Click to access this newsletter online

Visit our Web Site

In this issue:

Touching Base

All about…

Market Volatility

Financial Year-End and the start of another one!

Spotlight on…Renee Dow

Quarterly Investment Review & Outlook

Staying in touch

Welcome to another edition of ‘CommonCents’. In this addition we continue to update you on the current market volatility and some well documented and well proven tips on weathering this storm.

Can I encourage you as markets continue to have their ups and downs to keep talking to us! Over 20 years of managing money I have found those clients who stay connected and keep communicating their concerns with us are the ones who upon our advice have faired the best and have investments and financial security to prove it.

Thank you also the many who have called specifically to congratulate us or wish us the best with the new merger of KFG Wealth Management into the Bernie Lewis group and the formation of Bernie Lewis Wealth Management. If you have not been around and somehow have not heard the news then stay tuned as no doubt you will hear from more from us and if you are a news reader, both the Financial Review and The Advertiser regularly run comments or statements from members of the team.

Scott Kirkwood

Director

Back to top

Market Volatility

Investors have certainly had a bumpy ride lately. Over the last 12 months or so , we’ve seen the markets finalise it’s tremendous rise, fall, and then rise again to settle on values down from the highs reached in mid-2007.

So where to from here?

Key events, past declines & recovery

I have included your information chart titled "History of the Australian Sharemarket 1900–2007". The chart illustrates how the Australian sharemarket has historically, and will continue to, experience declines and volatile periods. Event occur which will impact the sharemarket in the short term, however the sharemarket has historically recovered and delivered solid returns over the longer term. Timing of this recovery is uncertain and this is why investing for the longer term is important.

Source: Mercer, ThreeSixty.

The chart above shows the calendar year returns for the Australian sharemarket from 1982–2007. The chart shows that out of these 26 calendar years, 7 have produced negative returns, while 19 have been positive. The important message is that Australian shares have been and are likely to continue to remain a solid investment option.

The table below highlights the best and worst full months for the Australian sharemarket (S&P/ASX 300 index) since July 1982 (representing a period of just over 25 years). It shows the volatility of markets, both positive and negative, and reinforces long term investing.

Source: Mercer, ThreeSixty.

MLC, Australia's second largest superannuation provider in Australia, offers some top tips for weathering the recent volatility in investment markets.

Brian Parker, MLC Investment Strategist, said "the recent weakness we have seen in Australian and global shares follows five years of amazing double digit returns – these returns were never going to be sustainable over the long term."

"In an environment of increased volatility, what's important is that people don't make knee jerk decisions. To keep you focussed on your goals during volatile times, keep in mind the following six insights."

1. Stay loyal to your long-term investment strategy – forecasting market returns in the short-run and making short-term changes to asset allocation are both mugs' games. Most people have a time horizon of decades for their superannuation fund and short term market volatility is nothing more than distracting noise. Sharemarkets generally reflect the broader economic environment so investors must expect periods of low or negative returns during weaker economic conditions. However, the reality is that markets bounce back and eventually return to and surpass previous levels.
2. It's time in the market, not timing the market that matters – over shorter time periods (up to a few years) sharemarkets are inherently volatile places. What is unusual is not the volatility of recent times, but rather the lack of volatility over recent years. Over the past 25 years, there have been 13 corrections in the australian market (where the market has fallen by at least 10% from its previous closing high). However, most of those corrections now barely show up on a chart. Investors in shares need to be invested for the longer term.
3. Don't bail out early and miss the market recovery – reacting to market corrections is a dangerous investment strategy, because it often means you miss out on the subsequent rebound – the average 12 month return after a correction has occurred has been 9.4%. Missing this return would have a dramatic impact on your overall wealth. History has numerous examples of sharemarkets tumbling, and nervous investors bailing out, only to miss an eventual recovery.
4. Diversification is king – Investors with a well-diversified investment strategy that has been formulated as part of a long-term financial plan should not be unduly concerned with the markets' recent moves. The aim of diversification is to ensure your investments don't all move in the same direction at the same time, without compromising your long-term returns.

Back to top

Financial Year-End and the start of another one!

It’s hard to believe another Financial Year has come and gone.

At this time of year you’re hastily tracking down those receipts, booking appointments with Accountants and crossing your fingers about the size of that tax return! It's now too late to reduce last years tax but its the perfecct time to start this years planning.

Here are some clever ideas to consider as we commence this financial year to prevent you missing out or leaving your planning to a mad rush in June 2009.

Super year-end strategies if…you have a young family

When you have a family, raising kids and providing for them takes up all your time and energy.

Retirement can feel a long way off when you’re busy paying school and day care fees, making mortgage payments as well as focusing on your own career and relationships.

But by taking action now, even in the smallest of ways, you can set yourself up to live well when you do stop working.

And tax-time is a great opportunity to assess how putting more into your super may benefit you now, and in the future.

Here are three great tips to consider:

1. Salary sacrifice

It’s not really about sacrifice! It’s about taking advantage of the fact that the money you put into super from your pre-tax salary will only be taxed at a maximum rate of 15%.

This could make a big difference to your retirement savings, as your marginal tax rate can be up to 46.5%*.

2. Invest personal assets in super

The tax-effectiveness of saving through your super fund can be really powerful. This is because investment earnings are taxed at a maximum rate of 15% and all benefits received at age 60 or over are completely tax-free#.

With this is mind, why not consider cashing in an asset and making a personal after-tax super contribution? This strategy works really well if your money is currently invested in a term deposit or other asset where you won’t have to pay capital gains tax (CGT) on withdrawal.

And even if you do have to pay CGT on assets such as shares, the tax benefits of super may more than offset the impact of CGT.

3. Top-up your super with help from the Government

If you earn less than $60,342^ pa you could be eligible to receive a Government co-contribution to your super.

To qualify for the full co-contribution of $1,500 you generally need to make a personal after-tax super contribution of at least $1,000, and earn less than $28,980^ per year.

A reduced co-contribution may be payable if you contribute less than $1,000 and/or earn between $30,342^ and $60,342^ pa.

Super year-end strategies if…you’re about to retire

Everyone wants to retire comfortably and enjoy the good life after years of hard work. And super is one of the best ways of achieving this.

Here are two super strategies to consider if you’re in the pre-retirement phase.

1. Grow your super without reducing your income

If you’re an employee aged 55 or over, there is a way to save more for your retirement without reducing your current income. It involves:

• arranging with your employer to put part of your pre-tax salary into a super fund
• investing some of your existing super in a ‘Transition to Retirement Pension’ (TRP) and
• using the regular payments from the TRP to replace the income you sacrifice into super.

If you’re self-employed, this strategy still works if you invest some of your business income in super as a personal deductible contribution instead of making salary sacrifice contributions.

2. Put more into super now

Making salary sacrifice or personal deductible super contributions can be a great way to boost your retirement savings.

But if you want to invest larger amounts in the lead up to your retirement, you may need to act quickly.

This is because the current cap of $100,000 pa that is available to people aged over 50 or over will reduce to $50,000 from 1 July 2012.

Want more? Four fast year-end strategies

1. If you… have a spouse who earns less than $13,800^: Make an after-tax super contribution on their behalf so you can receive a tax offset of up to $540 and increase your spouse’s retirement savings.

2. If you… are likely to receive a bonus from your employer: Salary sacrifice your
bonus into super rather than receiving it as cash. This reduces the tax on your bonus by up to 31.5% and allows you to make a larger after-tax investment.

3. If you… are employed or self-employed: Pre-pay 12 months’ income protection insurance premiums. This allows you to bring forward your tax deduction and pay less income tax this financial year.

4. If you… have received capital gains from your investment: Trigger a capital loss by selling a poor performing investment that no longer suits your circumstances. This way you can use the capital loss to offset your taxable capital gain and save tax.

For more clever year-end strategies, contact my office.
Financial year-end is also a good time to…

• If you haven’t already, remember to supply your tax file number to your superannuation fund to avoid facing additional taxes on your contributions.
• From 1 July 2008, certain personal income tax thresholds will increase. If this means you will be paying less tax in the next financial year, consider using the money to reduce debt, build wealth or take out insurances.

* Includes a Medicare levy of 1.5%.
# If received from a taxed super fund (not an untaxed fund such as certain Government or public sector schemes).
^ Includes assessable income plus reportable fringe benefits.

Source: Mercer, ThreeSixty

Back to top

CC: How long have you been in the financial services industry?

RD: Nearly 6 years.

CC: How did you get into financial planning?

RD: Whilst employed at a local credit union I had the opportunity to work with our Financial Planning referral partner and through this experience I came to realise the importance of financial advice. Soon after I was fortunate to be offered a position within the firm working as a Client Services Officer and commenced studying for the Diploma of Financial Services (Financial Planning). As my education and experience progressed I was able to move into Para Planning where I have continued to grow and develop.

CC: What do you like most about being in the financial planning business?

RD: Helping people is my passion so the chance to be part of a client’s journey and assist them in bringing their goals to fruition is always very fulfilling for me personally. I relish the opportunity to educate and empower people to achieve a greater level of financial security, freedom and control over their future.

CC: What types of people do you think benefit from seeing a financial planner?

RD: Everyone can benefit from financial advice! No matter what stage of life you’re in or how much money you have meeting with a financial planner can help you to clarify what’s most important to you, both now and in the future, and implement a plan to make it happen.

CC: Tell us about your worst moment in financial planning?

Building relationships with clients to help them on their journey is what financial planning is about, so when that relationship comes to an end due to their passing, whether it is an elderly client, or a client who is unexpectedly sick, it is always a difficult time.

CC: And your favourite moment?

RD: For me nothing is more fulfilling than when I’m able to see that we’ve made a positive difference to a client’s situation. The opportunity to work with a group of people that share my passion makes coming to work everyday a joy.

CC: What do you do when you’re not working at BLWM?

RD: I enjoy keeping fit, spending time in the great outdoors, reading for pleasure, listening to music, dancing, watching movies and supporting the arts.

CC: What do you think is the biggest challenge facing people today regarding their finances?

RD: A journey of a thousand miles begins with but a single step and yet that first step always seems to be the most difficult to take. We lead such busy lives and as a result all too often we get caught up with day to day life and routine and end up putting off doing the things that are really important. The sooner you start on the journey and begin planning for your future the more likely it is that you will achieve your goals and live the life you dream of.

Back to top

The Investment Review & Outlook for March 2008 is available by clicking here.

The Australian economy

A moderation in domestic economic growth can be expected as the year unfolds, reflecting the expectation of further tightening..….read more.

Australian shares

Volatility within the Australian share market continues with all companies having completed their..….read more.

The global economy

The economic news from the US continues to be weak. There is a downward revision.….read more.

International shares

Further falls in equity markets, a further rally in US Treasury markets (lower yields), and a falling.….read more.

Back to top

Whether it is just for a quick chat or to make an appointment, you can contact us by telephone:

(08) 8300 8300, fax (08) 8415 2701 or on email infowm@bernielewis.com.au.

Office Locations

Back to top

Please note: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.

© 2008 Bernie Lewis Wealth Management

Bernie Lewis Wealth Management Pty Ltd, ACN 124 080 682, is an Authorised Representative of GWM Adviser Services Limited, ACN 002 071 749, an Australian Financial Services Licensee with it’s registered office at 105-153 Miller Street, North Sydney NSW 2060.