SMSF - Investing for Income by @SMSFCoach

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Tips on Investing for additional income from every sector of your Self Managed Superannuation Fund portfolio. We cover cash, high interest accounts, term deposits, Bonds and Hybrids, Direct Shares, Equity for Income Funds, ETFs both High Yield and Bonds, Commercial Property and International shares. Showing you how to make the most of your SMSF while managing the risk. This is part one of a 2 part series with the second part “Investing for Growth” to follow. Check out our blog at Http:// or follow us on twitter at @SMSFCoach and @NextGenWealth

Transcript of SMSF - Investing for Income by @SMSFCoach

  • 1. Investing for IncomeHow to seek out incomefrom every sector of yourportfolio. Liam ShortePresented By:SMSF Specialist AdvisorNextGen Wealth Solutions
  • 2. Important information This presentation has been prepared by Genesys Wealth Advisers Limited ABN 20 060 778 216, Australian Financial Services Licence Number 232686 and principal member of the FPA. Any advice contained in this presentation is general advice only and does not take into consideration the participants personal circumstances. To avoid making a decision not appropriate to you the content should not be relied upon or act as a substitute for receiving financial advice suitable to your circumstances. Any reference to the participants actual circumstances is entirely coincidental. When considering a financial product please consider the Product Disclosure Statement. Genesys and its representatives receive fees and brokerage from the provision of financial advice or placement of financial products.
  • 3. Investing for Income from all sectors Cash Term Deposits Annuities Listed Income Securities / Hybrids / Bonds Fixed Interest funds Australian Property Australian shares Exchange Traded Funds International shares
  • 4. Cash is King (at the moment) but only if youmake it work for youDo not settle for less than 3.0% for cash needed in next 3 monthsand do not pay account keeping fees. Use:Macquarie Cash Management Account 3.25% (Nov 2012)CBA Cash 3.25%Link to High Interest Savings Accounts with no Fees / charges like:INGDirect cash rate 5.35%(Personal) 5.0% SMSF for 4months reducing to 3.5% (switch to Term Deposit after 4 months)Ubank (Part of NAB) bonus cash rate 5.46% if you put in$200 per month (No withdrawals)RaboDirect Bonus Cash rate 5.46% for 4 months reducingto 4.3%
  • 5. Term Deposits Beware the 4,5, 7 month specials! Look to spread some funds to lock in better 2, 3and 5 year rates. American rates not likely to rise before July 2015. Government guarantee reduced to $250K and may disappear soon. or for deals Best consistent options: INGDirect, UBANK & Rabo Direct Dont be scared of these banks as they are secure competitors. Approved Deposit Taking Institutions.
  • 6. Our new TERM DEPOSIT facility! Access over 24 Term Deposit Providers with one application Move from one to another at maturity without need for new forms Access to great rates for cash or term deposits easily Only one place gets your information so you will not be spammed ID only needs to be submitted to the facility once. Rates from 1month to 5 years and many options in between.
  • 7. Annuities evolving and becoming attractiveagainIssues about providers as a long term investmentBenefits of annuities You are paid a guaranteed income regardless of how markets perform You dont have to pay tax on your income from age 60 You dont pay tax on investment earnings You have the peace of mind of a regular fixed income 4.45% Index linkedDrawbacks of annuities In some cases you cannot take out your money as a lump sum (changing and access within first 10-15 years common now) You cannot choose how your money is invested by the fund manager You may not be able to transfer to an account based pension Over the long term, an annuity might pay less than cash or term deposits or an account based pension trading return for certainty
  • 8. LISTED INCOME SECURITIES : Corporate Bonds,Floating Rate Notes or Hybrids Pre-GFC too little upside and too much downside. Now decent rates of return reflect risk taken. DO NOT Debt issued by Blue-chip companies TREAT Pay a fixed or floating rate LIKE TERM DEPOSITS Stick to the top issuers to protect your capital Recent issues like CBA PERLS VI, Westpac and Suncorp Notes offering 6.5-8% Yield very popular. Look to stagger maturities to avoid interest rate risk Note that the shares themselves are returning similar yields.
  • 9. Current Comparison of bank hybrid securities CBA PERLS Bendigo Suncorp VI Westpac CPS ANZ CPS3 CPS CPS2 (CBAPC) (WBCPC) (ANZPC Price ($) 100 100 100 99 98 Preference Preference Official ranking share share Perpetual note Preference share Preference share Risk characteristics Equity-like Equity-like Equity-like Equity-like Equity-like 3m BBR + Distribution rate 3m BBR + 5% 4.65% 3m BBR +3.8% 6m BBR +3.25% 6m BBR +3.1% Cash + franking Cash + franking Cash + franking Cash + franking Cash + franking Distribution type credits credits credits credits credits Compulsory distributions No No No No No Cumulative No No No No No BEN shares or SUN shares or CBA shares or Principal repayment cash cash cash Westpac shares ANZ shares Maturity date* 13-Dec-19 17-Dec-19 15-Dec-20 31-Mar-20 1-Sep-19 Tier 1 capital < Tier 1 capital < Tier 1 capital < Tier 1 capital < Capital trigger Event 5.125% No 5.125% 5.125% 5.125% Non-viability trigger event Yes Yes Yes No No 3m BBR + YTM (on current price) 3m BBR + 5% 4.65% 3m BBR +3.8% 6m BBR +3.6% 6m BBR +3.7% Current Bank Bill Swap Rate 3 month 6 month (BBSW) 3.13% 3.16
  • 10. Fixed Interest / Credit Funds Deal with all ofthe above locally and internationally Professional Mangers Diversified Portfolio Global reach We use a mixture of conservative funds as a core and then some more aggressive equity like managers to seek higher returns. Sector Limits (Min/Max) Core portfolio includes: Core Income Portfolio 20/100 RMBS, CMBS, floating Domestic Hybrid 0/30 rate notes, asset backed Securities and fixed rate corporate Global Investment Grade 0/40 debt securities Global High Yield 0/15 Emerging Market Debt 0/15 Credit Opportunities 0/20
  • 11. Sample of current conservative exposure 6.8% 0.4% 81.6% 11.2%Post fee as at 30 September 2012 3 months (%) 1 year (%) 3 years (%pa) Since inc1 (%pa)Fund Performance 2.38 6.65 7.19 5.88
  • 12. Australia is out of balance Percentage of superannuation assets invested in fixed income Also Australia has a aging baby boomer population