One of the most hotly debated areas in investment is whether you should invest in actively managed funds, or index funds. As is often the case, these debates often generate much more heat than light.
The difference is that actively managed funds seek to select assets (let’s focus on shares, but the same principle applies to other asset classes such as bonds), whereas index funds simply look to track a given index and buy shares to mirror the index, without worrying about the merits of any particular company.
The assets test affecting age pensioners will change on 1st January, 2017.
The effect will vary from person to person (or couple to couple), depending on circumstances. Broadly speaking, those who have smaller amounts of assets may see their pensions rise, whereas those with bigger amounts, could see their pensions reduce, or cease altogether.
In order to avoid nasty surprises, people receiving an age pension, should undertake the following three steps:
It seems that the “culture wars” continue spreading, and have now reached the corporate regulator, ASIC, itself.
Remember, we are dealing with culture as being the values and norms that an organisation holds and which drives much behaviour, not culture as in music, statues and paintings.
We call our business “Black Swan Event Financial Planning” for a very specific reason – to keep reminding ourselves that, despite the best efforts of the legions of financial analysts in the world, there is an awful lot that nobody knows when it comes to giving financial advice.
Too often the exercise of doing projections provides a false sense of certainty about how somebody’s position may evolve over time. It’s almost as if the exercise of coming up with numbers enhances the certainty of a future outcome – without looking into the assumptions behind the calculations. Then, hey presto, some unanticipated change happens, and the projections go out the window.
Changes of this kind are known as “Black Swan Events”, and the crunch is that they happen far more often than theory dictates. This point (the fact that things changed in big ways much more often than they were meant to) was noticed by Nazim Taleb, and formed the basis of his book, “The Black Swan, The Impact of the Highly Improbable”. It also enabled him to pursue a very successful career as a New York fund manager.
