05Jan

Ark Informer January

Ark Informer January

Welcome to 2014… and our first Ark Informer for the year.

To start the year with something different, we have decided to do away with the best tips of the year and look back on 2013 and see what worked and what didn’t work from a finance perspective to see if there are any lessons to be learnt for 2014.

We have also detailed our upcoming events for the year, which will cover a variety of topics and strategies. If there is anything specific you want to hear about, just let us know.

What worked in 2013?

Record low Interest Rates – In August 2013, our benchmark interest rate decreased to 2.50%. This is half of the average of 5.35% from 1990 to 2013.

With historically low interest rates it might be a good time to look at fixing a portion of your loan if you intend on holding your property for the medium term or you are looking for some cash flow security. Predicting interest rates is a difficult task, so it is better to make the fix or variable decision based on your personal situation and cash flow as oppposed to predicting the market.

The US stock market recovery – The Dow Jones Industrial Average had a spectacular rise during 2013 rising 26.5% for the year, which is the best single year return since 1995. The market finished the year on a record high of 16,576. That is more than 10,000 points higher than the lowest point in 2009.  The Nasdaq had the biggest rise of 2013 out of the US Market indexes rising 38.3%.

Given the rapid rise, now would be a good time to review your US allocation in your portfolio’s including your super to make sure you are not over-exposed. If you do not have any exposure, now is not too late. There are multiple index funds available that can give you specific or market wide coverage.

The Sydney Property Market – If you own a property in Sydney, there is a high probability that it would have increased from a capital value. RP Data released the annual home value performance for 2013 and the combined capital cities appreciated 9.80% and Sydney outperformed all capital cities with an increase of 14.5%. Although these are just averages, and each property is different it shows a positive trend in property, specifically in Sydney.

This might be a good time to re-finance or even get a valuation to see what investment options you have. It could also be a sign that the Sydney market is pretty heated but given the way the market finished at the end of the 2013 it doesn’t look like going backwards anytime soon.

What didn’t work in 2013?

The English Cricket Team – Sorry, this had to be mentioned somewhere.

The i-PIGS – This consists of Ireland, Portugal, Italy, Greece and Spain. Unfortunately all of these countries hit debt trouble post the 2009 GFC. Since then it has been a battle to borrow more debt to pay their existing debt. Looking at the forecast for the year for each country, it looks like each one of them are in for another tough year which potentially might lead to more unrest and political instability.

Based on the tough forecasts, it is worth reviewing your investment portfolio’s to see what exposure you have to these countries, or companies that are exposed to these countries.

My Super – From the 1st of January 2014, employers will need to make super contributions to a fund that offers a ‘MySuper’ product. The idea of My Super is to replace the default fund with a simple low cost option. In practice, this theory works really well.

Where the system hasn’t worked is that employees are not aware they have been switched across to a My Super option (so they have two accounts and possibly two insurance policies) or employees are switching to the MySuper option without reviewing their current super. In some cases this results in them having an inferior fund and less insurance than they need.

If you want to chat with an advisor about any of the issues above, or any other matter. Please contact us here, or call on 02 9262 3333.

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