Monthly Report – April 2017
Generally, April was another good month across the markets with the Australian share market's ASX 200 Index up from 5865 to 5924 points, a rise of just over 1%. International markets lifted by approximately the same - the US market was up 0.9% in US Dollar terms. At the same time, the Australian dollar dropped by 2.2%, largely off the back of falling iron ore and oil and gas prices. This was good news for our International funds, but not as beneficial for the RealIndex Global Share Hedged Fund. Interestingly, however, that fund still managed a 0.44% increase in value for the month. And finally, even the Bond Market lifted off the back of some underwhelming growth news that meant the chances of an interest rate rise in the near future further decreased, pushing money market and bond interest rates lower. Official interests were kept the same again at 1.5%.
For all the good news, our monthly face to face reviews have continued to reinforce the message that this might be a good time to lock away some profits, because its highly likely that the next bit of bad news, whatever that may be, will probably produce a small adjustment downwards in prices. That is part of the normal cycle, of course, and nothing to get too excited about, but the process of taking profits when they are obvious remains effective.
The big news in the last 4 weeks is naturally Tuesday night's Budget. The surprise this year was just how rational the changes were - a welcome relief and hopefully a sign that the Pollies are going to be more sensible about balancing the budget, cleaning out the dead wood and showing some restraint. For our clients, the stand out items were limited to three.
The first is a new savings measure for First Home buyers; they can now use their super to save up to $15,000 p.a. extra in their fund (and $30,000 in total), and then draw those funds earlier than normal if they are to be used to purchase their first home. The big catch is that the First Home buyer must not end up with a partner that already owns a house, otherwise their super savings are stuck until retirement (or separation??).
The second item of interest is the ability for those over 65 to have one more chance to add to super using the proceeds from the sale, or downsizing, of their home. It is limited to $300,000 per individual, but provides an excellent opportunity to effectively invest those proceeds either tax free, or tax reduced, compared to investing in their own name. This programme is about helping to encourage retirees to downsize. There is a catch though - the released capital will still count for Centrelink purposes, if relevant. It means that those reliant on the Aged Pension need to be aware of the potential loss of that pension income. However, the liquidity benefits will often outweigh those issues.
The final bit of good news; for those who became Self-Funded retirees on 1/1/2017 with the change in the Assets Test for Centrelink (i.e. they lost access to the Aged Pension), another downside was the loss of the Pensioners Concession Card. The government has obviously woken up to the anger around that part of the change and has retrospectively decided that anyone previously holding the PCC will now be entitled to retain it. We will keep an eye out for the details, but I'm sure Centrelink will be in touch for those affected individuals.