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Financial Strategy: Pathways To A Prosperous Future

Financial Strategy: Pathways To A Prosperous Future

We all look forward to creating a financially secure future. But how do you build security for tomorrow without sacrificing your lifestyle today – especially if you have a family to raise or a mortgage to manage?

There are many pathways to a prosperous future for you and your family. Your long-term financial strategy is likely to include everything from cash, managed funds and shares, to the family home and your super.

So it makes sense to follow the lead of the investment professionals and look at all your assets as a diversified portfolio.

By thinking about your assets as a portfolio, rather than a collection of separate investments, you can hone your financial strategy and make sure you’re getting the right overall balance between risk and return.

Creating a Financial Plan 

Most investors understand that there’s a trade-off between risk and return, with higher growth assets generally involving more risk. But what you might not realise is that the right mix of investments can give you better returns without driving up your overall risk. 

That’s because different asset types tend to rise and fall at different times, so the right combination can help you create a profitable financial plan. Your financial adviser can help you with how you should combine your assets to help achieve your objectives.

Before your first meeting with your financial adviser, consider the role each of your investments and how they contribute to your financial plan. 

Investing in brick and mortar

For many of us, the family home is a large part of our personal wealth – and we invest a large proportion of our income, and our lives, in paying it off this mortgage.

Currently, there are record-low mortgage rates, and it is a great opportunity to add to your financial plan and build a comprehensive portfolio, it could even help you pay off your home faster. 

Property can be a great long-term investment, but it is only one part of your portfolio. Property often adds quite a large value to your financial plan, but it is hard to access unless you plan to downsize down the track. That’s where the other assets in your portfolio come into play.

Investing in shares

History shows that shares are an outstanding long‑term investment, despite the short‑term ups and downs. Over the long‑term, Australian shares have outperformed most other investment options. With the benchmark S&P/ASX 200 returning 9.58% a year for the five years to August 2013, it’s an enduring – if sometimes volatile – way to grow your money. But it can be worth it with the right financial advice. 

 It is also worth considering investing in global shares. With the Australian sharemarket accounting for only 2.3% of the global sharemarket in August 2013, investing in global shares can provide additional diversification and investment opportunities for your portfolio.

You can invest in shares directly or through managed funds. For more information on the best way to access the share-market, speak with your Financial Adviser.

Get instant diversification with managed funds

Managed funds are a great way to take advantage of the benefits of a diversified portfolio without the effort of constructing it yourself. This means your money is pooled with contributions from other investors, and you can draw on a wider range of opportunities. Opportunities may include large infrastructure projects (such as airport or energy production plants), bonds or other assets that require multiple investors.   With a huge range of funds to choose from, it’s easy to find a fund with an appropriate balance of risk and return for your financial strategy. This depends on whether you’re looking to grow your money over the long term, earn an income today, or something in between.

Invest tax-effectively with super

When we think about our investments, we too often forget about our super. Yet your super is likely to be your biggest asset after the family home.

Like a managed fund, super isn’t a separate asset type, but a vehicle for investing across a range of different assets. One of the main differences is that super can be extremely tax-effective.

Generally, you’ll pay less tax when you put money into super – less tax on your investment returns and less tax when you take it out. So compared with a non-super investment, super can give you more value from every dollar you invest.

For example, making salary sacrifice contributions lets you add to your super from your pre-tax salary. Instead of being charged your normal tax rate, these payments are taxed at just 15%. So if your normal tax rate is more than 15%, you’ll effectively get more for your money than if you had invested from your after‑tax income.

Similarly, earnings in super are taxed at a maximum of 15%. But if you are over the age of 60 when you access your super, any lump sum or income payments you receive will usually be tax-free.

However, while super may be one of the most tax-effective investments, it must be preserved until you reach your ‘preservation age’ – this means for most of us you can’t access it until you reach at least 55 years of age (and up to age 60 for others).

So it makes sense to treat super like any other investment and give it the attention it deserves. That means thinking carefully about your super investment options and ensuring you’re managing them actively to achieve the outcome you need. 

Financial Strategy with Master Your Money Now

At Master Your Money Now, we can help you develop a financial strategy that can help you diversify your portfolio and fits your current financial situation. We are Geelong-based financial advisers, but we can help people all over Australia with our online financial planner tool. If you would like to get started, book in your strategy NOW!

If this is a topic that you would like to discuss in more detail, please go to www.MasterYourMoneyNow.com.au/getstarted to book in your complimentary 30-minute strategy session.

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Disclaimer: This information is general information only.  You should consider the appropriateness of this information with regards to your objectives, financial situation and needs. Past performance does not guarantee future returns.

Chris Carlin is an Authorised Representative (No. 1235031 for financial services and No. 514748 for credit) and Master Your Money Now Pty Ltd ABN 65 627 229 681 is a Corporate Authorised Representative (No. 1265677 for financial services and No. 514747 for credit) of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL and Australian Credit Licence No. 236523

 

 

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