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| Welcome, |
| Welcome to the Summerhill Group’s Spring newsletter – a combined publication for both Summerhill Financial Services and Summerhill Financial Management.
Shares have just topped two consecutive years of big losses, leaving many investors feeling pessimistic for the future. While there’s still a long “worry list” for growth-oriented assets (including shares), we’ll explore why that “worry list” might not be so worrying after all.
For the more technically minded, we take a look at the risk equity premium of shares over bonds, and why the prospective return differential today is far more attractive than it was at the height of the last bull market in 2007.
And what about housing? With the recession said to have “bottomed”, what effect will that have on already-rising prices? And where does it fit in your investment portfolio?
But if it’s your personal ability to manage your own cash flow that has you worried, fear not: we now have the perfect solution! See the article on our new personal bookkeeping service, which will give you greater understanding, therefore control, over your cash flow. The result? You can make more informed decisions about spending and saving.
Our clients know Summerhill supports Western Chances (including nearly $4,000 for the 2009 financial year), but we’ve also come across a great program that helps children in out-of-home care. Called The Real Pressie Club, the idea is you have a celebration, but in lieu of buying you a present your guests donate to the Club (via you), with the money buying a gift for a child in care. It’s applicable for adult milestones, children’s parties and, with Christmas coming up, perfect for Kris Kringles. (No more “inappropriate” office presents!)
On a personal note, Caroline has completed two more professional certifications.
Having finished the ASX Accredited Listed Product Program has increased her knowledge again on listed investments. She is also now a Life Risk Specialist, one of a select few as the first graduating class within the Financial Planning Association.
What do they mean for you? That your financial adviser has the most up-to-date knowledge and skills to guide building and maintaining your wealth - even more important in today’s climate.
And with the financial year just finished, we’ve also included some timely articles on tax issues.
As always, we appreciate and welcome your comments and questions on both the newsletter and the services we provide to you.
Enjoy the read,
Caroline and Andrew
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| Worried about the ‘worry list’? It’s better than you thought |
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Shares have just topped two consecutive years of big losses. Such a slide has resulted in a long “worry list” for shares and other growth-oriented assets – indebted consumers, inflation off the back of ballooning budget deficits and central banks pumping money, worrying demographic trends, and so on.
Some investors are pessimistic: the temptation being to assume just more of the same. However, as we’ll see, the “worry list” might not be so worrying after all.
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| Reasonable Travel Allowances – what are they? |
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For those required to travel for their work and business, they may be paid a travel allowance from their employer to go towards covering their costs whilst travelling away from home. Generally, allowances received may be considered to be income and required to be declared in the tax return, with then the ability to claim deductions for costs incurred to which the allowance is being paid.
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| Summerhill donates $3,901 to Western Chances |
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Helping people achieve their goals is what Summerhill Financial Services does. So it makes sense for us to support a community program with the same aim.
Western Chances helps talented and self-motivated young people in Melbourne’s western suburbs to realise their potential. Since 2003, it has awarded 1,430 scholarships to 599 young people, with an average value of $1,000 per grant each year. This means they’ve invested more than $1 million directly to young people.
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| Chasing the Inflation Dragon |
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After spending last year fretting about the damage to economic growth from the global financial crisis, many investors are now worrying that policymakers’ medicine may prove too effective.
The fear is that the stimulus injected by central banks, via interest rate cuts, and by governments, via additional spending and tax reductions, will create an intractable inflationary spiral that will force interest rates sharply higher and erode the value of fixed income assets.
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| House prices are rising – why? And what will happen now? |
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At 6%, Australian house prices didn’t dip nearly as far as those in the USA and UK (32% and 19%, respectively) and already prices are rising again. So what happens now? And how does housing compare with other investments?
Despite fears of the big declines we’ve seen in the USA and UK, Australian house prices did not plunge dramatically – indeed the average drop remained well in single figures.
Yet, after “only” falling 6% from their early 2008 peak to the March quarter (a big enough drop for those trying to sell), house prices have begun to recovering, with Australian Bureau of Statistics’ data showing average gains of 4.2% in the June quarter, confirming rises already seen in private-sector surveys.
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| ‘It’s the bottom’ says the Fed with ‘level’ words |
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With the change of just one word, the US Federal Reserve has called a quiet end to the recession, while in Australia, it seems to be all hands on “deal deck”.
Is it over? Are we there yet? Can we breathe a sigh of relief? According to economics commentator Alan Kohler of Business Spectator, “yes”.
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| The Real Pressie Club |
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Instead of buying into the excess of modern gift giving this year (after all, who needs “extra bric-a-brac”?!), have your celebration but put gift money towards helping children in care.
Kris Kringles, birthdays, anniversaries, (second) weddings, overcoming serious illness … whether it’s celebrating life’s milestones or team building, it gives us a sense of achievement.
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| Handling insurance in uncertain times |
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“Times are a bit tough right now, so we’re cutting back on the non-essentials. I’m thinking of dropping my life insurance – because I hope I don’t need it! – and picking it up again when times are better.”
While it’s tempting to think of life insurance as a “non-essential”, it’s not. If you think you can’t afford the premiums, look at it this way: you are so reliant on the income you do have, that you need to sustain it! That means, your life insurance premiums are essential, not discretionary spending. |
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| Personal bookkeeping services |
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If you are concerned about “just where” your money goes, and would like a greater understanding of how much you spend on what, then Summerhill Financial Services’ new Personal Bookkeeping Services are for you. But rather than being a “big stick”, the knowledge will give you greater understanding, and, therefore control, allowing you to make more informed decisions about spending and saving.
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| NSW intestacy laws changing |
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We all know that making a valid Will means our estate will be handled the way we want, plus is optimised for our loved ones - yet nearly half of us don’t have one. Law changes in NSW that might see everything go to an estranged spouse, could, however, be the impetus to change that.
Intestacy law in New South Wales will change from March 2010, part of bringing succession laws across Australia into line. States that haven’t followed suit, soon will.
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