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Humble Investors – The New Investor Website

By on March 1, 2013 in Featured, Five Ways To Invest, humble savers commentry, Newsletter, Questions for humble savers, Retirement

HI Symbol

A quick message to our humble savers readers – We now have a new website up and running called

Humble Investors have been created for our readers who are wanting greater investment knowledge.

It has been written for the Aussie investor, however, much of the content will be useful no matter where you are from.

The website is unique as the content is coming directly from professional financial advisers and associated businesses. You hear all the latest investment news directly from the people who are helping their own clients to secure financial security.

Each financial adviser at Humble Investors will have their profile ‘on show’ and with one click you can ‘connect’

We would appreciate if you came along and visited the Humble Investors website. Any constructive feedback would be appreciated.

Humble Investors - Your Advice Hub

Important – humble savers will continue as a money saving website. You will notice more direct money saving opportunities over the coming months.

 

To join the the investment buzz at Humble Investors, just click on the link below

Click To Visit Humble Investors

A big thanks from the humble savers team for all your support.

 

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Is Now The Right Time To Invest In The Stockmarket?

By on January 3, 2013 in humble savers commentry, Questions for humble savers, Quick Money Saving Tips

Is Now The Time To Invest Into The Stock market?

Important – Please Read

This post has become very popular during 2013, even more so since the Dow Jones hit new peaks and closing at new highs in March 2013. The information is more important than ever.

You shouldn’t get carried away with the  new found found enthusiasm for the stock market, just as you shouldn’t become disillusioned when it falls.  A couple of key points to always remember with the stock market:

  1. The Market tends to rise by the staircase and fall with the elevator – Good gains can be wiped out very quickly
  2. For you to be 100% sure that now is the right time to buy, you need someone else just as convinced that now is the right time to sell. That’s how the market works, you need buyers and sellers

The rest of the post has not been changed other than minor changes to the numbers that occurred in Jan 2013.

Cheers and please read on.

This Post has been updated to reflect market conditions to January 3, 2013

Question – The world’s stock markets do appear more stable when compared to the last few years, so is this a time to get into the stockmarket?

Answer – It doesn’t matter if now is the right time, it depends if you have the right investment time frame and the right investment risk profile to invest in the stock market.

As we have witnessed over recent years, the stock market can be very volatile. It can fall in value and wipe out many years gains in a short space of time.

The markets right now may look cheap, a bargain you might say. Below is a brief chart of three major stock market indices highlighting their peaks (highest valuation achieved) and their current valuations. The ‘Growth to Peak’ highlights the growth required from their current valuations to reach their previous peak.

Peak*  Now** Growth to Peak
Dow Jones (US) 1,4198 13,391 6.03%
ASX 200 (Aus) 6,829 4,740 44.07%
FTSE 100 (UK) 6,731 6,047 11.31% 


 *Peak dates: DOW - 09/10/2007, ASX - 01/11/2007, FTSE - 12/10/2007


** Current (Now) dates: January 3, 2013


If you take the view that stock markets always regain their losses and post new highs (history suggests this always happens), the stock markets do look attractive


The Australian Market  will need to gain 44.07% to reach it’s previous peak. However, there are no guarantees that this will happen. For example, Japan’s stock market is still well off its peak that occurred in 1989!


The chart also highlights how tricky it is to make the right investment. By comparison, the Australian stock market is easily the furthest from its peak. Yet Australia, unlike most of the western world, did not suffer a recession during the global financial crisis and the economy continues to look very strong compared to the US and UK.


Back to the critical questions for you


Your investment time frame – If you need your funds for a short to medium term goal, such as buying a new house, the stock market can be very risky. Ideally, your time frame should be in excess of five years.


Your investment risk profile – There are two key elements to your investment risk profile


    

  1. Your personality – ‘Can you sleep at night when stock markets are falling?’
    2. 

  2. Can you afford the losses?
    3. 



As we saw in the global financial crisis, most people understood the basic premise of the investment risk associated with the stock market, i.e. Knowing that losses will occur. However, as the losses accumulated many investors couldn’t sleep at night and decided to sell, often at the wrong time.


We have also witnessed investors who were not financially prepared for a major downturn in the stock market. The most affected investors were those had borrowed funds for their investments (often referred to as margin loans). Many investors had to sell their shares at the worst possible time to repay the loans upon receiving a margin call from the bank.


If you have the time and you can afford to suffer losses, then the stock market could be a good option right now. Just be prepared for a rocky road. And never forget:


For you to buy a stock, you need a seller who believes it is a good time to sell!


Important – general advice only. You should always seek professional personal advice before investing.


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What is a Financial Comparison Interest Rate?
                    
                    
By  on August 27, 2012  in Debt, Questions for humble savers, Quick Money Saving Tips   

                    
                    

                    		                    
Comparison Interest RatesOver the past few months here in Australia, there seems to have been a steady rise in car commercials pushing an ultra low interest rate, described as a Comparison Interest Rate. We have been asked a few times about this ‘Comparison Interest Rate’ and should it be trusted.


What is a Comparison Interest Rate compared against?


This is the most common question. However, the rate is not compared to a specific benchmark.


The rate is calculated using a standard formula that incorporates:


    

  • The amount of the loan 
    • 

  • The fees associated with loan 
    • 

  • The repayment frequency
    • 

  • The interest rate.
    • 



With each financial institution following a set formula it will make it easier for you, as the consumer, to make a ‘comparison’ of the loan repayments against competing financial institutions.


The introduction of the comparison rate was to try and stamp out the ‘dodgy’ practice of using different and often confusing methods of calculating interest rates and allocating hidden fees.


What type of loans should show a Comparison Interest Rate?


The loans need to be for personal use and for fixed periods of time. For example, a five year car loan and a 25 year home loan will need to be shown at a comparison interest rate.


As Credit Cards are not for a fixed period of time, they are not required to show a comparison interest rate. 


Advertised Comparison Interest Rates


The comparison interest rates advertised should follow a standard criteria. Currently, for car loans this should include the fees, be a five year term and for $30,000. For home loans, it will need to include the fees, a 25 year term and at $150,000.


Can the Comparison Interest Rates be trusted?


For the most part – yes. As with any finance deal, you do need to check the fine print for any other fees and penalties that may be incurred. For example, late payment fees.


Because the advertised rate follows a fixed period of time and a fixed loan amount, the actual rate could well be different for your particular loan versus the advertised comparison interest rate. However, if you seek home loan quotes from different financial institutions for the same loan, the comparison interest rate will be a good guide to the total cost of your loan.


Are all the fees included?


Fees associated with the normal operation of the loan are included. However, as indicated earlier, fees that could be issued such as late payment fee and other penalty fees are not included.


IMPORTANT - Fees not associated directly with the loan, such as Stamp Duty fees are not included.


What else do I need to know?


You should view the comparison interest rate as a handy ‘tool’. As we know, financial institutions are out there marketing loans and will do whatever it takes to pitch their deal in the best possible light.


For example, be wary of car deals as they may bump up the price of a car but give you a low interest rate. You think you got a great interest rate deal, but you end up paying too much for the car!


Your job is to review the loan details and if you have any doubts about anything, ask questions until you are completely satisfied that you know exactly what you are getting into.


And one last point - The interest rate, no matter how it is described, is only one factor in the decision making process. Consider the quality of the institution, penalty fees and the service that your mortgage broker and/or finance dealer can provide.


 You may also like:



 


Image: FreeDigitalPhotos.net

                    	                    

        			
                    		
   
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Five Ways To Save Money – Money Myth Busters
                    
                    
By  on May 10, 2012  in Five Ways to Save, Questions for humble savers   

                    
                    

                    		                    
Which money myths are true and which are falseWhat are money myths? Money myths are those old sayings that are repeated so often that they become myths. They are very popular with many people living by them as a guide for creating and protecting their wealth.


Which money myths are true?  We take a look at five popular money myths and deliver our verdict. 


 


1.    Where there’s muck there’s brass (money): Our verdict - TRUE


An old English saying believed to have originated out of Yorkshire. The presumption is that working in ‘muck’ (dirt to manure), can create brass (slang for money) as few people want to work with muck.


In Australia, the BRW 200 Rich List for 2011 shows that four of the top five wealthiest individuals all made their fortune through mining. They mine for coal, gold, copper and iron ore in the Australian red dirt.


The real working miners, the ones who actually do the hard work are also doing just fine. The miners are averaging over $2,172 as a weekly wage. This is far better than their ‘white collar’ friends from financial services who are earning $1,374 per week.  (Source: Suncorp Bank Wages Report 2012).


The evidence strongly suggests that this myth is true.


2.    Penny wise, pound foolish: Our verdict - TRUE (most of the time!)


The saying assumes that obsessing with small things (pennies) will hold back from making sensible decisions with bigger opportunities (pounds).


Consider this: If you are the sort of person that would drive all over town to try and save on every deal, the saying would be true. The reason is simple, the cost of driving equates to $0.74 per KM (Source – Australian Tax Office). This is the tax office estimate and takes into account fuel, wear and tear along with depreciation of your car. 


If you drive 50 KM to find the bargains, you’ll burn $37.00 in motoring costs. Add to that the time (and time is money!), shoe leather, food and drink while you are shopping, you’ll have to make some extraordinary savings to justify the expense. 


Rather than burning up your motoring costs, you would (probably) be better off putting that bargain shopping time to good use. For example, use your time to better your education and training for a higher paid job.


This myth, in our humble opinion is true (most of the time).


3.    As safe as houses: Our verdict - FALSE


This saying can have a few meanings. For example, houses are meant to be ‘safe’ because they are made of ‘bricks and mortar’ (Won’t blow down!).


The saying is often used by investors who like to ‘see and touch’ their investments and believe that no matter what happens, housing will always give a good investment return.


House prices right around the western world have taken a severe beating over the past few years. They can no longer be seen as a safe bet when it comes to your money.


If you are not convinced that house prices do fall in value take a look at this great chart from The Economist - Interactive Global House Price Chart. Have a play and see what has happened across the world to house prices. You can even select prices in ‘Real Terms’


All the information tells us that this myth is false. 


4.    Don’t put all your eggs in the one basket: Our verdict - TRUE


No guessing how this myth was developed. In money terms it is often used to highlight safety by diversifying (spreading) your money around as opposed to placing it all into the one investment; just in case that one investment fails.


A large number of the very rich have made all their money through one investment. For example the miners as mentioned in Myth 1 above, Bill Gates through Microsoft and so on. These examples would suggest that the myth is false.


Before declaring the myth as ‘false’, we need look at those who poured everything into the one investment and lost. Right across the world we are seeing everyday people apply for bankruptcy because of an inability to make mortgage repayments. They have lost everything through one investment.


As the myth is emphasising the need for safety, we declare the myth as true


5.   Investments will always come good because of the investment cycle: Our Verdict - FALSE


Investment advisers and economists often talk about investment cycles and quickly point to the ‘investment clock‘ to prove their point.


If you look at the Dow Jones stock market back to the 1900, you’ll see that it is very difficult to highlight a series of investment cycles with any predictability. Dow Jones 1900 – Present


Many will say ‘The stock market always goes back up’ and to be fair that appears true, at least for the Dow Jones.


Now, take a look at the Japanese stock market. Today it is only worth one quarter of what it was when it peaked in 1990. 22 years of suffering for every investor and still no signs of a quick recovery.


We declare this myth to be false as there is not enough consistency in the investment markets to justify the myth.


 


What are your thoughts? We would appreciate your comments along with any money myths that you believe in.


image source


 

                    	                    

        			
                    		
   
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FOFA – What Australian Consumers Of Financial Advice Need To Know
                    
                    
By  on April 2, 2012  in humble savers commentry, Questions for humble savers   

                    
                    

                    		                    
What Australian Consumers Need To Know From FOFA


The Australian Federal Government has just passed its ‘Future of Financial Advice’ legislation, better known as FOFA. The intention of the legislation is to create a transparent market for financial advisers to act and operate in the best interests of consumers.


The debate over FOFA has been long and at times very intense within the financial advisory community.


Now that FOFA has been legislated the big question is: How will FOFA affect the Australian financial consumer?


To find the answer we asked the Association of Australian Financial Advisers (AFA) a series of questions that we believe are critical to the Australian consumer.


Why did the Government see the need to introduce the FOFA legislation?


Back in 2009 a Parliamentary Joint Committee (PJC) Ripoll inquiry was formed largely in response to the collapse of high profiles businesses including Storm Financial and Opes Prime. The inquiry was wide ranging and received a large number of submissions and held lengthy public hearings.


The Government recognises the benefits to consumers seeking advice, both financially and emotionally. However, only 20% of Australians actually seek financial advice. From the lessons learnt during the PJC inquiry, the Government proposed the FOFA legislation as an opportunity to improve the standard of financial advice.


What three proposals within FOFA do you believe will benefit everyday Australians the most?


The three FOFA proposals that should provide benefits to Australians are:


    

  1. Best Interest Duty
    2. 

  2. Ban of conflicted remuneration
    3. 

  3. Increased Australian Securities and Investments Commission (ASIC) powers.
    4. 



Best Interests Duty – The AFA agree in principle with the Best Interests Duty. Advisers will have a statutory duty to act in the best interests of the client in relation to the provision of advice. This is a benefit for Australian consumers and should give them additional peace of mind when dealing with a qualified adviser.


Ban of conflicted remuneration – Reducing the conflicts in the remuneration system for financial adviser is a good outcome and will work in the best interests of Australian consumers.


Increased ASIC powers – ASIC is the Government’s ‘watchdog’ for Australian financial services. The AFA support the increased powers of ASIC and ASIC’s efforts to protect consumers by tackling unacceptable financial industry conduct and improving standards for financial advisers and product manufactures.


Are there proposals within FOFA that you don’t think will benefit Australians?


The AFA believe the following three FOFA package proposals will not benefit Australians:


    

  1. Opt-In
    2. 

  2. Fee disclosure statements
    3. 

  3. Ban on commissions for insurance inside super.
    4. 



Opt-In – This is the term used for a provision in the legislation that requires a client to ‘re-sign’ a service contract with their financial adviser every two years. If the contract is not re-signed for any reason, the client will cease to have a relationship with the adviser.


We believe the Opt-In provision is unnecessary given the inclusion of ‘Best Interests Duty’ and the ban on conflicted remuneration. Further it will be a costly exercise, from an administrative perspective, which is a cost that will need to be passed on to consumers.


Fee Disclosure Statement – Fee disclosure statement obligation is annual and is extensive in the detailed requirements. Due to the complexity it will be expensive for advisory firms to implement and unfortunately the costs of this complex reporting will inevitably need to be incorporated into client costs.


Ban on commissions for insurance inside superannuation – The AFA strongly opposes the ban on commissions for insurance inside super. Advice is important with this market and without commissions it is difficult for an alternative remuneration model to be built. AFA research ‘Back to Basics’ conducted by CoreData demonstrated that clients are happy to pay commission for advice and prefer to have choices.


A ban on commissions and this forcing clients to pay upfront fees will less people having access to advice and fewer will have adequate levels of insurance. This will probably further exacerbate the underinsurance problems in Australia. Furthermore, this will result in an uneven playing field as the ban will not apply to insurance outside superannuation.


Does FOFA make it more important to seek professional financial advice?


The need to seek financial advice is as important today as it has been in the past. We have a population that is quite literally growing older and putting additional pressure upon Government resources. This means more people will need to financially take care of themselves in retirement.


The past few years has seen the role of Financial Adviser and the Financial Services industry come under intense scrutiny. Whilst much of this scrutiny is welcome, there is a need to clearly address the key question – ‘What do financial advisers do, and how do they add value to their clients?’


The AFA research ‘Back to Basics’ conducted by CoreData demonstrates that consumers who have an advice relationship are better planned, are happier with their investments and have a good sense of financial freedom.


We strongly recommend that all Australians should seek advice from a suitably qualified financial adviser.


image source 


A big humble thanks to the team at the Association of Financial Advisers




                    	                    

        			
                    		
   
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