The start of a new financial year should be a time to step back and assess how your investments are tracking and whether they are stacking up to your expectations.
It has been a wild ride with markets spooked by everything from the rise of Donald Trump to Brexit to our own marathon inconclusive election adding to the uncertainty.
But as markets and the media scramble to make sense of what’s happening and find a way forward, a big picture view can add perspective.
That big picture shows, despite the daily jitters and general gloom, we are travelling pretty well financially.
Here’s our mid-year investment review.
- Economy
As we head into our 26th year of uninterrupted economic growth, we’re not exaggerating when we say Australia is an economic miracle.
Just think about it. Basically any Australian under the age of 45 hasn’t had to deal with the financial stress of an economic recession as a working adult. That’s pretty incredible.
That’s not to say we don’t face challenges. We’re currently in the middle of a seismic economic shift away from mining driven growth towards a services based economy.
On top of this, government and household debt levels are climbing and wage growth is at record lows. But despite these challenges we are still in reasonable shape.
The Reserve Bank expects the economy to grow between 2.5 – 3.5% in 2016, business lending is increasing, the unemployment rate is near three year lows and the falling dollar is good for exports and enticing a record number of tourists to our shores.
Plus, the Reserve Bank still has ammunition up the sleeve to cut rates and stimulate growth.
- Share markets
There’s no sugar coating it, investors had a tough time of it over the last 12 months in the most volatile investment year since the GFC.
The turbulence started with the Greek debt crisis (remember that?), and after that it was a case of strapping yourself in as Chinese sharemarket volatility, a rout in commodity prices and most recently Brexit made for a bumpy ride.
Remember that horrible start to the calender year in January as well?
Commsec data shows the All Ordinaries index rose 2%, while the ASX 200 index ended 4.1% lower, the first drop in 4 years. The big 4 banks make up a sizeable part of the ASX200 and they have been crunched over the last year.
But, to us, these results just show the resilience of share markets to shocks. After everything we’ve seen in the last 30 years, the ASX has still managed to deliver solid returns at an average rate of around 10 per cent a year. Impressive stuff.
- Superannuation
Closely tied to the performance of the sharemarket is the state of Australia’s retirement savings. SuperRatings data shows the average balanced fund returned 2.3 per cent over the last 12 months, the seventh year in a row of positive returns.
Of course, an average return is not necessarily reflective of what’s been happening in your superannuation.
According to SuperRatings, returns range from -1 per cent all the way to up +6 per cent. Take this as a timely reminder to review your fund and make sure it still meets your needs.
- Property
As we’ve seen for some time, the property market is still a tale of two cities.
Prices in Sydney and Melbourne have increased by 11.1% and 10.6% respectively over the last 12 months according to CoreLogic RP Data, while the rest of our capitals are plugging away at lower much more reasonable rates.
While we don’t pretend to know what’s going to happen next, there are clear signs of a slowing in growth in certain parts of Melbourne and Sydney. At times like this it’s more important than ever to dot the i’s and cross the t’s before committing.
Factor in a interest rate rise of at least 2 per cent into your calculations as a safeguard against ‘cheap’ debt enticing you to borrow more than you can afford.
GREAT BUDGETTING APPS
Managing your finances can be a dry task, but thankfully, technology is on your side. Here are 4 great budgeting apps to save you serious time.
- Daily Budget Original
This free app takes a minimalist approach to displaying your financial data.
But don’t let that fool you, it contains powerful analysis features and breakdowns to help you take control of your money.
- Pocketbook
This handy little service integrates with your bank accounts to give you a bird’s eye view of your finances. It allows you to tag specific transactions like regular income, periodic bills and even your daily coffee to help you work out your monthly budget.
The ability to analyse your spending data makes it much easier for you to identify areas where savings can be made.
Another alterative in this space is Money Brilliant, which has similar features.
- Wally
Presented on a tidy user interface, Wally lets you set savings targets, categorise your income and expenses, and view insights into your financial behaviour.
What sets this app apart from the rest is the ability to scan and save receipts, meaning you can throw them away afterwards instead of lugging them around in your wallet.
- Trackmyspend by ASIC
This app is a simple but effective tool to track your spending. It may not have bells and whistles like bank account integration, but it works.
One great feature of this app is that it encourages you to flag expenses as a ‘needs’ or ‘wants’, which is a good way to rethink your spending habits.
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