Be Done Correctly

Financial planning, in Perth and across Australia, is a field that is constantly evolving. Recently, Dr Shane Oliver, Chief Economist and Head of Investment Strategy and Economics at our parent company, AMP Capital, published a wealth of information on active asset allocation.*

We would like to share some of the information with you to help you understand the importance of allocating your assets correctly.

Overview

In the long term, growth assets such as shares can provide huge returns due to compound interest. However, growth assets regularly go through periods of high volatility. This causes some investors to react to periods of low value by selling these assets off and resorting to cash investments, which don’t often produce losses but don’t produce long term returns, either.*

The key, according to Dr Oliver, is to use one of two strategies. The preferred strategy is to stick with assets for the long term and take advantage of the growth. However, Dr Oliver also recommends what he calls a “rigorous approach to dynamically varying the asset mix” if one can’t hold onto an investment long term or wants to take advantage of cyclical swings in the markets.*

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Investment PlanningNews Three Straight Years of Good Returns for Diversified Investors

Three Straight Years of Good Returns for Diversified Investors: How Long Will it Last?

The investment planning industry has had three great years. In Perth and across Australia, the past financial year produced a third consecutive year of “solid returns for investors,” according to AMP Capital Chief Economist, Dr Shane Oliver. Dr Oliver projects returns to “slow” in the coming year, but still provide “reasonable” returns. *

He attributes this to steady share evaluations and an economy growing fast enough to be healthy but slow enough to stem inflation. Here’s why.*

The Overall Outlook

Diversified investors who “moved beyond cash” saw solid returns. The average of superannuation fund performance was 9.9%, marking three consecutive financial years of growth at 9.9% or over. *

International equities ($A) provided a 25% return on investment (ROI). Australian listed property provided 20% ROI; global listed property returned 10%; international equities (Local) returned 9% and direct property returned 8%. Australian equities, Australian bonds and global bonds all returned 6%. Cash investments had the lowest ROI at 2.6%.*

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Investment PlanningNews Pitfalls of Property Investment

Do You Think Property Investment is a “Sure Thing”? Think Again.

Perth financial planners field a lot of questions about property investment on a daily basis. The concept sounds simple: purchase an investment property in a hot Perth suburb, rent it out and wait for capital gains to outperform all other forms of investment. But does it really work that way?

The Pitfalls of Property Investment

We have helped plenty of investors with well-managed investment property portfolios do well. So we aren’t saying that you can’t make plenty of money with investment property. However, there are plenty of pitfalls that can stop property investors before they gain a foothold in the market. Here are a few of them.

Unexpected Expenses

Were you ever a renter? Think back to what happened when something went wrong. Did the air conditioner go out? Did your roof suddenly spring a leak? Did an appliance such as a refrigerator or oven stop working? Do you remember who fixed the roof, replaced the appliance or bought a new air conditioner? It was the property owner.

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Financial PlannersNews Steady Capital or Sustainable Income

Do You Need Steady Capital or Sustainable Income?

As providers of a wide range of financial services in Perth, we have helped a lot of your neighbours achieve their financial goals. However, there is no such thing as a “one size fits all” investment because everyone’s individual situation is different.

One of the basic questions we like to ask our clients is whether they are looking for steady capital or sustainable income. Recently, our parent company, AMP Capital, addressed the effects of the low cash interest rate on cash investments. While a low cash interest rate is good for the economy, it tends to reduce the value of cash investments such as term deposits.*

As you probably know, the cash interest rate is still at a record 2.0%. For comparison, it was at 7.25% in August 2008 and 4.75% in November 2011. *

Cash Investments

Term deposits and other cash investments have traditionally been regarded as “safe” investments because the value of those investments is usually stable. Historically, interest rates have been enough, even when in a “low” cycle, to provide adequate return on investment (ROI). However, interest rates are now at record low levels.*

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