Time to change investment strategy, retirees told

Is it time to change your investment strategy?

investments

It’s time for older Australians to review their investment strategies after the Reserve Bank of Australia (RBA) rate cut this week, says Australian funds manager Plato Investment Management.

The rate cut will help homebuyers, but will work against retirees who rely on returns from investment assets.

Cash rates and 10-year government bond yields were already at all-time lows before the cut and economists are predicting two or more cuts over the next year, which could scarcely be worse news for retirees.

“Returns on cash, term deposits and products linked to bank bill rates will likely continue to fall under that scenario,” said Plato’s managing director Don Hamson. “Many income-related products, like income securities or bank hybrids, are priced at a margin to bank bill rates, and we have already seen 90-day bank bill rates fall more than 60 basis points this year, which is already crimping their income.

“Retirees living off cash-linked income will struggle to make ends meet. So, it is very timely for retirees to reconsider their income-generating asset mix. Thankfully, given the somewhat surprising election result, retirees can continue to bank on receiving franking credits from Australian share investments.”

Dr Hamson added that even though interest rates were lower than ever, dividends paid by Australian companies had never been stronger.

“Ironically, the ALP threat to franking has actually caused some companies to flush out excess franking credits prior to the end of this financial year, providing Australian income investors – including retirees – with a record level of dividends,” he said.

“However, not all investors and retirees have benefitted from this dividend bonanza. Many, retirees, in particular, need to reassess their income-generating investments to ensure they are invested in the best possible income-generating equities, not just the big four banks and Telstra.

“Dividend increases, for example, have been largely concentrated in the resources sector, with traditional income stocks like the big four banks and Telstra either maintaining or cutting dividends.

“A cut in interest rates – while it won’t lead to an increase in dividend income – will also lead to increased investor demand for dividend-paying stocks, raising the capital value of some.”

Read more at www.sharecafe.com.au

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COMMENTS

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Old Man
6th Jun 2019
10:44am
It's not a shock announcement that a reduction in the cash rate will mean lower returns on cash investments. What is a concern with this article is that it is a blatant advertisement for a seminar where one of the speakers is a principal of Your Life Choices. Surely there is a conflict of interest that should be made known?
Discontented
6th Jun 2019
11:10am
makes one wonder eh
Discontented
6th Jun 2019
11:10am
makes one wonder eh
Wstaton
6th Jun 2019
11:44am
Bloody typical OLD man. A principle of "Your Life Choices" is just one of 18 presenters. She is not trying to sell anything but just presenting the five ingredients that SMFS's should look at. It is an EXPO for goodness sake. People choose the talks they want to listen to.

Get off your horse OM and let people choose.

Apart from that why shouldn't she promote the SMSF Expo that she is a speaker in. I know I would on my website if I was sa speaker.
jackie
6th Jun 2019
11:59am
Old Man, haven't you noticed the other advertisements and the finance-related topics on Your Life Choices? How do you think they survive? On fresh air.

I can't believe it's taken so long for you to work it out.

Your Life Choices relates to retirees and covers many matters that relate to them.

Blame our Federal Government for this fake deficit we aren't having and trying to stop the TRUTH with the ABC.
Greg
6th Jun 2019
12:04pm
This is a free site, if you're stupid enough to believe everything you read that's you're problem.
Canabelevit
6th Jun 2019
12:58pm
This website is a mix of information, some just info, some obviously promoted. I like it because someone has is enterprising enough to provide a free info service. However nothing is truly free, and somehow this website must be funded, so the great thing about free speech is you are able to choose to notice; react; act or ignore. If you rely and believe only on this source of info, then that's your choice.
SFR
6th Jun 2019
11:11am
Not surprised one bit, won't help home buyers one bit as wages won't increase enough in the majority to have much impact while any savings on mortgage rate will be more than gobbled up by ever increasing utility, insurance, health & food costs as well as fuel.
Agree OM about the blatant add for an upcoming expo, advertising should be kept separate from posts.
As far as deeming rate changes go I doubt it very much, we'll just have to wait & see what the review of the retirement income system comes up with.
jackie
6th Jun 2019
12:05pm
SFR, I agree it definitely won't help homeowners. It will take them three generations to pay off a modest home, not their lifetime.

Your Life Choices is a business and have to make a living from something. The entire country can't be on welfare.
maelcolium
6th Jun 2019
11:16am
Ah, the fund manager solution is to put money into shares, right before the first recession in decades. A recession will wipe out your share assets overnight. It's coming and because this Government is hell bent on achieving the surplus they promised to retain power, this next recession will be worse than the one we had to have - thanks Keating! Anyone remember mortgage rates jumping to 21%? Of course this happened before the current crop of financial geniuses hung out their shingles, so they can't contemplate a rapid collapse of the sharemarket.

Keep your assets in cash. and wear the short term low interest. At least your capital is safe.
Gonfishing
6th Jun 2019
12:27pm
Agreed. This seminar appears to be geared towards getting people to invest in shares via SMSFs. With a global recession looming I wonder if that is a responsible thing to do. Also, I don't want to pay $15 to sit through boring presentations on how well the share market is performing.
jackie
6th Jun 2019
12:37pm
maelcolium, the Cayman islands may be the go for some. Turnbull can vouch for that.
Cowboy Jim
6th Jun 2019
2:43pm
I would prefer Bermuda, jackie. It is free of income taxes but not necessarily a tax haven. We should ask Reg Grundy from TV. He retired there. There are many places Aussies can retire to but with no Medicare provisions the full pension is not all that much. Have a look at the retired Aussies you meet in Asia! Nubile girls is the benefit not much else; had a look at the all the bars and I would prefer the old "Town and Country" right here with Slim on the juke box. But then I am getting old.
jackie
6th Jun 2019
3:55pm
Cowboy Jim, those nubile girls would be better carers and cheaper than those in our nursing homes here.

I have friends that have had surgeries in Thailand and the hospitals and recovery were better than Australia. Dental work is better and cheaper too.

A friend of mine has retired there. He has a maid, cook that is happy to take care of him. She is cheaper than a wife and he is still free to do as he pleases with the rest that treat him like Brad Pitt. He will never return here. He hates how our system is expensive and our lack of freedom.
ex PS
6th Jun 2019
5:05pm
My aim is to try and predict when shares have hit rock bottom, that is the time to buy. If you buy when they are doing the best they can there is only one way to go and that is down. It just amazes me that so many intelligent people did not see this coming.

The government promised a Unicorn in every yard, fountains that discharge champagne and Unicorns that pass gold nuggets and you fell for it. It's so easy to con the greedy.
Ardnaher
11th Jun 2019
5:04pm
I prefer not to have all my eggs in one basket...I have a good mix of shares and cash.
slapsy
6th Jun 2019
11:25am
Why no mention of the conflict of interest?
Wstaton
6th Jun 2019
11:45am
What conflict of interest?
Mondo
6th Jun 2019
11:29am
So what happened to the jobs and growth, booming economy and tax cuts speak of the LNP less than a month ago? It seems to have all suddenly evaporated to match the LNP's integrity and honestly which if it ever existed vanished years ago. The LNP has now been in for six years, it still blames Labor for its problems while presiding over the lowest national growth in over a decade with all the signs that it will get worse. When will the LNP ever take responsibility for its own actions?
ozirules
6th Jun 2019
11:43am
when the hole in my derriere heals up, Mondo and it's not just the Libs who are guilty of blame shifting, it's lesson one in the pollies handbook.
Jansview
6th Jun 2019
12:02pm
You are absolutely right. They went into the election with their crystal ball prediction of ‘being in the black’ and people followed and believed like lambs to the slaughter. We were already technically in recession then but it’s worsening daily. All these years and they’re still blaming Labor. Everyone was up in arms about the franking credits. Now people will be rushing to put their money into speculative investments, i.e. ‘shares’, hoping to make up the difference for the drop in interest rate, and another to follow apparently. That means it costs the Government more. I read it could be an annual estimate of $20 billion. The shares go down when we’re fully in recession and then we have a national disaster of bankruptcies, homelessness, suicides, crime rate rise. The list goes on.
Greg
6th Jun 2019
12:09pm
I was well aware of what the economy was/is like, plenty of warnings have been coming through before the election. The LNP have always been good at deceiving the people and Labor are useless at putting the truth out there. Look at our old friend Mr Abbott, remember before he was elected, the sky was falling in, the world was ending because of our massive
"debt and deficit disaster" - that all quickly vanished when the LNP were voted in.
jackie
6th Jun 2019
12:12pm
Mondo, let this Government hang itself. It's a blessing Shorten never got in.

The six-year mess created by this Government can never be repaired. They will never have the decency to admit it and will expect a big pension for their mess.

Our entire political system needs to be revised and it needs to be fully transparent and accountable for any mess.

Too many lives are at stake.
roy
6th Jun 2019
12:44pm
You're not MICK in drag are you jackie?
SFR
6th Jun 2019
12:48pm
F@#k of roy, you never have anything constructive to say & when you do comment can't back anything up when asked.
Your full of shit mate, verbal diarrhea, you're just a tragic excuse for a human being.
KSS
6th Jun 2019
1:36pm
Seriously some of you really need to take a chill pill.

Yes the last quarter GDP results were less than expected but still in positive territory (just) despite the same period containing not only the NSW elections (important as it is the country's powerhouse economy) but also the run up to both the Federal budget (always produces a slow down in anticipation of the budget outcomes), and the general election (where virtually everyone stopped everything in anticipation of the ALP winning). Household spending generally takes a bit of a beating too as the excesses of Christmas and holiday period come home to roost.

One set of figures alone does not mean a whole lot. You will all be burned out by Christmas unless you calm your jets.
Cowboy Jim
6th Jun 2019
2:47pm
Let us keep a certain decorum here, no need to denigrate others on this forum - I know sometimes it is tempting. I try to understand both sides of argument and sometimes it's getting hard.
roy
6th Jun 2019
3:49pm
SFR, you're not your.
jackie
6th Jun 2019
3:57pm
roy, you have to be a joke. ha ha
roy
6th Jun 2019
4:25pm
You paid ALP trolls get so irritated.
Misty
6th Jun 2019
6:05pm
Says a paid LNP Troll roy.
jackie
6th Jun 2019
7:31pm
roy, I hit an NLP nerve. ha ha
roy
6th Jun 2019
9:53pm
Don't have any nerves jackie and musty, no I don't get paid by the LNP unlike you and the ALP.
BigAl
6th Jun 2019
12:25pm
More insanity lowering the interest rates. I lend you $100 and I get $2 in return, after inflation big fat zero. The lower interest rates will drive up all asset prices such as homes and office blocks and further inflate the bond and share bubbles. The rich will get richer because they can take the risk and the reckless will borrow up bigger. The world debt levels continue to increase in excess of $250 trillion. At some point people, corporations and governments simply will not be able to borrow any more because they have reached their capacity to pay. Heaven help us if there is any form of shock. A major recession is an absolutely certainty. Lowering the interest rates is only kicking the can down the road. Solutions: put interest rates back up to 5%, enforce 20-30% deposits on homes, enforce that governments cannot spend more than they get in taxes, and most importantly life skills education so kids know how to budget and look after themselves without depending on the state!!!
roy
6th Jun 2019
12:45pm
Hear hear a thousand times BigAl.
wisky171
6th Jun 2019
1:24pm
i agree at least 5% 10% would be better. gov. debt needs to come down , because when shit his the fan, the gov . will come after our super, savings ,shares and any other liquid assets they can get their hands on, and nothing we can do about it. same as happened in Greece.
wisky171
6th Jun 2019
1:24pm
i agree at least 5% 10% would be better. gov. debt needs to come down , because when shit his the fan, the gov . will come after our super, savings ,shares and any other liquid assets they can get their hands on, and nothing we can do about it. same as happened in Greece.
Paddington
6th Jun 2019
12:46pm
I doubt the franking credits are safe. If there is a review and the government is looking at everything relating to income for retirees it must be in the mix especially when more people know about the refund thanks to all the advertising.
If anyone had any doubts about the truthfulness or decency of this government it should have been dispelled now unless one does not want to see it.
If I had shares or investments or super I would be heading to my financial planner for advice or looking carefully at everything and changing things where necessary. Change is in the air for sure.
Cowboy Jim
6th Jun 2019
2:55pm
Change is always in the air, Paddington. I had mates laughing at me for keeping some money aside and getting a house as well. Today they are wailing about having not enough on the age pension and are jealous about all the ones who looked ahead if they could.
If one has nothing to worry about so much the better so they said but you can never recoup what you put in the slot machines. I know I worked in Clubs and Casino.
jackie
6th Jun 2019
4:04pm
Paddington, change is the only thing that is constant. Retirees could invest in a recycling waste facility and industry. That would be a definite good financial return.
Cowboy Jim
7th Jun 2019
11:29am
jackie -what about investing in the funeral industry? Surely a dead cert!
gillham
6th Jun 2019
12:50pm
Lowering interest rates is probably the worst of any endeavour to mange our economy. And it is artificial .

We need to use our resources such as coal and iron ore to create use, and export the products. We do NOT need to export the natural resources and import the product of our resources at at inflated cost. Do it our selves and provide more employment and income.

Interest is now at 1.25%. ie 1.25% from zero. We cannot increase the interest rates because of the potential and certainly for housing loan foreclosures. So the lower we go the lower we stay. And there is a boundary of zero 1.25% away.

I am from the generation where housing loans ranged 7% to 13% with a period of 17% to 19% in 1988/9. QWe h\gave up other items and less luxuries to focus on paying off the loans. Pity we do not have that principle remaining.

One of the principles passed down then, mainly from your father, is that you are responsible for your own destiny from your own input.

We have completely 'U' turned and blame someone or something else. Women are the main benefactors of increased handouts and less responsibility for yourself and your outcome. Achieved through PC handouts and concessions.

We concentrate on University attendees who progress to paper shufflers, ideology protagonists, and PC promoters, rather than producers. Women dominate our Universities at 60%+ of our enrolments. Our men dominate the unemployed.

All items are linked. The leader addressing such issues is Donald Trump. And he has addicted criticism without comment on productivity.
Rae
6th Jun 2019
5:00pm
We don't own our resources gillham. They are mainly UK and US owned and now China and India.

We decided to do that back when Whitlam wanted to buy our resources so we could be wealthy like Qatar or Norway and the people said No way.

We chose to be foreign owned and allow our wealth to fund foreign bank accounts.

We chose privatisation of everything our parents and our high taxes built.

We chose to double the population to destroy unions and stagnate wages.

The consequences of our choices are arriving now.

Giving up luxuries won't be the half of it. I think those wasting money on frivolity are quite stupid now.

Wait until the winter energy bill arrives. It will be a ripper. Subsidising Chinese manufacturing electricity is not much fun.
gillham
6th Jun 2019
5:43pm
Rae, we do own our resources. We have forfeited them to other Countries by selling out with mineral licences to other Countries.

And as you say we are going down paths of selling out our principles established by hard working and sacrifice of our previous hard working past workers.

The main issue i see is using interest rates as an artificial stimulation strategy for our economy.

As you say, and I agree, a range of other matters also combine to retard the Country. Immigration, importing, fabricated interest rate philosophy, PC driven matters, feminism (female) priority over male, etc

Cheers
gillham
6th Jun 2019
5:53pm
I will add that in the 1970's I worked for both a US exploration company and a Canadian Mineral exploration Company, based in Australia for mineral oil and mineral exploration in Australia and some Pacific and Indian ocean island Countries.

Australia's legislation arrangements under Mining Legislation Law was 51% Australian control of all Australian mining ventures. ie the 51% made up by 25% local Australian exploration companies and 26% Federal Government controlled.

Now we have sold the lot out to foreign Countries.

Pure evidence that politicians' IQs have receded from about IQ65 rating to about a present IQ45 rating.
Rae
7th Jun 2019
7:04am
Yes gilliam all true. I don't think it's an IQ problem. More like the sort of corruption and greed seen in third world countries.

The 51% agreement sounds quite sensible.
KSS
6th Jun 2019
1:18pm
This is nothing more than an advert for the expo and should have been clearly stated as such at the top of the "article". There are laws to protect readers from this sort of advertising - an advert posing as an independent article.
KB
6th Jun 2019
2:03pm
KSs I agree with you. You can choose to read or ignore the article in question.
KB
6th Jun 2019
2:03pm
KSs I agree with you. You can choose to read or ignore the article in question.
Cowboy Jim
6th Jun 2019
2:59pm
Not easy to put something new in a daily post, we should all understand that. One reads it and sometimes one totally ignores it. I appreciate YLC's output and read it most days and some days I find it baseless and other days rather pertinent. Take your pick, friends.
Rae
6th Jun 2019
5:02pm
The expo might be of some use if you live close enough to attend. I have no problem with this site advertising the products they sell. Nobody is forcing anyone to buy.
Tricky
6th Jun 2019
7:41pm
No mention of a review into Deeming Rates to assist pensioners and part pensioners.
Chooky
6th Jun 2019
9:26pm
I agree with you ‘Old Man’ def an advertisement. And those on part pensions and those on borderline of pension eligibility will be impacted more as LNP has not amended the deeming rate since 2015 and have refused to adjust it to reflect the interest rate cuts. And there’s more pain for you ahead LNP and their obsession with a surplus while the economy is tanking should raise your ire. But if you have a fist full of excess franking credits, free money will continue to be yours.
As for cuts to interest rates, here’s a thought. The economy has been in trouble for some time and you cannot deny this, but the Reserve Bank held off cutting interest rates until first opportunity post election. Why? Reserve Bank knows LNP has no mechanisms in place to stimulate the economy. None. Zilch. If LNP had lost the election Reserve knew Labor policies would get the economy moving again.
Don’t complain pensioners, you voted for it.
jimbo
8th Jun 2019
4:02pm
With deeming rates remaining unchanged over the past 3 years and term deposit rates reducing by over 50% centrelink can be considered to be guilty of ELDER ABUSE. We should be strongly arguing the point that we are being deliberately discriminated against.

A online petition may be a useful start.
adbob
11th Jun 2019
3:00pm
Most Australian retirees' investment portfolios (even if buried inside a super fund) are heavily exposed to Australian ordinary shares.

When official interest rates go down shares go up - so it's not bad news - it's good news.

They go up primarily because the dividends they produce will now appear to represent relatively good value compared with the fixed-interest or cash alternatives.

Some will also benefit because the cost of their borrowings will decline - leaving them with higher net profits.

If you are underexposed to Aus shares and are wanting to make a sudden major change you probably just missed the boat.

Personally I am overexposed to Aus shares and Real Estate - I need to get some exposure to overseas investments. Over the long term Australia is going to go down the gurgler - the "clever country" delusion isn't going to happen - if it was it should have happened already - but what advantages we previously had (eg cheap energy) are being thrown away to placate greenies - or at least their acolytes - most of whom couldn't explain the workings of a Bunsen burner - but they know all about climate change.
Ardnaher
11th Jun 2019
5:05pm
I do not agree that Australia is going down the gurgler at all
adbob
12th Jun 2019
2:26pm
@Ardnaher

You might like to explain how we are going to earn our keep to pay for our appetite for (currently) cheap imported consumer goods when our main currency earners - coal - demonised by greenies worldwide, and university courses (our Mickey Mouse soon to be replaced by genuine quality in developing countries with serious national plans).

Clever country?

Cleverer than which other countries exactly?
The Solomon Isands and Papua New Guinea maybe.

Certainly not China, India, Singapore - and keep an eye on Indonesia.

The AUD has fallen a long way since its most recent peak but it still has along way (downwards) to go.


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