Introduced as part of the 2017-2018 Federal Budget, the First Home Super Saver (FHSS) scheme aims to make housing more affordable for first home buyers. Essentially the FHSS scheme allows you to save money in your super fund that will go towards your first home.

If you are making either concessional or non-concessional contributions into your super fund, you will be able to apply to have your voluntary contributions, as well as associated earnings, released to help you purchase your first home. Since your concessional contributions are taxed at 15% as opposed to your marginal tax rate, the FHSS scheme can be an effective tool in helping you save for your first home.

When making a withdrawal from super to help purchase a home, you are able to withdraw total voluntary contributions of up to a maximum of $30,000 across all years, with a maximum of $15,000 from any one financial year. The contributions are ordered by a first-in first-out approach. For example, Joe has made $10,000 of eligible non-concessional contributions each of the past 3 financial years. He finds a house he would like to buy. He can withdraw a total of $30,000 to purchase the house as each year he has stayed within the maximum of $15,000 per year. If Joe had made eligible non-concessional contributions of $20,000 and $10,000 in the past 2 financial years, he would be limited to only withdrawing $25,000 (maximum of $15,000 from the first year and $10,000 from the second year).

Once your first FHSS amount has been released to you, within 12 months you must do one of the following:

– Sign a contract to purchase or construct your home – you must notify the ATO within 28 days of signing the contract
– Re-contribute the assessable FHSS amount (less tax withheld) into your super fund and notify the ATO within 12 months of the first FHSS amount being released to you.

There is a strict set of criteria you must satisfy in order to be eligible for the FHSS:

– You must be at least 18 years old when you request a release from your super account
– You must never have owned property in Australia (this includes investment property, vacant land, commercial property, a lease of land in Australia or a company title interest in land in Australia).
– You must not have previously requested the Commissioner of Taxation in Australia to issue a FHSS release authority in relation to the scheme.

You may be eligible for the FHSS even if you do not satisfy the above conditions. More details of this can be found here.

There is also criteria on what you cannot purchase through the FHSS and these include:

– Any premises not capable of being occupied as a residence
– A houseboat
– A motorhome
– Vacant Land

One thing to note is that just because it can be done, doesn’t mean that every super fund offers it so if you believe you are eligible and would like to explore it further, it would be worthwhile contacting JBS.

The Global Financial Crisis (GFC) was for the majority of us, the worst financial crisis of our lifetime. What started in 2007 with a US Subprime Mortgage collapse, developed into a full-blown international banking crisis with the collapse of the investment bank Lehman Brothers on 15th September 2008.

These 2 years between 1 January 2007 and 31 December 2008 resulted in the following returns:

The figures show that what started as a mortgage and property crisis, quickly spread and impacted all growth assets (shares) across the globe with double digit negative yearly returns across the 2 years. Only the high returns from the defensive fixed interest assets could have possibly saved you from disastrous returns across your entire portfolio. Diversification across all asset classes, and having a portion of your funds in defensive assets was crucial during this time period.

It’s important to remember however that just before the GFC, growth markets had been booming for years and by having a lot of funds in defensive assets during this time would have resulted in lower returns. If you were to base your investments on the recent past performance, when the GFC hit you would have been overweight in growth assets and suffered the full effect of the GFC.

In the ten years since the GFC it’s been quite a different story

The figures show that no matter the asset class, by staying invested throughout the GFC, you would have not only recovered your losses, you would have a positive return on all asset classes.

If we look at the returns based from the end of December 2008, growth assets have grown substantially once again showing that relying on the recent short term past performance would have resulted in poor returns as you would have allocated less money towards the growth assets due to their disastrous GFC performance and more towards the defensive assets.

The GFC was not the first big market downturn that we’ve had and it won’t be the last. It’s often hard during these times to ignore emotions and stay the course with your investments. When things are going well we tend to become overconfident and take on more risk (increased growth assets) than what we should. In contrast, when things are going badly, we tend to become pessimistic and be too cautious (not investing enough in growth assets).

Having a financial adviser by your side during these times can help guide you through the tough times. They can help you keep your emotions out of investing, have you stick to the plan, and ensure that you reach your financial goals. Remaining disciplined is the key.

To speak to a financial adviser to help you avoid making wrong decisions during emotional times, call JBS Financial Strategists on 03 8677 0688.

– Liam Rutty –

Some of the more common things that people are passionate about are family, work, their favourite sporting team but very few are actually passionate about investing. There is the occasional person you find who loves the markets, is constantly reading the financial papers and analysing financial ratios, but is this beneficial. Do passionate people make better investors?

There are a lot of emotions involved when you become passionate, both good and bad, and these emotions generally help us become better at something. If we look at sport for example being passionate and emotional can improve our performance, if we win we feel good and we like to repeat the feeling and hence we try to win more. In contrast losing creates that sadness and disappointment which feels terrible, something we may wish to avoid in the future and hence we look for ways to improve be it practise or implement a different strategy in order to avoid that disappointing feeling in the future. Investing however is a whole different ball game.

If we have a positive experience our emotions are high and we tend to want to repeat. In investing terms, we buy more. In contrast a bad experience causes us to do the opposite, if we lose money we want to sell to avoid losing any more money. What this means is we tend to buy high and sell low, the complete opposite of what we should be doing.

How the stock market and your emotions influence each other. Source: Manulife.com

DALBAR Inc. a US company completed an annual Quantitative Analysis of Investor Behaviour. Although it is based on US investors the results are staggering.

So in one year the average investor has underperformed the US Market by over 4%, however the long term statistics are even worse.

Over 30 years, while the market has increased by just over 10% per year yet the average investor’s performance has been just below 4%. In dollar terms on an initial investment of $100,000, the average investor has missed out on $1.5 million dollars.

While it’s well and good to state that in order to be a successful investor we need to remove emotions and not be so passionate it is easier said than done. Markets will continue to go up and down and it’s how we react to those situations will determine how successful we are at investing. Having an adviser by your side to help navigate you through different market conditions will prevent you from acting out of impulse decisions and increase your overall returns.

Here at JBS our team is accredited to provide holistic investment advice including direct shares, so feel free to contact us to look at your investment strategy.

– Liam Rutty –

If you haven’t already started investing, there is no better time to start than right now – take action!

People see investing as complicated; something that takes a lot of work, research and a lot of time and expertise. They also tend to be a little frightened when investing their hard earned money using excuses like “It’s not really the right time to start investing” and “I’ll get in after the next crash” when in reality, when the crash comes, they come up with another excuse along the lines of “It’s all too volatile right now, I’ll wait until volatility calms down.”

For people that see markets like this, the reality for them is that it is never a good time to invest. There is always another boogie man around the corner just waiting to pounce and cause them to lose their money.  Here are 4 reasons why now is the best time to take action and start your investment portfolio.

1)  We can’t predict the future – No matter how hard we try and how much effort and research we put in, we can’t predict how markets are going to act in the future.  This is good because it simplifies investing.  There are thousands of people right now analysing the future prospects of CBA shares, looking at all the numerous financial statistics trying to come up with what they believe the company is worth to see how that compares to the current share price so they can determine whether they want to buy or sell the investment. The good news is that this means that we don’t have to.

Markets work in a way that if a security is slightly mispriced, investors continue to buy or sell the security until the price reflects true value. So for us ordinary human beings, all we need to do to see what a stocks true value is, which is to look up its current price.Only new information that people have been previously unaware of will change the share price dramatically and given our inability to predict the future it is not worth worrying about.

2)  Investing is a long term game – We tend to concentrate on the short term things rather than things that will impact us over the long term. Investing is a great example of this. The stock market crash of 87 was the biggest one day fall in the history of the markets. On that fateful day, the Australian Market lost a quarter of its value.  The worst possible time to invest would have been just before this monstrous crash happened. The below graph shows the Australian market performance during 1987.

However let’s have a look at what happens to the market if we extend it out to 10 years.

The drop is still there, but it’s more of an inconvenience than anything else.
Finally let’s have a look at 30 years and bring it up to 2017.

I can guarantee that you weren’t looking at the huge drop that occurred in 1987. It is simply irrelevant. Investing is a long term game. Not only can we not predict what will happen in the future, we will also more than likely not care about what happened in the past.

3)  The longer we are invested, the better compound interest works – What’s better than doubling your money? Doubling your money again.  Earning interest on interest is a great feeling and the longer your money is invested, the more money it will earn. If you wait another 3, 5 or even 10 years before investing, you will lose out on all the potential gains in that time.

4)  It’s easy – Investing money is easy, with all the online brokerage accounts available, it only takes a few clicks to make an investment. If you aren’t sure what to buy, you can get someone else to do it for you at a small cost by purchasing a managed fund which holds a basket of shares or an index fund in the form of a managed fund or directly on the share market as an Exchange Traded Fund (ETF). This index fund allows you to buy the entire market at a small cost so you don’t have to worry about individual stocks and just let capitalism work for you.

Where investing does become hard is when emotions come into it and it’s handling these emotions which becomes tricky. Unfortunately when it comes to emotions, they tend to encourage us to do the wrong things around our investments. When things are going well we get more confident, maybe even cocky and we take on more risk than we should. In contrast when things go bad we go into our shell a little bit and become more cautious than we should. These emotions are what impacts our investing experience and returns far more than when we actually invest. That’s where JBS comes in.

JBS can help you manage your emotions and help you pick the right investments to maintain an appropriate risk profile allowing you to reach your goals. Don’t sit on the bench, take action now, give JBS a call and we can help provide you with a great investor experience.

– Liam Rutty –