John Cameron's personal blog

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

Four Points to Note About Recent Rants, Furphies and Beat-Ups Around Tax and Franking Credits.

There has recently been serious concerns expressed in major media, about investors in account based pensions (it applies to other vehicles as well, but most of the rant has been about pensions).

The “concern” goes like this: “because a lower company tax rate will mean companies are paying lower tax, the will have fewer franking credits to pass on, and investors will get smaller tax refunds.”

Oh, save me. There is a serious misunderstanding here.

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Wanted – A Better Way To Measure Risk

The twin elements of investment are risk, and return. We are constantly told that you cannot get a better return, without taking on more risk (but the reverse doesn’t apparently apply. If you invest in higher risk investments, it doesn’t follow that higher returns will necessarily eventuate. And, here the argument becomes fairly circular – more risk means more risk, which may mean no return, or total loss - if you get my drift).

The current way of measuring risk, is to look at the average volatility of returns over an extended period (in practice it is a bit more technical, but this is the essence of it). The more volatile the returns, the riskier the investment, and vice versa.

This way of measuring risk has been around since the 1950’s, and it was certainly a big improvement on what went before.

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4 Things To Think About When Deciding Whether Or Not To Do It - The Age Pension and Downsizing

The recent Federal budget contained some incentives for older Australians to sell their homes and downsize. Specifically, people over 65, who were selling their home that they had owned for 10 years or longer, will be able to put $300,000 each into their superannuation. Previous restrictions that would prevent this, will not apply.

However, it remains to be seen how attractive this is, especially to people who may lose all or part of the age pension in the process. By freeing up capital in this way, it moves from the non-means testable area (your home), into the area where it becomes means testable. In the process, all or part of your age pension may be affected.

In our experience, people often decide not to downsize when faced with this loss of pension. However, this action is not logical and puts too much emphasis on the age pension. After all, the age pension is nothing but a source of income, and it is not inherently better than an alternative source of income.

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Food for Thought: 3 Classes Battle for the Upper Hand, Where There Used to be Just 2.

Look at the literature over the last hundred years or so, and you will see 2 classes battling for the economic upper hand. They are Labour and Capital. 

Karl Marx based his whole theory around this battle. While classical and neoclassical economists portrayed it in less confrontational terms, much of their theories were still based around competition between these two classes.

Enter the third class – Consumers.

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Your Invitation to a: RETIREMENT INCOME SEMINAR Important issues for retirees:

RETIREMENT INCOME SEMINAR

Important issues for retirees: Estate Planning, Investment, Income...

Details and RSVP:

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