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May 2017 – End of Month Update … and FHSST!

Slack Investor remains IN for US, UK, and Australian index shares.

Despite a bad month for the Australian index, the Slack Investment Cycle returns for the US, UK and Australian markets are 141.0%, 12.7% and 8.9%, respectively.

Extract from the ASX Index Fund (STW) May 2017 – Incredible Charts – More detail on the individual Index Chart Pages

May 2017 still finds the monthly price range bar is well above the 10-month moving average in all markets (This is the last bar on the far right of the charts on the index pages – and it is above the black wavy line that represents the 10-period moving average). This is Slack Investors comfort zone … so no action again this month.

For more information on parameters such as progressive gains, try the Slack investor ASX Index, US Index and UK Index pages for updated details – and a look at the charts. Next end of month update on the index charts will be early in July.

FHSST … First home super saver scheme

Slack Investor has probably gone a little early on this as, although announced in the 2017 budget, it is still a twinkle in the government’s eye as the legislation is still to be presented to the quite fickle senate and passed as law. But, it is a sensible proposal that should give first home savers in Australia a bit of a kick along if passed.

The scheme opens up the great tax-saving vehicle of salary sacrifice. Salary sacrifice is not normally on the radar for young first home buyers as it is normally associated with saving for your superannuation – and locking away your money for decades. FHSST lets you save up to $30000 for individuals ($60000 couples) – and lets you access your money when you buy your first house.

There is a nice calculator and graph here provided by SCOMO Someone on $60000 who puts $10000 per year into the scheme would have $25578 saved up after 3 years. This is a bonus of $6239 as measured against just putting the savings into a bank.

For those who are young and saving for their first home … hope for a quick legislative passage and get on it! … Its really dope!

Sometimes What You Don’t See is Really Important!

Especially when the thing you don’t see is your money!

I know things are difficult out there … rents are high, things break, bills keep coming in, and everything seems to be going up – except for your wages. But, if you can have the discipline to save even a little bit of your money, your wealth fund will be able to establish some roots … and this start is a huge and necessary step to financial independence.

Through experience, Slack Investor knows that it is easier to save money close to the source – if you can quarantine some of your income at the time of payment, – all the better! Start up an online, no fees, bank account and tell your boss that you want a portion of your pay put into this. If your employer can’t do this, then set up a direct transfer from your wages bank, the day after payday, to your online savings account. It is done … you are on your way.

In the parable from the financial classic The Richest Man In Babylon, the rich man Algamish passes on the secret of his wealth to the financially challenged scribe Arkad –

“I found the road to wealth,” he said, “When I decided that a part of all I earned was mine to keep. And so will you.”

Algamish suggested at least 10% of your wealth was to be put aside – and Arcad, with his mentor’s help, also became a rich man in Babylon. Arcad was not lazy with his money and understood the power of money and time through compounding interest …

“Then learn to make your treasure work for you. Make it your slave. Make its children and its children’s children work for you … Invest they treasure with greatest caution that it may not be lost.”

Back in the real world, and far, far from Babylon … So many Australians have built their wealth through real estate. Increasing land values have helped this (Especially in Melbourne and Sydney) … but a big reason why home ownership is a vital stepping stone to wealth is that the banks will lend you 80% of the asset value (If you satisfy their income tests!) … and you are “forced” to quarantine your monthly loan repayments from your spending. This is “forced” saving and most homeowner’s, up until now, have found a way to make these payments each month. Business Insider quote a Standard and Poor’s report of an Australia wide loan delinquency rate of only 1.29% for January 2017. This figure will most certainly rise as we go into an interest rate increasing regime – but that’s another story!

Salary sacrifice into superannuation is another way of putting a portion of your wages aside and “paying yourself” in a tax-advantaged way. This strategy has great benefits for older folk but, … this has little appeal if you are 40 years from retirement.

But wait … Hidden in SCOMO’s 2017 Australian budget there is a tantalizing offer to the young home saver who wants to quarantine a bit of money for their future wealth … The First Home Super Saver Scheme. The unfortunately named, deflating sounding scheme has the acronym – FHSST … and will be discussed next post.

Good Debt and Bad Debt – SCOMO you Genius!

Slack Investor doesn’t often comment on the political scene but in Australia it is the yearly budget week and it always pays to keep an ear out for what our politicians are up to. The Australian treasurer Scott Morrison (or SCOMO to the politically aware dudes) presented his budget yesterday with the usual media fanfare. A good summary here … there was a lash at the banks with a new levy on liabilities for the big 5 (Popular with everyone except banks!). The banks took a hit in the share price today … but Australian banks are very good at spreading the costs back to the customers and I am sure that their profits will continue. There was lots of other stuff, putting out a few political fires, bash the bludgers, etc. Of worthy note is the funding of the National Disability Insurance Scheme (NDIS) with an expansion of the Medicare levy … a revenue raiser that hopefully will be passed by the senate.

I haven’t been inspired by treasurers for a long time … I would have to go back to Paul Keating (Currency floating, tariff reduction, compulsory super) or Peter Costello (Future Fund) to find more than mere twiddlers (I am talking about you here Wayne Swan and Joe Hockey!). But SCOMO looks to be doing a few visionary things that might help the nation. His real contribution as far as Slack Investor is concerned is his introduction of the terms “Good Debt” and “Bad Debt” to the political landscape.

It can be very wise for governments to borrow, especially while rates are low, to lock in longer term financing and invest in major growth producing infrastructure assets, such as transport or energy infrastructure,” From Scott Morrison ABC Audio

These are concepts that Slack Investor has explored before, in the personal sense. The difference in type of debt is such an important concept and understanding of the difference is fundamental to financial independence. Good debt is debt that you take on to buy assets that hopefully appreciate in value (e.g., Real Estate, Shares, Education) and contribute to your wealth. Bad debt is debt that you take on just to buy, or do, stuff.

While I applaud Scott Morrison for introducing these debt concepts to the masses, when you drill down into some of the infrastructure spending that is being proposed there is some doubt as to whether all of his proposals will benefit the country. Not all infrastructure is good infrastructure.

Although Slack Investor is cynical enough to think that consultants will give you the answer that you pay for, I think that a compulsory cost-benefit analysis should be required before any major government outlay. At least then, the figures would be out there and the debate would begin on the veracity of the analysis.

In researching this post … well, its “kind of” research … Slack Investor found a couple of SCOMO photos that are so good that I want to share them. They are here below for your delight (or fright)!

A bit of last minute adjustment ….SCOMO and the Former Prime Minister and renowned onion eater, Tony Abbott – From WixxyLeaks

Put another bit of coal on the fire! Good Idea Scott??? A brilliant, but disturbing, photomash from GeorgeBludger on twitter

2017 April – End of Month Update

Slack Investor remains IN for US, UK, and Australian index shares.

April 2017 has seen rises, in the US and Australian markets and a dip in the UK Index. So far, the Slack Investment Cycle returns for the US, UK and Australian markets are 141.0%, 7.6% and 12.0%, respectively.

Bull markets are a funny thing – and there is no doubt that all markets that Slack Investor follows are in various stages of a bull run – they are comforting as the Slack Investor can congratulate himself on what a stock market genius he is (Ironic comment!) – And yet, I can’t help but feel a sense of unease that things have been “too good for too long”.

Looking at the index chart pages, I get the feeling that it has been a long time since my stop losses have been adjusted upwards in the UK and ASX markets – and this will have the potential to erode any gains should the markets fall suddenly. However, I am comforted that the Slack Investor monthly-decision based method is tried and true and has brought rewards in the past … so I’m staying the course … the objective Slack method is designed to keep you in the markets as long as possible and only withdraw from the fray during a major downturn.

I am also comforted by the fact that we frail humans have behavioural biases, we lack patience and we want to tinker with things! Although Slack Investor is unable to track down the original source, an often quoted study by Fidelity (e.g., Business Insider) investigating the Fidelity trading accounts between 2003 and 2013, found that its best performing accounts were the inactive ones – Either owned by people who had forgotten that they had an account, or by dead people!

The Slack Investor does not recommend complete inaction though – but trading less has its merits.

While it is fresh in my mind I will drop in another example of the fine New Zealand experience below…

Day 3 Milford Track NZ – Slack Investor’s corpulence is almost eclipsed by the magnificence of Sutherland Falls. Reminder … must exercise more often!

For more information on parameters such as progressive gains, look on the Slack investor ASX Index, US Index and UK Index pages for updated details – and a look at the charts. Next end of month update on the index charts will be early in June.

Superannuation … Engage! – Part 2

You have been busy (and definitely not Slack) and gone through the paperwork that combines your super funds into one fund that you will keep for your working life. You have probably found an Industry Super Fund provider with established performance and low fees … Sorted!

Slack Investor is proud of you!

However, a little more work is required. The default investment option for most funds is called “balanced” – that sounds pretty cool – who wouldn’t want to be balanced! Generally Balanced options comprise 60-70% in growth assets and 40-30% in income assets.

The options that your fund may offer you are … in terms of increasing risk are

Cash – Invests 100% in bank deposits or other ‘capital guaranteed’ products.
Conservative – Around 30% in shares and property with the majority in fixed interest and cash.
Balanced – About 70% in shares or property, and the rest in fixed interest and cash.
Growth – At least 85% in shares or property.

If you are young … go for Growth, or High Growth … every time! Your super will be invested for 40-50 years and this is plenty of time to ride a few bumps that Growth assets such as shares and property can sometimes throw … Embrace risk and ride these bumps …. It is a good lesson to realise that the beautiful dance between risk and growth must be part of your investing life – Without risk, it is impossible for your investments to grow substantially.

Depending on your time frame, your tolerance to risk will vary. There are good reasons for someone approaching retirement to step back from a growth at all costs investment strategy. But, if you are just starting your working life, and want to grow your superannuation in a meaningful way … time is on your side … and risk is part of this process …

Australian Super have crunched the numbers and found that

YOUNG workers choosing “low risk” investments for their superannuation may be up to $170,000 worse off

The appealing sounding “low risk” options mostly deliver returns not much higher than inflation … And, we are not interested in just tracking inflation … we want growth!

If your superannuation amount is low and you want to give it a bit of a boost, and you earn less than $51,021 (2016/2017 year), the Australian government runs a co-contribution scheme that will reward you on a sliding scale – If you earn less than $36,021, the tax office will automatically kick in a maximum $500 for a $1000 after tax contribution to your super fund – This reward gradually tapers to zero as your income approaches $51,021. This is a pretty good return for your investment!

Grandparents and parents please note – if your wonderful offspring have a part-time job and a compulsory super fund – and you have a windfall that you would like to pass onto the next generations that cannot be frittered away on teenage pleasures – I am reminded of the fantastic George Best quote here.

I spent a lot of money on booze, birds and fast cars. The rest I just squandered.

Despite the wisdom of George Best, a gift of $1000 that would go directly to your loved one’s super fund would attract this govt co-contribution and be a great lesson in the benefits of compounding interest.

Superannuation … Engage! – Part 1

Most Australians, particularly young Australians, rarely show interest in their superannuation(retirement)fund. I can understand this when you are just starting your working life and your experience with super is just to see a slab of your pay earmarked for some obscure fund that you wont be able to access until you are almost fossilized at the age of 60.

However, it is time to engage … our super fees are too high in Australia … and a lot of the problem is the design of the system … and apathy. The Australian compulsory superannuation system is much envied – However, it could be improved – your default fund is decided by your employer and this, annoyingly, could change with each new job – it is time to take control!

According to the Super Sting report put out by The Grattan Institute, Australian’s pay $21 billion a year in super fees. Australians pay fees at almost 3 times the rate of other OECD countries. The report states

… a 30-year old Australian today will have his or her super balance reduced by almost $250,000 in fees (in today’s dollars) at retirement!

This is too much! Set aside an evening where you hunt down the latest super statement from your fund and do a bit of google research. I would throw in a glass of wine … but that’s just me!

Sure … there is a delay in getting your super … but it is your money, why give to the bloated financial industry!

Many super funds ask you to pay fees of up to two per cent per year to have your compulsory superannuation ‘managed’ However, with a tiny bit of effort, it is possible to restrict your super fees to around 1% (or less!) per year. This means a person with a fund balance of $50,000 could reduce their fees from around $1,000 per year to less than $500 – just by filling out a few forms .. the whole process is outlined on the ASIC Moneysmart site – I will borrow and paraphrase these steps …

Choose a fund – The Slack way is to let someone else do the legwork for you and go to the independent site SuperRatings – they list a top 10 funds (I have shown the top 5 – over a 5-year period below). Note that on this trawl, they are all Industry funds. Retail funds usually have lower returns as they have higher fees.

TOP 10 RETURNS AS AT 28/02/2017
Rank	Fund Investment Option	Return	Return Period
1	HOSTPLUS – Balanced	10.80%	5 year
2	Cbus – Growth (Cbus MySuper)	10.66%	5 year
3	UniSuper Accum (1) – Balanced	10.56%	5 year
4	AustralianSuper – Balanced	10.54%	5 year
5	CareSuper – Balanced	10.54%	5 year

Don’t get carried away with small differences in returns but, as well as previous returns, take a look at the other important factor, yearly fees – RateCity has sponsorship deal with some super providers, but their listing on performance comparison here shows typical yearly fees on $50k balances – If you can get fees $500 or below (<1%), you are doing OK.

Check your insurance cover – Income insurance is usually a good idea, and this is a separate component to your fees- life often can sometimes throw up something unexpected and a basic policy might help you out in times of trouble. For older folk … near retirement with equity in your house … this insurance is not so important.
Open a new account – Contact your proposed new fund and set up an account – no upfront transfer of money is required … this will come later. Ask them for all details to tell your employer – Choose well … and this will be your super fund for your working life.
When your new fund is established, tell your employer – Make sure they know where to pay your super and make sure you have your new account number. Your employer will have to enter these detail in the payroll software- Keep this fund for ALL of your jobs when you fill out your employee information forms!
Rollover super to your chosen fund – This is simple if you have only only one existing fund – your new fund will have a form that you can use to request a rollover from your existing fund. OR, if it is complicated and you have several funds going, you can combine these online through myGov,

There is more to say on this topic … stay tuned for part 2. For more information take a look at the ATO’s keeping track of your super page.

2017 March – End of Month Update

Slack Investor remains IN for US, UK, and Australian index shares.

The Slack Investor has been true to his ethos and not published any general interest posts for a month … this will happen from time to time … but I will commit to prompt monthly updates for those who follow the US, UK and Australian indexes and who may value the Slack input to their buy/sell decisions – these will be published in the first couple of days of each month.

I have been off to New Zealand. The great advantage of the Slack approach to investing is that I can be away from the markets – even out of internet range for up to a month at a time – the lack of required decisions on a daily, or weekly, basis suits my style.

New Zealand is a remarkable country to which Australia is the older, louder, uglier, more arrogant brother! I had a great time and the the Kiwis would often impress with their manners, integrity and general genuineness(?).

Day 3 Milford Track NZ – Thanks sister-in-law for the photo

We were mostly in the South Island and the scenery was jaw-droppingly beautiful. … I want to go back! Slack Investor and travelling companions are shown casting appropriately shadowy figures on Day 3 of the Milford Track – Nice photography skills from my sister-in law … Enough of the travelogue.

March 2017 has seen rises, in the UK and Australian markets and a refreshing pause with the US Index. It is also dividend season down under and Slack Investor always enjoys this time when each company (hopefully) shows their appreciation for supporting them with a little trickle into the bank accounts.

For more information on parameters such as progressive gains, look on the Slack investor ASX Index, US Index and UK Index pages for updated details – and a look at the charts. I have also updated my Portfolio page – this portfolio page will only be updated occasionally and is not presented as an investment guide – it just shows the type of companies that Slack investor is interested in – mostly growth companies with established dividend records. Next end of month update on the index charts will be early in May.

2017 February Monthly Update

Slack Investor remains IN for US, UK, and Australian index shares.

Please forgive the early call … but all markets had an ebullient month … and I am off on a holiday. The great advantage of a monthly system for index funds is that no decisions need be made until early April after analysing the end of March charts.

February 2017 has seen rises, in the 3 markets that Slack Investor follows. I am always glad to be able to raise the stop loss on any of my index funds in a hope to trap any hard fought gains. The US market (SPY) had a rules-based rise in stop loss from 199 to 208 – small … but every little bit counts!

The SPY is 236.74 at the ‘end’ of February – a 140% increase since the initial buy. The Australian, and UK markets were bought much more recently (2016) and have had modest increases of, respectively, 8.6% and 8.5%. All rises are based on end of month prices only – Dividends and transaction costs are not included.

I beseech dear readers to mine further on the Slack investor ASX Index, US Index and UK Index pages for updated details – and a look at the charts. Next monthly index update early in April.

I WISH I could save on petrol

What is it about people and petrol prices? … OK …not all people!

However, It does qualify as a “Barbecue Stopper” (Thanks Fiona Katauskas … and Tony Abbott?) when the petrol price suddenly rises or falls, its in the news and people talk. It can start up some irrational behaviour. I did know a bloke who would fill up jerrycans of petrol on any fuel price reduction.

Slack Investor has been guilty of it himself … driving across town to save 4c per litre … and perhaps using the amount of fuel that I am supposedly saving! Fuel prices are important to Australians as only a few Australian cities have great public transport networks – and the car is a necessary evil, and petrol is a non-discretionary expense, in a lot of cases.

WISH cards are gift cards that can be purchased at a 5% discount at a variety of places I get mine through RACQ, a local motoring organisation that has member discounts. You apply online and you can get a physical WISH card or an e-gift card number that you can use straight away at any Woolworths aligned store or petrol station.

5% discount doesn’t sound like much – Why would you bother? – I would usually agree, but, if there is no inconvenience to using the card, Why Not!

Let me give you an example. My current cost for petrol is $1.44 per litre, using the e-gift card (which I buy $500 lots and hide in my car! …I admit, there is some risk here … but so far so good!). The 5% discount is a saving of over 7c per litre – which can be added to any other loyalty discount (usually 4c per litre).

Now, Slack Investor does not want to create the impression that he is excessively frugal – I enjoy spending money on things that I like e.g., travel. However, all day to day expenses should be examined in a rational way so that you can then use any savings to do the things you enjoy – or, to increment your way towards financial independence.

2017 January Monthly Update

Slack Investor remains IN for US, UK, and Australian index shares.

January 2017 has seen no great plunges, or rises, in the 3 markets that Slack Investor follows. In these crazy times of Trumpenomics, I am naturally nervous – but our stop losses have held for another month.

I am particularly watchful 0f the US market as it is very deep into a bull run. Slack Investor bought in to the US stocks through the ASX listed SPY – an Exchange Traded Fund (ETF) that emulates the US top 500 companies. The initial investment was at 98.81 in July 2009 on a monthly Directional Movement Index (DMI) BUY signal. The SPY is 227.53 at the end of January – a 130% increase since the initial buy – a staggering annual average performance rate of over 17%!

The Australian, and UK markets were bought much more recently (2016) and have had modest increases of, respectively, 5.7% and 5.6% .

There are plenty of opinions on where the various markets will be heading in 2017, Slack Investor will admit to being in the first category of investors as described by the American financial academic William Bernstein,

“ There are two kinds of investors, be they large or small: those who don’t know where the market is headed, and those who don’t know that they don’t know. Then again, there is a third type of investor –the investment professional, who indeed knows that he or she doesn’t know, but whose livelihood depends upon appearing to know.”

So, Slack Investor tries to follow objective rules that define his stop losses on a monthly basis knowing the markets will do what they do and he can react accordingly. In the mean time, he can relax for another month!

Normally, I would beseech dear readers to mine further on the Slack investor ASX Index, US Index and UK Index pages for updated details – however, due to technical difficulties, these pages, and the Portfolio page, will not be updated this month – they will be updated for the 2017 February monthly update, early in March.