chalkcapital

Building Your Superannuation

Mon, 17 Jan 2022 07:19:08 GMT

Superannuation and the strict rules surrounding it can sometimes be quite confusing, so much so that this can often be off-putting to those who are looking to build their wealth through superannuation for retirement.

In this piece we thought we would help break down the different ways you can contribute the superannuation environment and the strategies you could consider to help accelerate the growth of your retirement benefits for the long-term

1. Concessional contributions

This is the most tax-effective way of contributing money into super as you are eligible for a tax deduction for the contributions made. There are two ways you can make a concessional contribution.

Firstly, as salary sacrifice through your employer where additional funds are taken out of your regular wage or salary and contributed to super on your behalf. Alternatively, you can also make a contribution using money you have already been paid and claiming a tax deduction at the end of the year.

There is currently a cap on concessional contributions of $25,000 per year.

2. Non-concessional contributions

This type of contribution does not attract a tax benefit. It is made from money that has already had tax paid on it and simply allows you to add more funds to superannuation to boost the value of your funds. This may be done to take advantage of the lower tax rate within the superannuation environment however, like all superannuation monies, is restricted in the way of accessing the funds before retirement.

The current cap on these types of contributions is $100,000 per year.

Adding funds to superannuation at an early age can make a significant difference to your final retirement benefits over the long-term.

Superannuation rules and restrictions are quite complicated, and you should always consider seeking advice prior to making any additional contributions to your superannuation fund.

Disclaimer: The information contained in this report is provided to you by Chalk Capital as general advice only, and is made without consideration of an individual's relevant personal circumstances. Chalk Capital ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Chalk Capital”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Chalk Capital investment adviser before doing so.

The Best Strategy When Markets Fall

Wed, 12 Jan 2022 07:19:08 GMT

Following such a large fall in investment markets, a question which often follows is “is now a good time to invest?”

We have spent considerable time in the past considering this question, and ultimately believe the response is we are not in the game of trying to predict these moments because the likelihood is the call will be wrong. What we believe is more important in these times is to consider, “am I invested correctly in conjunction with my tolerance for risk”. Taking this approach helps to remove the emotion naturally comes when dealing with investment markets. All too often, we become worried about markets continuing to fall after they have already had a decent fall, mainly because everyone becomes pessimistic about the future. Commonly, there is more risk in markets when everyone is optimistic as prices are much higher.

At all times we discuss with clients the importance of asset allocation, that is having the correct split between growth and defensive assets within your portfolio, in line with your personal tolerance towards risk. This is what should ultimately guide your decisions around further investments. Therefore, at this time, when markets have fallen and sentiment is uncertain, we would suggest the wisest thing to do would be to review your asset allocation to determine how much of your investable assets you wish to have in growth assets and then this will guide the answer as to whether you should be investing further. Whilst this may result in you being incorrect in the short-term, if markets continue to fall, this strategy will likely smooth out your returns over a longer period.

This may mean that you are re-allocating assets which have previously fallen into the defensive category across into growth assets to ensure your portfolio remains aligned with your investment risk tolerance. The opposite also occurs in rising markets, which is why we are open to taking profits on growth securities on strength.

Famous investor, Warren Buffett, has been quoted in the past as saying, “only when the tide goes out do you discover who’s been swimming naked”. This quote also has great importance in current markets, whereby you should stress test your portfolio by looking at the securities you hold and considering whether you would continue being comfortable with your holdings if the market were to fall further.

Falling markets aren’t comfortable for investors or advisers alike, however we know volatility is required as this is what will allow stronger returns to be generated over the long-term. While there may be further weakness in the short-to-medium term as we see a multitude of factors play out, we continue to believe investment markets offer great opportunity over the long-term if managed correctly in conjunction with an investor’s tolerance for risk.

Does more risk equal more return?

Wed, 05 Jan 2022 07:19:08 GMT

It is quite often believed that taking on greater risk with your investments will lead to greater returns. This is somewhat true; however, it is crucial for investors to understand the relationship between risk and return.

Whether you are a seasoned investor, or you are just getting started with investments, risk and return is a conversation we are having with these clients every day. It can prove more beneficial, instead of thinking about taking on more risk to achieve greater returns, to think about your capital preservation and avoiding a loss of capital.

This has been best highlighted more recently with the volatility we have seen across investment markets with the impact of COVID-19.

We have found time and time again that investing funds in stronger, higher-quality companies, which have the ability to weather the bad times and re-position for the good times, is a beneficial long-term investment strategy.

High-quality companies with strong balance sheets and experienced leadership teams are more often than not able to utilise market downturns are opportunities to acquire weaker businesses and take advantage of the discounts being applied across the market.

Although it may be tempting to buy cheaper companies at low prices, investors should remember that investing in higher-quality companies is a more proven strategy to deliver long-term returns utilising compounding over time.

As long as you are patient you will benefit from the growing earnings of these businesses and bear less risk over the longer term.

We like to look to the likes of US investor Warren Buffett who is famously quoted: "It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price."