{"id":1742,"date":"2020-11-15T14:34:00","date_gmt":"2020-11-15T03:34:00","guid":{"rendered":"https:\/\/www.gpadviser.com.au\/gpl-theme-1-2015\/2020\/11\/15\/where-to-now\/"},"modified":"2020-11-15T14:34:00","modified_gmt":"2020-11-15T03:34:00","slug":"where-to-now","status":"publish","type":"post","link":"https:\/\/www.gpadviser.com.au\/gpl-theme-1-2015\/2020\/11\/15\/where-to-now\/","title":{"rendered":"Where to now?"},"content":{"rendered":"<p>Most working Australians have had an interesting time of it lately. The Reserve Bank of Australia (RBA) recently noted that we\u2019re experiencing the biggest economic shock since the 1930s, with unemployment expected to hit 10% later this year.<sup>1<\/sup>\u00a0In times like these it\u2019s natural that people should be feeling cautious.\u00a0<\/p>\n<p>Many finance experts would suggest you have a rainy-day fund \u2013 perhaps six months\u2019 worth of income readily available for emergencies. But it\u2019s also important to keep the long term in mind. If you can afford to think more strategically about the long term, what are your investment options in this current environment? If you\u2019ve got a secure income, or cash from a recent home sale, tax refund or inheritance, investing in your super could be a smart choice.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" alt=\"\" height=\"300\" src=\"http:\/\/internal.clientcommunity.com.au\/uploaded\/level\/1285\/mlc-chess.jpg\" width=\"570\" \/><\/p>\n<h3>Cash, property or super?<\/h3>\n<p>In the past, many people would have turned to two Australian investing stalwarts\u2013 cash and property. They\u2019re both looking less attractive as an investment now. Here\u2019s why.<\/p>\n<p>Interest rates are at historic lows, after being on a downhill slope for the past decade. In September, the RBA said \u201c\u2026It will not increase the cash rate target until progress is being made towards full employment.\u201d The RBA\u2019s current cash rate target is 0.25%<sup>2<\/sup>\u00a0and you can search high and low for high interest savings accounts and get not much more than 1% for your money \u2013 and that\u2019s for a very limited time.<\/p>\n<p>With low returns, comes low risk \u2013 cash is one of the least volatile investments available. The trade-off is that cash won\u2019t necessarily grow your money at a pace faster than your cost of living.\u00a0<\/p>\n<h3>Bricks and mortar getting pestled<\/h3>\n<p>Meanwhile, Australia\u2019s favourite dollar destination \u2013 residential property \u2013 could face an uncertain future, with at least two big forces pushing down prices and rent.<\/p>\n<ul>\n<li>\n<p>Unemployment is currently at over 7%<sup>3<\/sup>\u00a0and likely to get worse. That means fewer people buying new houses and pushing up prices. And more people struggling with their mortgage and selling under pressure \u2013 which could push prices down.<\/p>\n<\/li>\n<li>\n<p>Immigration has paused. In June, the Government suggested immigration could fall by 85% this financial year. That\u2019s over 200,000<sup>4<\/sup>\u00a0less people looking for a home \u2013 and a lot less demand for residential property.<\/p>\n<\/li>\n<\/ul>\n<p>We don\u2019t proclaim to have a crystal ball on residential property prices \u2013 prices have surprised on the upside before. We know when looking at overseas property markets and pockets within Australia, prices can surprise on the downside too. When the outlook is so uncertain it\u2019s important to understand the full risks of property.<\/p>\n<h3>If not there \u2013 where?<\/h3>\n<p>Where does all this leave you?\u00a0 If you\u2019ve got extra cash, you might consider building up your retirement nest egg through super. You can spread your money across a range of different investment types via a diversified fund or focus on particular asset classes like shares if you\u2019re comfortable with short-term fluctuations.<\/p>\n<p>Why super? One reason is it\u2019s track record. Since compulsory super started coming out of our pay in\u00a01992, the median growth fund has delivered an average return of nearly 8% each year.<sup>5<\/sup>\u00a0That\u2019s well above inflation and above the target return for those types of funds.<\/p>\n<p>Perhaps the most under-rated reason is that super earnings are tax effective. You may find you pay less tax on your investment earnings in super than in non-super investments (unless you\u2019re on a very low income).\u00a0 That means a higher effective return.<\/p>\n<p>And why a diversified fund? In an uncertain economic climate, it makes sense to invest in a portfolio that can handle a range of different events and trends. A bedrock of MLC\u2019s strategy is to spread funds across traditional asset classes like fixed income, cash, property, and shares, but also to use alternative investment strategies \u2013 i.e. hedging, derivatives etc to reduce risk and seek different \u201ctypes\u201d of return.<\/p>\n<p>Obviously, each person\u2019s investment strategy should be tailored to their exact needs as there are tax and preservation rules you should consider. If you\u2019d like to explore your investment options and whether more super makes sense for you, contact your financial adviser on |PHONE| for some more investment insights.<\/p>\n<p><span style=\"font-size: 10px\">1\u00a0Statement by Philip Lowe, Governor: Monetary Policy Decision, 1 September 2020,\u00a0https:\/\/www.rba.gov.au\/media-releases\/2020\/mr-20-20.html<\/span><br \/><span style=\"font-size: 10px\">2\u00a0<em>Cash rate target<\/em>,\u00a0Reserve Bank of Australia,\u00a0https:\/\/www.rba.gov.au\/statistics\/cash-rate\/<\/span><br \/><span style=\"font-size: 10px\">3\u00a0<em>Key economic indicators snapshot<\/em>,\u00a0Reserve Bank of Australia,\u00a0https:\/\/www.rba.gov.au\/snapshots\/economy-indicators-snapshot\/pdf\/economy-indicators-snapshot.pdf?v=2020-09-07-09-19-12<\/span><br \/><span style=\"font-size: 10px\">4\u00a0<em>What an 85pc fall in migration means for the economy and housing<\/em>, The Australian Financial Review,\u00a0https:\/\/www.afr.com\/policy\/economy\/later-migration-plunge-to-hurt-economy-and-housing-20200501-p54p2g<\/span><br \/><span style=\"font-size: 10px\">5\u00a0<em>Super Funds Navigate The Crisis To Deliver Surprise Result<\/em>,\u00a0Chant West,\u00a0https:\/\/www.chantwest.com.au\/resources\/super-funds-navigate-crisis-to-deliver-surprise<\/span><\/p>\n<p><span style=\"font-size: 10px\"><a href=\"https:\/\/www.mlc.com.au\/personal\/blog\/2020\/09\/where_to_now\" target=\"_blank\" rel=\"noopener noreferrer\">Source : MLC Insights September 2020\u00a0<\/a><\/span><\/p>\n<p><span style=\"font-size: 10px\">National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686. MLC Limited uses the MLC brand under licence. MLC Limited is a part of the Nippon Life Insurance Group and not part of the NAB Group of Companies. The information contained in this article is intended to be of a general nature only. Any advice contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice on this website, NAB recommends that you consider whether it is appropriate for your circumstances.<\/span><\/p>\n<p><span style=\"font-size: 10px\">Important: Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents\/information contained within the linked site(s) accessible from this page.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Most working Australians have had an interesting time of it lately. The Reserve Bank of Australia (RBA) recently noted that we\u2019re experiencing the biggest economic shock since the 1930s, with unemployment expected to hit 10% later this year.1\u00a0In times like these it\u2019s natural that people should be feeling cautious.\u00a0 Many finance experts would suggest you [&hellip;]<\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[19],"tags":[],"class_list":["post-1742","post","type-post","status-publish","format-standard","category-general-articles","entry"],"_links":{"self":[{"href":"https:\/\/www.gpadviser.com.au\/gpl-theme-1-2015\/wp-json\/wp\/v2\/posts\/1742","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.gpadviser.com.au\/gpl-theme-1-2015\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.gpadviser.com.au\/gpl-theme-1-2015\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.gpadviser.com.au\/gpl-theme-1-2015\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/www.gpadviser.com.au\/gpl-theme-1-2015\/wp-json\/wp\/v2\/comments?post=1742"}],"version-history":[{"count":0,"href":"https:\/\/www.gpadviser.com.au\/gpl-theme-1-2015\/wp-json\/wp\/v2\/posts\/1742\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.gpadviser.com.au\/gpl-theme-1-2015\/wp-json\/wp\/v2\/media?parent=1742"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.gpadviser.com.au\/gpl-theme-1-2015\/wp-json\/wp\/v2\/categories?post=1742"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.gpadviser.com.au\/gpl-theme-1-2015\/wp-json\/wp\/v2\/tags?post=1742"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}