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Investment and portfolio building has traditionally been a male-dominated world, but these days more women are trading on the market – and they’re good at it!

According to an ASX Australian Investor Study completed in 2020[1], women make up 42% of Australian investors, yet 45% of those only began investing in the previous year.

Younger women, aged 18-25, known as Next Generation Investors, are starting to invest in stock portfolios. Typically, the goals for this cohort include saving for a holiday (50%) or paying down existing debt (34%).

The ASX study highlighted a few other interesting points:

• Women prefer products more commonly understood, such as direct Australian shares (53%), residential investment property (37%), and term deposits (31%).
• Women are less concerned than men about low interest rates and market fluctuations but consider issues like whom to trust, hidden fees, and liquidity.
• Typically, while men are more accepting of market volatility (higher risk), women prefer stable or guaranteed investment returns (lower risk).

While we’re about breaking down stereotypes, the study found that women are generally more successful in their investments than men. This could be because women are cautious by nature, take longer to research investment choices, and prefer to ride out market ups and downs once settled. Conversely, men tend to regularly review their portfolios and trade aggressively, buying and selling assets, potentially incurring additional fees and losses due to market swings.

In recent times there has been a surge in Australian women backing other Australian women in start-up business ventures. Interestingly, support for Indigenous businesswomen is increasing as women’s investment networks strive to encourage women from diverse backgrounds. According to SmartCompany.com.au[2], female venture capitalists recognize that entrepreneurial women face a specific set of challenges, such as a lack of networking and mentoring opportunities, and lingering perceptions around gender-based work/family roles. Fact is, almost 40% of Australian women who are single for reasons of divorce, widowhood, or otherwise, will retire in poverty. Issues around the gender pay gap are recognized contributors to women generally having less money in savings and/or superannuation: with women saving an average of $598 per month compared with $839 for men.

To improve these figures, many women strive to secure their financial futures through self-education: magazines, blogs, podcasts, etc. Others seek professional advice through a referral from a trusted friend or relative.

A great place to start is your local library, where you’ll find financial books and magazines. Check out the ASX online education centre, your local TAFE, or the government’s MoneySmart website for short investment courses and information.

The financial planning industry recognizes that more women are actively investing.

As professional financial planners, we can ensure all your decisions are well-informed and that your personal needs and goals are considered.

Women are proving themselves very capable investors, and we’re here to assist you in your path to a better financial future.

[1] www.asx.com.au Australian Investor Study – Investor Profiles (ASX Australian Investor Study 2020)

[2] www.smartcompany.com.au Analysis, Venture Capital (Stephanie Palmer-Derrien, March 2021)

[3] www.au.finance.yahoo.com How much the average Aussie your age has in savings (Lucy Dean, January 2021)

[4] www.finder.com.au Women rule at investing, so why don’t more of us do it? (Kylie Purcell, March 2020)

Investing is normally a topic that conjures up images of pin-striped executives and sophisticated financial markets. In reality, the act of investing is part of our daily lives; all of us are doing it throughout the day, though we might not consciously stop to think about it.

By exercising and pursuing good eating habits, we invest in our health; taking good care of our families and looking out for friends is an investment in our relationships, and commitment to education is an investment in our future. These are but a few examples and many more can be found. The point is that – as a way of life – we consistently invest time, effort, and other resources, in matters that are important to us.

The largest investment for most of us is the countless hours spent on earning a living; a substantial part of our life is absorbed by working to make ends meet. Consider this basic truth: there are only two ways to earn a living – you must work for your money, or your money must work for you.

Our money must work hard for us so that we can comfortably maintain our quality of life.

So how does your savvy about financial investing stack up right now? Try this quick quiz to find out.

How would you describe an asset?

1. something that suits my personal taste
2. something useful or valuable
3. only objects that I can see or touch

Is investment income taxed?

1. no, not at all
2. maybe, depends on whether you have a job
3. yes

What is meant by “bull market”?

1. the farmers market
2. the price of meat
3. rising financial markets

What is a managed fund?   

1. a pool of investors’ money controlled by professionals
2. investment opportunities only for high-value individuals
3. managing your own financial affairs

What is a share?

1. a fund manager’s share of the investment profits made for clients
2. when industry professionals share the same client
3. ownership title in a company giving you the right to share in profits

Which is a riskier investment – property or term deposit?

1. property
2. term deposit
3. depends on whether it’s short-term or long term

What is a dividend?

1. when your investments are divided into cash and shares
2. when a company pays out profits to its shareholders
3. when your investments are divided into taxable and tax-free

What is negative gearing?

1. the opposite of a bull market
2. when advisers caution against a particular investment
3. when you borrow money to buy an investment asset that will result in a current loss

ANSWERS

How would you describe an asset?

1. something that suits my personal taste
2. something useful or valuable
3. only objects that I can see or touch

Investments, such as shares – are called assets because they are valuable and are intended to make our money grow. Physical items that can be put to good use –such as machinery – are also called assets because they may fulfil important roles; for instance, to manufacture consumer products.

Is investment income taxed?

1. no, not at all
2. maybe, depends on whether you have a job
3. yes

Investment income is taxable. An example is the interest that you receive on funds held with banks and financial institutions.

What is meant by “bull market”?

1. the farmers market
2. the price of meat
3. rising financial markets

When financial markets are upbeat and optimistic it’s referred to as a bull market. The opposite, when a market is pessimistic, is called a bear market.

What is a managed fund?   

1. a pool of investors’ money controlled by professionals
2. investment opportunities only for high value individuals
3. managing your own financial affairs

Managed funds are vast amounts of money, made up of the contributions of many individuals placed together. The funds are invested in various assets and managed by experienced and skilled professionals.

What is a share?

1. a fund manager’s share of the investment profits made for clients
2. when industry professionals share the same client
3. ownership title in a company giving you the right to share in profits

Companies raise the money that they need for their operations – also called capital – by selling shares. The people and legal entities who have bought into a company are called shareholders. They have the right to vote on company matters and to receive a portion of their profits.

Which is a riskier investment – property or term deposit?

1. property
2. term deposit
3. depends on whether it’s short-term or long term

The return on your term deposit is guaranteed by the financial institution, whereas property investment returns fluctuate in line with property market values. The value of a property can swing significantly and even fall.

What is a dividend?

1. when your investments are divided into cash and shares
2. when a company pays out profits to its shareholders
3. when your investments are divided into taxable and tax-free

The directors of a company decide each year how much of its profit can go to the shareholders and how much should be held for the ongoing operations of the business. The portion of the profit that gets paid out to the shareholders is called a dividend.

What is negative gearing?

1. the opposite of a bull market
2. when advisers caution against a particular investment
3. when you borrow money to buy an investment asset that will result in a current loss

An example of negative gearing is through the property. An investor usually finances a rental property through a mortgage. The mortgage interest and property maintenance costs are offset against the rental income. If these costs exceed the income, the property is negatively geared. In usual circumstances, one benefit of negative gearing is claiming tax deductions for the costs during the life of the loan. This practice should only be attempted in a rising property market.

So, how did you go?

Although it can be complicated, the financial markets can offer a great opportunity to make our money work hard for us. Sensible investments can mean the difference between reaching our financial goals, or not.

If the quiz shows that your own investment knowledge needs some work, we can help.

Financial advisers are qualified and licensed professionals who stay in touch with the fast-moving financial world and can provide solid guidance across all types of investing.

Contact us to see how investing can help you on the way to reaching your own financial objectives.

Sources

https://en.oxforddictionaries.com/definition/asset

https://www.ato.gov.au/Individuals/Income-and-deductions/Income-you-must-declare/Investment-income/#Interest1

https://www.investopedia.com/terms/b/bullmarket.asp

https://www.moneysmart.gov.au/investing/managed-funds

https://financial-dictionary.thefreedictionary.com/share

https://www.investopedia.com/terms/d/dividend.asp

https://www.investopedia.com/terms/n/negative_gearing.asp

According to the Collins English Online Dictionary, a get-rich-quick scheme can be defined as “a promise to make a person extremely wealthy over a short period of time, often with little effort and no risk”.

If you think that sounds a bit dodgy, you could be right. Yet ordinarily sensible and cautious people signup to such schemes every day. If it seems too good to be true…well, you know the rest.

Remember those pyramid-style investments we saw back in the 1980s? Fraudulent arrangements where investors’ money was used to pay earlier investors. The plan worked well for those in at inception, but later investors lost out. The most well-known pyramid scheme was created by Charles Ponzi in the 1920s, which is where the phrase ‘Ponzi scheme’ originated

These days, pyramid schemes are illegal, but there are plenty of legal investment strategies out there that appeal to our desire to earn big returns over a short period of time, like gearing, crypto-currencies, and even gambling. However, being legal doesn’t mean you should throw caution to the wind. All investments come with risk – it’s about how much risk you can afford or are willing to accept.

We understand the risks associated with gambling – after all, casinos and other gambling outlets are not in the business of losing money! But what about the risks associated with other investment opportunities?

Gearing can potentially yield strong returns but can just as easily generate great losses. Let’s say you borrow at low interest rates to purchase an investment property. All this scenario needs is a period where you lose your job, the property is untenanted, or, interest rates increase rapidly, and suddenly you’re unable to service the loan.

You may be forced to sell the property at a loss. Conversely, if selling for a gain, you’re most likely up for capital gains tax (CGT), reducing your anticipated profit.

Cryptocurrencies are quick and easy to transact, but they’re also anonymous, a feature attracting all kinds of investors – including crooks!

The crypto world has been used for nefarious activities like money laundering and illegal dark-web purchases, (think firearms). As online ne’er-do-wells have access to the latest technology, just like the rest of us, it can be difficult to spot an illegitimate scheme, and since there’s no regulator, there’s no claims process if you believe you’ve been swindled.

Additionally, cryptocurrency investments are volatile; their value can sky-rocket overnight, but just as quickly plummet. Of course, such volatility can work to your benefit, but if your investment keeps you awake at night, it’s probably not right for you.

So, is it really possible to get rich quick?

That depends on your definition of quick which is why you should always seek professional advice before making any financial decisions.

Keen to invest capital in a business? Your accountant and financial planner will be able to help.

Fancy borrowing to invest in property or shares? Perhaps you’ve had your eye on a commodity you think is about to take off.

Your financial adviser can help create a strategy that meets your specific needs and attitude to risk.

And as for gambling, well you can ask your financial adviser about that too, just don’t bet on the response!

Sources

www.collinsdictionary.com Definition of ‘get-rich-quick scheme’

www.techbullion.com Pros and cons of investing in cryptocurrency (21 April 2022)

https://www.heraldsun.com.au/ ‘Victorians ‘bamboozled’ out of $22m in cryptocurrency scams’

That $50 note in your pocket. What’s it worth? “$50,” you say, probably thinking it’s a dumb question. But is it really? Or a sheet of plastic and a bit of ink that likely cost the note printer less than a cent? Your $50 note only has value because the government declares that it does.

This lack of intrinsic value means your $50 note, and the balances of bank accounts that represent most money in circulation, might better be described as currency rather than ‘real money’. For the majority of us, most of the time this distinction is of no great importance, but there are times when it matters a great deal.

Over the past few thousand years, all sorts of items have been used as currency, from shells and cocoa beans to soap and cigarettes. But to be considered real money, several key criteria need to be met. The most important are that it is:

• Recognised as a medium of exchange and accepted by most people within an economy.
• Portable, having a high value relative to its weight and size.
• Divisible into smaller amounts.
• Resistant to counterfeiting.
• A store of value over long timeframes.
• Of intrinsic value, i.e. not reliant on anything else for its value.

Throughout history, gold and silver have come closest to meeting these and other criteria, though nowadays you’ll have difficulty paying for your groceries with gold Krugerrands. Also, you’ll want to keep your gold and silver in a safe place, and it was people seeking to do just that which gave rise to paper money and our current system of bank-created money.

What started as a good idea…

Centuries ago, goldsmiths would take in gold and silver for safekeeping and issue the owners receipts, or notes, confirming the amount of gold held. The depositors soon discovered that these notes could be used for payment in place of the physical gold, making them an early form of paper currency. But the goldsmiths noticed something else. It was rare for anyone to redeem all their notes at once. They saw the opportunity to issue notes as a loan that borrowers paid back over time, with interest. And, because the redemption of the gold was relatively rare, they could create loans worth many times the value of the gold they held. Provided borrowers paid back their loans on time and only a small proportion of owners wanted their gold back at any given time, all was well, and goldsmiths transformed into bankers.

But this didn’t always work out. An economic shock might see everyone wanting their gold back, and if the bank couldn’t deliver the full amount that was demanded, it went broke. To help prevent this, many countries created central banks, with some governments even acting as lender-of-last-resort.

While government control and the rules around banking have evolved over time, private banks are still the source of most currency created today using a process that is much the same as that used by goldsmiths of old. However, gold no longer plays a part. Most countries did away with the gold standard during the 20^th century.

Banks may be better regulated than they were in the past, but that doesn’t prevent crises happening from time to time. Reckless selling of mortgages to people who had no hope of repaying them, then bundling them up in complex financial instruments that multiplied debt was the cause of the sub-prime lending scandal that sparked the Global Financial Crisis.

When things get real

In economically stable times it’s easy to think of currency and real money as the same thing. However, a couple of examples reveal the difference between the two.

One is when a government starts printing money to pay for its programs. Inflation usually results, and the value of the currency can plummet. In the case of hyperinflation, paper money and bank deposits can quickly become worthless as happened in Germany in the 1920s.

And banks still go bust, as Lehman Brothers proved in 2008.

In Australia, depositors are protected by a government guarantee, but this is limited to $250,000 per person per Authorised Deposit-taking Institution (ADI).

In both situations ‘real’ money such as gold retains its intrinsic value. All else being equal, if a unit of currency halves in value due to inflation, the price of gold will double. And provided gold is stored securely, it can’t be consumed by the debts of a mismanaged bank.

The difference between currency and real money and the issue of intrinsic value has implications for other investments. If you would like to learn more, talk to your financial adviser.

Wikipedia https://en.wikipedia.org Fractional-reserve banking

ASIC’s MoneySmart website www.moneysmart.gov.au Managing your money – Government guarantee on deposits

The recent passing of cricket legend Shane Warne reminds us all too vividly of our own mortality. One positive outcome may be that we become collectively more aware to look for what we can do to reduce the risks and the potential impact of such an event in our lives.

Whilst the average life expectancy in Australia is currently 82.8 years, up from 70.6 years in 1960[1], around 1 in 3 Australians die under the age of 75[2]. Males are more likely than females to experience premature death. In 2019, there were 28,000 potentially avoidable deaths: half (48%) of all deaths for people aged less than 75. Of these deaths, 64% were male and 36% were female[3].

One in three Australians personally know someone who has had a heart attack. In Australia, every nine minutes, one person is hospitalised due to a heart attack[4]. While men are at higher risk of heart attack, women are more likely to die of a repeat heart attack than men. Our health risks are wider than that. It’s estimated that over 400 Australians are diagnosed with cancer each day[5], with around two in five cases attributable to personal and behavioural risk factors such as smoking or being overweight[6].

Whilst it’s easy to wallow in numbers, we are all aware of risk; after all, we are 100% mortal. Life is full of risks. It’s how you chose to act and respond that can make the difference. You can reduce the impact of risk in your life by planning for the worst and living for the best.

Reducing health risks

You can help reduce your heart attack risk by getting on top of your heart health[7] and speaking to your doctor about having an annual heart health check. Making positive lifestyle changes can also decrease your risk factors. Even small changes can have a positive impact. These can include maintaining a healthy weight through a heart-healthy diet and lowering alcohol intake, exercising regularly, quitting smoking, and taking steps to manage blood pressure levels as well as to lower cholesterol levels. Speak to your doctor about what changes you can make.

Are you sufficiently insured?

Another important step you can take is to ensure you have sufficient insurance in place, should life take an unexpected turn. This can include things such as health insurance, travel insurance, and most importantly income and life protection. Having these in place will help reduce the potential impact of these life events.

Reducing estate risks

NSW Trustee & Guardian estimated that around 45% of Australians do not have a valid will[8]. This in effect means that the government gets to choose how your assets are distributed. This in effect means that the government gets to choose how your assets are distributed. The percentages are similar across Australia. You can ensure this doesn’t happen to you by having a valid will and estate plan in place, which is regularly reviewed to keep pace with any significant changes in your life, such as buying a house, getting married, having children or grandchildren, or getting divorced.

No matter what curve balls life may spin us, proactively managing risk in your life can better enable you to live each day to the fullest with confidence.

[1] https://www.macrotrends.net/countries/AUS/australia/life-expectancy

[2] https://www.aihw.gov.au/reports/life-expectancy-death/deaths-in-australia/contents/age-at-death

[3] https://www.abs.gov.au/statistics/people/population/life-tables/latest-release

[4] https://www.hri.org.au/health/learn/cardiovascular-disease/heart-attack-causes-and-warning-signs

[5] https://www.canceraustralia.gov.au/impacted-cancer/what-cancer/cancer-australia-statistics

[6] https://www.aihw.gov.au/reports/cancer/cancer-in-australia-2021/summary

[7] https://www.hri.org.au/health/learn/cardiovascular-disease/heart-attack-causes-and-warning-signs

[8] https://www.tag.nsw.gov.au/