John Cameron's personal blog

Serious discussion about your financial position now - and in the future.

5 Superannuation Myths Debunked!

Anybody following the Hayne Royal Commission could be excused for thinking our superannuation system is broken. It is not – although parts of it need serious repair.

An excellent article in the Australian Financial Review of 18-19 August, addressed and dispelled a number of myths surrounding the superannuation system.

The author of the Chanticleer column identified the following myths:

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How Big Is Your Buffer?

One of the issues that repeatedly crops up when dealing with clients is, “How well placed are you to deal with unforeseen expenses?” 

The expenses can range from relatively minor things such as an appliance suddenly failing, a minor car accident or a leaky roof, through to things far more catastrophic – a major illness, death of your partner, loss of job, marriage breakdown or any of a whole host of other things.

I started thinking along these lines, on reading a story in the Financial Review on 1st July. The story reported a survey carried out by the US Federal Reserve, to assess the resilience of American households if some financial shock occurred.

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Is It Time To Reconsider What We Mean By “Risk”?

Traditionally investments such as government bonds have been considered “safe”, whereas shares are considered “risky”.

So pervasive has this been, that, in the jargon of financial markets, when somebody talks about “taking on more risk”, what they are really saying is that they are selling bonds and buying shares (or using cash to buy shares). Conversely, if they are selling shares and moving to bonds or cash, they are “reducing risk”.

Now, it seems, the jargon is moving mainstream. I recently saw a retiree being interviewed on television. In order to make ends meet, he said he was “taking on more risk” with his investments.

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