Finance & Fury Podcast

This week’s question is, ‘do I need a family trust?’. I have had a few questions about this over the past weeks, however in order to avoid making this ‘personal advice’, I thought I’d just talk about it in more general terms.   What is a family trust? Family Trust refers to a Discretionary Trust set up to hold a family's assets or to conduct a family business Established by a family member for the benefit of members of the 'family group' Established to hold assets for mainly two reasons: asset protection or tax purposes (will come back to this)   The Trust Settlor - settlor executes the trust deed and then, generally, has no further involvement in the trust Appointor – Has the power to add or remove trustees (controlling power) Trustee Role – the trustee is responsible for the trust and its assets broad powers to conduct the trust and manage its assets Types Individual – Can be mum and dad for instance, in a family situation Corporate – Company acting as trustee – Directors Additional layer of

Though banks bear much of the blame for previous financial crises, ordinary investors play a more central role than most people realise… …through greed, and fear. Ironically, it is likely to occur through a vehicle which has been created with just that in mind – exchange-traded funds, or ETFs Listed funds are passive by nature, designed to track the performance of an index of stocks, bonds, currencies or commodities, rather than to pick and choose among individual companies. The ETFs are very popular; The simplicity and low costs But they could be a time bomb for global markets. Australia – Only listed in Australia in 2009, when it was cheap to buy shares (after the GFC) The popularity of ETFs has soared in the past decade. Passively managed have nearly doubled = 40 per cent of Funds under management (in America) Vanguard alone owns a position greater than 5 per cent in 491 of the stocks on the S&P 500, adding up to nearly 7 per cent of the index's total market cap. Japan, where the central bank owns

This week we continue with where we left off last week’s episode - is it the Banks, or Government Regulation and interference, that causes financial crashes. Let's take a look back on America and their financial crashes through history   1873 – 1907 – Financial panic was common 1983 a bank panic triggered worst depression US had seen – Stabilised after J.P. Morgan stepped in – P. Morgan – The monopoly man, founder of J.P. Morgan Bank Speculation that J.P. Morgan caused this through spreading rumours 1907 – Speculation on wall street ended in failure – bank panic History: speculation that went awry - "stock operators" borrowed huge sums of money to finance an effort to manipulate a stock price In October 1907 - Mercantile National Bank attempted to corner the market of a copper mining stock. The operation failed, and the stock, which reached a price of 60 during the attempted corner, almost immediately collapsed to 10. Mercantile National Bank, was feared by the public to be bankrupt. The bank was s

Why has Telstra tanked? For so long, Telstra has been a Market Darling … a great dividend-paying share, almost like the world’s best term deposit…but what has happened? They are out of favour with investors for the past 3 (or so) years…   What has gone wrong: Telstra has warned investors to brace for a profit level at the lower end of its guidance range, but remains committed to a 22-cent total dividend payment. Telstra has blamed "challenging trading conditions" for a pre-tax and interest profit that is now expected to come in at the bottom end of a previously stated $10.1-$10.6 billion range. CEOs and price - History: Ziggy Switkowski – 1999 to 2004 – Oversaw the transition from government sector to privately owned, started in 1997. Went from $9 to $5. Sol Trujilo – 1/7/05 Went from $5 to $3.5 in his first year Back to $4.8 the next year, then down to $4.2 the next year Just before he left - $3 David Thoedy – May 2009 From a price of $3, it went to around $2.50 18 months later (at a low), but from t

Welcome to Finance and Fury   Welcome to the New Financial year – looking back on the year, are you in a better or worse financial position than you were this time last year? Today’s episode we’ll be looking at how to be in a better financial position this time next year.   Ways to get ahead in your finances The compounding effects of the little changes in behaviour and things you do everyday   What does a “better position” actually look like? In general terms – there are categories we can look at Build wealth – start investing Reduce tax Save money Increase income – Salary, investments Hard to generalise with these broad goals: That is where having predefined, specific goals comes in   What are your goals? “New Year’s Resolutions” Not many people stick to new year goals – Why? There can be too many. Normally people think this is good, to have a lot of goals But if these are similar to last year and you didn’t make it, why might that be? Hard to go from 0 to 100 overnight – Inertia – something contin

Welcome to Finance and Fury, the Furious Friday edition! Today’s misunderstanding is about the “Too big to fail” myth. I want to tell you a story. It’s probably a relatively unheard-of story… of our “Big 4” banks and their recent history.   The whole point of this is to answer: Are financial collapses created by too many regulations, or not enough?   The answer seems to be that more regulation is the only way to solve future financial crashes and any financial collapse has had some form of regulation come out of it as a result. But, the aim of this episode is to see if this has helped or hurt the economy and the banks overall   Warning: The banking system is pretty complicated, so there’s some points in this episode that might be pretty in depth. But that seems to be the whole point of the financial system: Make it so complicated not many people know what is going on. I have tried to make this as simple as possible so hopefully it isn’t a bore.   In this episode: What we will go through Banking sector: Verti

Welcome to Finance and Fury, “Say what Wednesday” Where we answer questions about the world of personal finance. This week, the question isn’t from a listener but a common one recently from people I have been meeting with. Best strategy for surplus cash: to reduce debt or use it to build wealth? Why is it important to ask this first? Finite resources – economic problem Wants and Needs – We have a lot of them Physical things Experiences like travel or going out Resources – A lot of things cost money – Which is typically more limited than our imagination Balancing act – Use what you have to get where you want to be Budget and Cashflow – What is left after everything is paid for? Things that reduce your cashflow Taxes – Decreases what you have left Lifestyle costs Debt – Mortgage What is spent on each, versus what is important  Now versus future needs – Your now needs will seem more important Uses of disposable income – A hard decision Factors that should help to determine: Stage of life and

Welcome! This week we will be talking about Estonia, which sits right on the Russian border, just below Finland. Anyone can become an e-resident in Estonia, create a company and operate it in the EU. Digital identity is probably the most significant legal and commercial and political concept we have in today's world Estonia is a very Digital Society - government services are provided online, including e-health, e-school, e-tax and e-voting. We will be focusing on Estonian e-Residency – As anyone in the world can become one   Estonian e-Residency You receive a government-issued smart ID card that provides digital identification and authorisation. you can digitally sign important documents, access secure services, and make secure transactions - even if you don't live in Estonia. E-residency does not grant citizenship rights or function as a travel document, but: as an e-Resident, you'll be able to Establish and run a company online Conduct your banking online e.g. make electronic bank transfers Have access

Welcome to Furious Friday… The Tax Bill has Passed…Yay! Now, let’s clear up a little misconception floating around, we’re going to talk about the Robocall that was made to a lot of Queenslanders. I wasn’t “lucky” enough to get one of these calls, but I can just imagine it was the same voice that does all the smear campaigns. It said: "Right now, in Canberra, Pauline Hanson plans to vote with Malcolm Turnbull to give another tax cut to the top end of town. She's even giving herself a massive tax cut. But it's not too late for us to stop her. Pauline is in Canberra right now – the final vote could happen at any minute. Press one to be connected direct to Pauline Hanson's office to tell her yourself: Stop selling Queenslanders out."   Questions of the day: Are these tax cuts going to the “top end of town”? And is this selling Queenslanders (and the rest of Australia as it is Federal) out? The plan is a 6-year rollout, aimed at reducing the burden on the full-time workers in Australia due to the progressive tax

Welcome to Finance and Fury, 'Say What Wednesdays' where each week we answer your questions.  This week's question is from Sandeep: “Hi, Can you please talk about how to purchase investment property using my superannuation?” Thanks Sandeep, great question! Buying property in superannuation First you need a Self-Managed Superfund (SMSF) An SMSF is a private superannuation fund, regulated by the Australian Taxation Office (ATO) that you manage yourself.  All other funds are managed by the Australian Prudential Regulation Authority (APRA) - the regulator of financial organisations (Banks and superannuation funds) SMSFs can currently have up to four members. All members must be trustees (or directors, if there is a corporate trustee) and are responsible for decisions made about the fund and have to adhere to compliance with relevant laws/ Superannuation Industry Supervision (SIS) Act When you run your own SMSF you must: carry out the role of trustee or director, which imposes important legal obligations on

Have your Super set up – do yourself a favour! What will kill your retirement? Not looking at your super now. Would you trade 15 minutes now for $350,000 in 30 years? That is all this episode is, little things now for the future self – not hard, and your future self will thank you. Tips on what you can do now with little effort or sacrifice to maximise your future   What is super? Most people think of superannuation as just something your employer pays into, which you can’t access until you turn 60 Even though your employer pays into super, that is your money! 9.50% on average Don’t care and why would you right? Out of sight, out of mind and decades away from becoming relevant. If you could log into your bank account and click a few buttons to save a few hundred dollars a year, would you? The real cost of super is opportunity cost – doing nothing now will hurt Any problem ignored long enough will grow – until it is too late Pay attention and make it work – don’t regret the future One thing I hear cl

Welcome to Finance & Fury’s ‘Furious Friday’! Today’s misconception – Is cheaper better, or do you get what you pay for? Met with a client this week for an initial appointment – He had been reading ‘The Barefoot Investor’ I haven’t read it, but he had a summary of the tips in the book. His biggest take away were on the cost of things – basically, lower cost is the best option. But is it? You pay for costs for a reason - to get something out of it! Super – Admin fees and Management fees Listed Investment Companies (LICs) – Management fees Very true that when looking at ‘like for like’ products – cheapest is generally the better option When comparing the exact same: for example, buying a car – If ‘Car A’ and ‘Car B’ are the exact same, you go for the lower costs Close substitutes: If things are really similar ‘Car A’ and ‘Car B’ (Mazda and Hyundai) – Might go for a personal preference But how do you compare things like investments or superfunds? Not all things are created equal Comparing solely on co

Welcome to Say What Wednesday - Today’s episode is a special one! Plus there’s a bit of an announcement at the end. This all started with a question I asked myself a few years ago. The question is: How can I increase the financial literary of Australians? The Back Story Started reading books about investing at age 12, played the ASX School Share Market Game as well Started investing at 16 years old, just before finishing school Went to Uni and did Commerce and Economics degrees Started in financial planning after graduating and never looked back I had a lot of financial knowledge, but my clients didn’t (which is why they were coming for advice!) I had a ‘Eureka!’ moment – most of the initial meetings I was having with clients was spent simply educating them on a few of the same basic principles. Teaching people was 60% of the job. Previously I hadn’t thought too much about the fact that people didn’t have the same background or exposure to finance as me; I was pretty naive starting out – I assumed everyone

Welcome to Finance and Fury Quick tips to help with making successful investments in property When property will work – and when it won’t! It is two-fold – How well the property works, and then what your own personal situation is like as well Situations that will work – essentially, doing well in property compared to not doing well Property Paying fair value or undervalue for the property - The first step is making sure that you don’t lose from the get go Don’t overpay – New builds can have the FHOG built in Or at least pay the fair value in an area that will grow Remember for a place where land values will go up – The property price will technically go down (remember to watch out for maintenance costs) Potential zoning and subdivision – future capabilities of the property What is the ability to increase prices? Zoning – growth of land value from high density zoning What are the limits on your ability to change the property? What is the ability to increase yields? Sub division – 2 incomes for one Du

Welcome to Furious Fridays! Make sure you’re caught up with last week’s episode about the system and what it should provide System - Inclusive Vs Extractive systems Inclusive - Equality of opportunity – everyone has access, same rights, no preferences Accountable – Can’t be extractive: held accountable and easily removable, transparent What system provides – what incentivises should be available Property rights – keep what you own Ownership of what you own and purchase, Patents Legal system - protect what you have, know deals are honoured Contracts Borrowing Public services – Well functioning state; police, infrastructure, education Use what the system provides – What has worked over history Extractive system – those that rise to power and keep it, sucking wealth up (short term for some) Inclusive system – those that do it on their own and keep it. Your incentive: increase the incentive of others to exchange money with you. System provides freedom – freedom of exchange of money is the first part You

Welcome to Say what Wednesday Today's question is from Emma. She says, “I'm new to the podcast so not sure if you have covered this in the past. I thought it might be cool to hear you analyse a specific stock or company; not like a recommendation but say something in the past. To avoid people taking it as a recommendation it could be something you have put money into and how it went or maybe something you lost money in and how that happened too.” Analysing stocks I’ll talk about the two camps of analysing shares Look at the pros and cons along with how they work Talk about how I personally do it, and a few winners and losers, what they did right and what they did wrong. The Methods of making stock analysis Fundamental Analysis vs Technical Analysis Fundamental analysis – Aims to value a share by its intrinsic (fair) value – valuation of shares Done by examining the financials, qualitative Why? Buy the undervalued or expected future performers Technical – Doesn’t care about intrinsic values Shares are t

Welcome – Today we're talking about controlling your behaviours and emotions...when it comes to investing Investing is an action, controlled by behaviours – emotions change your behaviours. Getting a good investment midframe allows you to invest well for the long term. How to start investing and not muck up – This means controlling your fear more than trying to control investments – Can’t control what investments do short term Fear is an emotion – Which stops you from investing Starting is the hardest part – Getting the right fame of mind and overcoming fear But staying motivated and on track is just as hard Life gets in the way – and new things happen in your personal life as well as market ups and downs How to start? “Needs-based” plans – ignoring your emotions Hard to know – “you don’t know what you don’t know” What are you trying to achieve? – If you don’t know your reasons to invest, you can’t answer this Long term growth? Passive income? How will you achieve this? Strategies and investment o

Introduction – Welcome to Furious Fridays Imagine you are a child North Korea - After school (which is mostly propaganda to solidify your ruler), 10 years mandatory military service No option to accumulate anything No way to start a business No way to buy your home Never own a car, telephone, or travel overseas Constantly looking over your shoulder, similar to Soviet Russia, 1 in 10 were government informants South Korea - Whatever you want – get a degree, buy a home South Korea out produces North Korea’s economic output by 37 times - $33,400 vs $1,800 GDP per capita (that is, per person) Live 10 years longer in south, infant mortality is almost 7 times lower So, what makes them so different? Capitalism!   Let’s look at the history: Korea WW2 – Japanese colony, then split North/South with Russia and America Korean War – June 25, 1950 North invaded south with Russian aid, America stepped in, demolished north with firebombs, they surrendered North – history – state run economy – founded by Kim Jung-il’

Welcome to Say What Wednesdays – Where we answer your personal finance questions each week. Two questions this week from Chris: No 1 what are your thoughts on investing through a platform such as acorns? In your opinion do you see it as reliable and a worthwhile investment option? Furthermore, with such platforms would you say that there is a degree of double fees being taken out (platform fees and ETF fees for underlying investments e.g. ASX ETF's) which erode earnings? No 2 What is the best way for people on a low income (around $25,000 p.a.), such as students and job seekers to start building a growth portfolio? Platforms What are they? – Ways to hold all of your investments in one place Types – three types Raiz (Acorns) – Investment application (app) Allows for micro investing – automatic investments Limited choice of options – Growth Option, etc Investment Platforms are a bit different Allows for accessing managed funds, shares at wholesale level Range of choices of funds Broking platforms Dire

Welcome to Finance and fury Financial Crash proof your Share investments There is no way to control the rise and fall of investments but focusing on what you can control makes all the difference! Behaviours lead to underperforming, or outperforming, the ‘market’ Firstly – What you buy and when Secondly – What you actually do when a “crash” occurs What is a correction or crash? Drop on prices – followed by mass hysteria – panic selling – further declines in investment values Shares can drop quickly – They are liquid Liquidity = How easy is it to sell shares and get your cash back The share market is a measure of crowd behaviour Positive feedback loops What triggers a crash? Prolonged periods of rising markets, excessive in the long term P/E far exceed long term averages Higher buying volumes Year on year large gains Then something spooks investors to think the good times are over If the markets think good times are done with, they will be Self-fulfilling prophecy – positive feedback loops