Editor’s letter
In late June I was shocked to read that Australia could be in for no less than eight Reserve Bank rate hikes over the next two years, according to former RBA board member John Edwards. But another report suggested that rising debt and property prices are keeping rates at record lows. Another suggested that inflation was about to hit as “the growth rate of the money supply is galloping ahead of economic activity”. If economists can’t agree, what are we mere mortals supposed to do?
Our guest chief economist this month, David Bassanese of Beta Shares, notes that “rising global interest rates do suggest a growing focus on international investment opportunities, such as the global banking and technology sectors, which can be accessed via exchange traded funds available on the Australian sharemarket”. It seems the chase for returns never ends. But if you fear there’s nothing to invest in your biggest risk could be sitting in cash. Yes, the government will guarantee your money, up to $250,000, if it’s held in an authorised deposit-taking institution but it will be going backwards thanks to inflation.
This month we look at three ways (low, moderate and high risk) you can turn $5000 into $50,000. While cash should certainly play a part in any diversified portfolio there are other low-risk strategies that can deliver decent returns. Dominique Bergel-Grant, director of Leapfrog Financial, says that while you’ll need to be patient with her low-risk plan, it should achieve returns of 5%-6% a year.
A strategy that I do like, and have been promoting over the past couple of weeks, is one that Money’s chief commentator, Paul Clitheroe, says has “all the key elements for wealth creation”. It allows you to put in money on a regular basis (tick here for dollar cost averaging), is a long-term investment (so interest is paid on interest) and is taxed at just 15%. You guessed it – it’s super.
Super Booster Day continues this month. Fewer than 20% of singles and 30% of couples over 65 are on track to achieve what ASFA calls a comfortable retirement. By pledging to pay yourself forward you could win $1000 to boost your super. There are five amounts to be won. Visit superboosterday.com.au.