Australian personal finance news, tips and advices.
by George
For most people, buying a home is the most significant financial investment they will make. A sizeable loan is usually required, and repayments are generally spread out over many years. Therefore, it’s important to also invest a little time into understanding your options and getting a deal that suits you. Let’s begin by learning the basics of how a home loan works.
Before discussing the different types of home loans it will help to understand what all home loans have in common. ... (read more)
by George
Modern Australian households typically involve both parents engaged in occupations outside the home, or a single parent working full or part-time in order to make ends meet. The Australian Government provides Paid Parental Leave for parents or primary carers of newborn children. Paid Parental Leave can be provided for up to 18 weeks.
Paid Parental Leave is available for the primary carer (usually the birth mother) of a child. You will need to meet Australian residence requirements, and earn less than $150,000 during the year prior to the date of the child’s birth. If you are employed, you will need to be on leave or not working for the duration of your Paid Parental Leave. You will also need to satisfy the work test requirements. ... (read more)
by George
Understanding how interest affects your home loan is an important step in the loan process. Even if the interest rate remains relatively low it will still add up to a large portion of your total repayments over the duration of a 25-30 year home loan term.
Many people misunderstand how interest is calculated. For example, when investigating a $100,000 loan at 10% interest, a novice borrower might think the total amount of interest to be paid will be $10,000. ... (read more)
by George
Renovating a home can be one of the most fulfilling achievements for a home owner or investor. However, when things go wrong (as they inevitably do) your renovations can turn into a financial nightmare. Taking out a home renovation loan that is tailored to your needs can be one of the most astute financial decisions you will ever make.
Understanding which home renovation loan best suits your project is the first step toward a successful outcome. The ‘plan’ in financial plan is more than just an idea; it’s an essential factor in making sure you add maximum value to your premises. Unless you have savings set aside for your home renovation, you need to understand what type of loan best suits you. ... (read more)
by George
Value investing is one of the simplest stock investment strategies, and also one of the most effective. You don’t even need to be a finance whiz or undergo a course in chart analysis. Value investing strategy means locating quality stocks that are presently undervalued. In other words, if you know the value of something and purchase it at a discounted price, you will get a bargain – and then make a profit.
There are just a few easy fundamentals to master in understanding value investing.
A dollar saved is a dollar earned is a common expression every discerning shopper understands. By educating yourself regarding the intrinsic value of goods you can save a lot of money over time. Buying company stocks is no different. According to demand, the value of a product will fluctuate, although the product itself is unchanged. It makes no sense to pay the full price when you know that a product will be on sale sooner or later.
Company stocks are subject to the same variables. Discounts will arise, but not at predictable times as in the retail market. Educating yourself regarding the intrinsic value of a company is the first step in value investing. Then, when the sale price comes, you will be poised to purchase stocks at bargain prices that other investers are unaware of.
A lot of factors are taken into consideration when constructing an efficient-market hypothesis (EMH). However, markets factor in a bewildering host of indicators that often do more to confuse rather than clarify investment strategies. Some investors who think they have mastered the hypothesis, actually believe that stocks cannot be incorrectly valued due to the abundance of company data available.
Progressive companies such as Clime Value Investing think otherwise. Data is mostly gathered from past performance indicators and doesn’t always reflect present circumstancs – nor can it fully predict investor response to emerging trends. For example, an underpriced stock could be the result of an economic downturn caused by unexpected events or national (or global) recession. Alternatively, an overpriced stock may be the result of excited investors jumping onto an unproven technology bandwagon.
A key principle of value investing is to keep a margin of safety. A value investment strategy means your chances of earning a profit on stocks is greater. Also, in the event of a stock not performing to expectations you are less likely to lose money. It’s important to distinguish ‘junk’ or speculative stocks from those with solid foundations where value is expected to rise.
A good rule of thumb for a margin of safety is to buy stocks that are performing at around two-thirds of their actual value, thereby maximising returns while minimising risk on a genuinely deteriorating stock.
Value investment isn’t a get rich quick scheme providing instant rewards. Long-term capital gains incur a lower tax than short-term gains, so there is no reason to become impatient. In fact, it could be several years before your stock returns to expected highs. Nor is value investment a guaranteed win on every occasion. Savvy investors understand there will be losses, but it’s the bottom line that counts. Gains that outweigh losses equals profit, and value investment supported by Clime Value Investing professionals is a strategy designed to tip the balance in your favour. Waiting until the time is right to invest is a significant feature of value investing strategy.
Avoiding the herd mentality ensures you don’t jump in and buy overpriced stocks. There is no such thing as a permanently flat line on a stock market chart, and value investors are educated regarding company financials and the expectation of a bounce-back for a company with sound business fundamentals.
by George
Although there are variations in property law for different Australian states, the terms of contract usually transfer insurance risks from seller to buyer as soon as the contract is signed. The time between signing the contract and final settlement is most commonly between four to six weeks, with many people unsure of their need for insurance during this period. A legally binding contract also includes fine print, and every word should be fully understood before entering into what, for most people, is their greatest financial investment.
The seller has an obligation to take care of the property between the sale and settlement dates, ensuring there is no property deterioration during this time. Even if the property becomes the buyer’s risk prior to settlement, it’s a good idea to remain insured until settlement. The property would otherwise be uninsured if the buyer doesn’t insure for the sale/settlement period.
The buyer should take out an insurance cover note as soon as the contract is signed. In some cases the buyer may not immediately be notified at the time the seller counter-signs, meaning the investment could sit uninsured for a period of time. Some insurance companies offer free insurance for the duration between signing the contract and settlement date, so it can pay dividends to investigate various insurance company policies.
If the land is vacant at the time of purchase, a buyer can use public liability insurance during the construction phase. As soon as building finishes, it’s time to invest in a comprehensive insurance policy covering both the land and building, including improvements such as carpets, fixtures and furniture.
The body corporate insurance responsibility is for common property, including common walls and other building or property assets. The buyer should insure for unit contents and public liability.
In the case where the buyer is uncertain, an insurance premium covering the building and contents will safeguard against any unforeseen events. Once it’s determined that the body corporate has appropriate building insurance, the buyer can cancel any unneccessary building insurance.
Buyers should understand the difference between being an owner-occupier and being a landlord. If your property is going to be rented out following settlement you will require a policy suited to your needs. A standard building and contents insurance policy will not cover every scenario. Risks include:
In every case, it’s in the buyers best interest to investigate all insurance options, carefully study the insurance policy, and take out appropriate insurance to cover any situation that could affect you as the home or property owner.
by George
Based on the monthly and yearly comparison reports of the Federal Chamber of Automotive Industries (FCAI), car dealers are having a tough time in Australia, especially in WA. The national year-to-date (YTD) average declines in vehicle sales was -2.5% in August 2014. Western Australia is leading this negative list with -8.3%, followed by Tasmania and Queensland with -7.1% and -5.4%, respectively.
The report doesn’t have state specific statistics about vehicle types, but in overall “passenger” vehicle sales decreased by 5.4% year-to-date, as well as light and heavy commercial vehicle sales. The only growth was reported in the SUV market, +3.7% year-to-date. The FCAI report has more details about the passenger type vehicles. Micro, light, small and medium categories decreased, while large, upper large and people movers increased YTD. The sports category had a 7.8% decrease.
In the SUV market, small SUVs had the best and only positive performance (+15.7%); therefore, the SUV market increased mentioned in the previous paragraph is due to the small ones. In overall, it’s not looking too good and it’s interesting to compare these numbers with the Australian automotive industry’s monthly product volumes. The FCAI website has data about the monthly production volumes and it can be seen that 14% less vehicles were built during the first two quarters of 2014 than the previous year. The product volume has been decreasing since 2013.
The tough market situation might be good if you’re planning to buy a car, because you have a better chance to get a larger than average discount from car dealers. As far as I know, car dealers make profit on service, not car sales, so you should compare prices and fight for a good discount.
by George
Price of the Great Australian Dream – An infographic by the team at vouchercloud