Monthly Newsletter - August 2010

Editors Note

This edition includes an inspirational quote, a funny picture, a market commentary with the main index returns during July 2010 and Financial Planning Q&A. I encourage you to make comments.

The new financial year began on an optimistic note, with the major world sharemarkets delivering positive returns in local dollar terms.  

Inspirational Quote

The difference between great people and everyone else is that great people create their lives actively, while everyone else is created by their lives, passively waiting to see where life takes them next. The difference between the two is the difference between living fully and just existing.

Michael E. Gerber (Author) 

Funny Picture

They say a dog is a man's best friend. Well, it appears the adopted dog who has destroyed the owners CD's "Training Your Adopted Dog" - is pushing the friendship.

Market Commentary  

The new financial year began on an optimistic note, with the major world sharemarkets delivering positive returns in local dollar terms. Confidence returned to sharemarkets this month as European sovereign debt concerns abated, with data showing the banking sector in a better than expected state of financial health. 

Performance scorecard to 31 July 2010 

Indexes used: Australian shares: S&P/ASX 300 Index, Australian listed property: S&P/ASX 300 A-REIT Index, International shares: MSCI World ex-Australia Index (net dividends reinvested), Australian fixed interest: UBS Australian Composite Bond Index, International fixed interest: Barclays Capital Global Treasury Index (hedged into Australian dollars), Cash: UBS Australian Bank Bill Index. 

The Australian sharemarket performed strongly in July returning 4.5% as all eyes turned to politics - Prime Minister Julia Gillard calling a federal election for 21 August. There was good news on the inflation front with the Consumer Price Index rising less than expected at 0.6% in the June quarter. Another positive was the Reserve Bank of Australia (RBA) deciding to leave interest rates on hold at the beginning of the month.

While company profit results in the US have been strong, economic data remains mixed with continued weakness in the housing and employment markets. Some developing countries are starting to show signs of a slowdown - albeit from comparatively high rates of growth. The Chinese economy slowed over the June quarter as policy tightening took effect.

The Australian dollar rose 7.2% against the US dollar in July in line with commodity prices benefiting investors with hedged international exposure.

The RBA kept interest rates on hold at both their July and August meetings - RBA Governor Glenn Stevens citing: “The current setting of monetary policy is resulting in interest rates to borrowers around their average levels over the past decade”.

While the global economy appears to be recovering slowly, growth is expected at a slower rate than previously projected. Back home, investors will be keeping a close eye on the company reporting season with many companies releasing their annual results over the coming month.

The Market Commentary has been sourced from Vanguard Investments Australia Ltd. 

Financial Planning Q&A

Financial Planning Q&A includes the best question from the public each month and my answer, to give readers an introduction into the benefits of financial planning advice. If you would like a question about your financial situation answered, click Financial Planning Q&A. The best question will also receive a MOVIE TICKET.

Question

What is an Self Managed Super Fund (SMSF) and why would I establish an SMSF?

Answer

An SMSF is a trust where money or assets are held and managed on behalf of up to four members to provide benefits for their retirement. Subject to certain exceptions, all members of an SMSF must be trustees of the SMSF or directors of the SMSF’s corporate trustee. 

Three key reasons for establishing your own SMSF are (1) control, (2) flexibility and (3) investment choice. As trustee of your fund, you decide on your fund’s investment strategy and choose in what your fund’s assets are invested. This means you can tailor your fund’s investments to suit members specific needs. Your fund can invest in almost anything, although investments are subject to some limitations and legal restrictions. Like all super funds, an SMSF receives concessional tax treatment. The top tax rate for the investment earnings of your SMSF is 15%. It’s important to note that this tax concession is only available if your fund complies with all the rules and regulations that apply to SMSF's.

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Past Issues

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Important Information

The above information provides an overview or summary only and it shouldn’t be considered a comprehensive statement on any matter or relied upon as such. The above information doesn’t take into account your personal objectives, financial situation or needs. It’s important for you to consider these matters before making any financial decision and I recommend you seek help from a financial adviser.