ABC Radio Segment Materials
Financial Education Consultant, Scott Francis, presents a fortnightly segment on 'Weekends with Warren' hosted by Warren Boland on 612 4QR in Brisbane and throughout Queensland regional ABC stations. The following material has been covered in Scott's segments and posted on the ABC website. Click on the segment title to be taken to the full article.
17/4/2010 - Who owns your financial advisor?
This segment on ABC radio looks at who actually owns your financial advisor and whether this ownership impacts or effects the investment advice you receive.
3/4/2010 - Dreaming of a home or a dream home?
This article and segment on ABC radio looks at:
1. Buying a home as a rental property first, then using the rent from the tenant and the tax advantages of owning an investment property to start paying off the mortgage before you move in.
2. Making sure that you start saving as soon as you can with the goal of home ownership in mind - saving $20 a week in a bank account paying an average rate of interest from the age of 18 will see you accumulate $20,000 by the time you are 30.
3. Starting with a more basic house, a little further from the centre of town than you would really like, and trading up from there. (Remember: an average price is just that - an average price; half the homes will sell for more than that and half will sell for less.)
4.Living at home longer while you get ahead financially.
5. Renting (for a while) rather than buying - and saving the difference toward a house deposit.
6/3/2010 - Who wants to be a millionaire?
1. Investment and pension income for retirees with smaller savings means they are only marginally worse off than those with seven-figure sums.
2. Thomas Stanley and William Danko, in their book 'The Millionaire Next Door', propose a formula for a persons net wealth based on a their age and income. They suggest that a person's net wealth should be:
15/11/2008 - Four Factors Weighing on Share Markets
25/10/2008 - Mortgage Funds / What is Happening in Investment Markets / NAB & ANZ Results
04/10/2008 - Personal Financial Strategies in the Context of the "Credit Crisis"
In really volatile times like these, investors often don't think about the income that their investments are paying to them. Whether it be property, shares, cash of fixed interest, they often focus too much on the price of the investments. However income can be a great investment benefit, and is actually more important in some ways to investors.
Superannuation member statements will hit letter boxes over the next two months. They will show a negative investment return which is quite reasonable in the current investment environment.
This article looks at 5 things that everyone should understand when you check your superannuation report.
28/06/2008 - Money & Happiness
Craig James, an economist at Commsec, has come out and suggested that Australians are significantly better off than at any time in history claiming that the average person is $425 per month better off than six years ago. Some might debate this assertion with this putting into question whether extra monetary wealth brings greater happiness.
This article looks at some research that has been conducted into this topic.
23/02/2008 - Cash as an Investment Option
In the discussion of investment options we often focus on shares and residential property - the higher risk, higher return investment options. We often don't talk about cash and term deposit style investments, although they have a crucial role in any investment portfolio.
This article looks in more detail at the use of cash in investment portfolios and concludes that with increasing interest rates and financial institutions competing harder for your money, than for some time returns from this asset class will also be strong in at least the short term.
02/02/2008 - Share Market Volatility
In these times following a sharp fall in sharemarket values - and at the moment Australian shares have fallen around 15% in value since November - you often see a lot of experts saying that people should not sell shares because 'they are a long term investment'. While this is the case, I am not sure if this is such a sophisticated argument. At some level I don't quite understand it - sure shares might be a long term investment, however if I think they are going down in value why wouldn't I sell?
This article looks in more detail why this might be a poor time to sell shares, and a reasonable time to buy them and concludes by looking at the 5 realities of how markets work.
15/12/2007 - Borrowing to invest - is it a good idea?
Warren Boland recently interviewed the author of a book called How to Create Wealth for Life by Tony Melvin and Ed Chan. I guess that we all want to 'Create Wealth for Life', as the book has created a deal of interest.
The basis of the book is that you can borrow to invest and, if you borrow a relatively large amount to invest in property, and property assets grow in value over time by seven per cent a year, then you will have a very positive investment experience.
All this is true; however there are other issues to consider such as:
- What if interest rates rise sharply to, say 15 per cent? (this has happened before under both Liberal and Labor Governments)
- What if property prices do not increase in value by seven per cent a year? (seven per cent is four per cent above the current rate of inflation of about three per cent - this is a big assumption to think that property will grow at more than twice the rate of other goods and services)
In the following article I have a look at the strategy of borrowing to invest. The strategy potentially works for all growth assets, be they shares, property or listed property. Indeed, the strategy may well work best with diversification amongst growth asset classes! I have specifically referred to borrowing to invest in shares, as there is more precise share data available than property data, and we can see exactly when borrowing to invest has created wealth - and destroyed wealth.
Borrowing to invest is a strategy that you need to be very cautious about - as there are risks that you must understand before 'launching in'.
7/11/2007 - International Share Investments
The Australian dollar is currently trading at around $US 0.92 - the highest level since the mid 1980s! This provides for interesting opportunities for Australian investors to use the strong Aussie dollar and purchase overseas shares. This segment looks at the possibilities.
15/10/2007 - Choosing Investments
In building an investment plan over time, an important place to start is to look at the characteristics of the investments on offer. This segment begins by looking at the distinction between defensive and growth assets. It concludes by looking at possibile considerations for people depending on their particular stage of life.
25/09/2007 - Understanding Mortgages
According to a Sydney Morning Herald, article on September 18, 113,000 households are currently experiencing mortgage stress, and at least 600,000 households are likely to experience mortgage stress by the end of this year. Australians are forced to take bigger mortgages than every before, because of rising house costs, making a mortgage a significant and long-term financial relationship. So is it better to rent or buy?
This article looks at some important details to consider regarding mortgages - what is the maximum loan you should undertake in order to leave a suitable repayment cushion? what are the benefits of extra repayments? fixed vs variable? and the dangers of redrawing.
25/08/2007 - Financial Planning for Life Stages
Over a lifetime the financial stages that people will go through will vary enormously. Obviously the financial direction of a 25-year-old is going to be very different from the financial direction of a 75-year-old. This article breaks this journey into four broad categories from age 20 to 35 (starting out), to age 35 to 50 (mortgages and family commitments), to age 50 to 65 (planning for retirement) to retirement (age 65 +) and proposes 4 financial strategies broadly applicable to each stage. Of course the stages for every one will be different and, as always, you should seek your own personal advice.
The headline changes to retirement planning have all revolved around superannuation - there has been much written about the rush to make $1 million superannuation contributions prior to the end of last financial year. There is, however, a retirement planning story that will affect far more Australians, and that is a change that will allow more people to access some age pension in retirement. (After all, there are only so many of us with a million dollars sitting around to be put into superannuation.)
For more Australians the story is the change to the assets test that is used to calculate whether you are eligible for the age pension, and how much pension you are eligible for. The change means people will be able to have a significantly higher level of assets and still be eligible for an age pension, or a part age pension, in retirement. This change in the assets test takes place on the 20 September 2007.
This asset test change is a significant change to the retirement planning landscape, and should be something that people who are retired or people who are looking ahead to retirement should be aware of. This article outlines the changes.
14/07/2007 - Shares or Property - What's the Better Investment?
Most people, over a lifetime, will have exposure to both shares and property, and both are worth considering in any portfolio - but is either ahead when it comes to the various different aspects of an investment? This article looks at the evidence and concludes that being exposed to shares and property might be the answer for an independent investor.
02/06/2007 - The Million Dollar Decision - Buying a Car
A lot of financial planners spend a lot of time talking about how to invest money - trying to squeeze every last dollar of potential investment returns out of your investment portfolio. In contrast not nearly as much time is spent on spending habits - the very thing that will either put yourself in the position to be financially secure - or not. After all the first, and often forgotten step to being successful financially is to spend less than you earn.
Doctors Stanley and Danko wrote a great book on the habits of financially successful people called The Millionaire Next Door. In that book they look at various habits of millionaires living in the United States - including how they act as consumers. It's very interesting to look at the spending habits of millionaires on cars (with the sample millionaire having a net wealth of $3 million), as described in The Millionaire Next Door. They found that:
- More than 1/3 of millionaires purchased second hand cars
When you think about it, a car is the biggest purchase that you will make in your life that will actually fall in value. Sure you are likely to have more in superannuation and your own home, but all else being equal, your super and house actually appreciates over time. Not your car. It is not that you just buy one car as well. If you buy your first car at age 20, your last at age 75 and turn your car over every five years, you will buy 11 cars in a lifetime.
This article looks at the financial implications of your car purchase decision.