Wednesday September 7, 2011

Director's Fore

Hi Everyone,

Welcome to your copy of Lakeside Consultants’ Spring News Update.

The world economy seems to be still teetering and the next 12 months will be interesting to watch.  The U.S. has a whole lot of reductions to come – the USD 17 trillion of debt needs to be slashed, the current 9% unemployment rates lowered, cost of the wars, etc  would all help.

Our economy appears to be in great shape when compared to many international economies, however let’s not forget that when America’s markets fall – so do ours.  We are not immune to world markets and in particular consumer confidence. 

Opportunities may present in the months ahead, and further in this edition of our News Update, we look at investing in these times of uncertainty. 

Please enjoy these articles and don’t hesitate to contact us if you have any queries.  We are only ever a phone call or an email away!

Best Wishes

ROSS HENNIG

Managing Director

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INSURANCE

The theme of our News Update  is ‘economic uncertainty’.  In times like these we all become more conscious of the downside, not just in the global market, but also in our own backyard.  To protect your wealth against a sickness or an accident, which will ultimately have an effect on your financial world and your loved ones, is vital during these times.

A CLAIM WITHIN....

Last month saw an employee of Lakeside Consultants claim a sizeable lump sum payment for Trauma Insurance, after being diagnosed with a cancer.
At the young age of 26, the good news is that he will make a full recovery, but it goes to show that you are never too young to protect yourself.

The payment received will go a long way to aid his recovery, and he was over the moon with the Insurance company and the outcome.

The trauma policy he took out was for a payment to be made on the diagnosis of a number of listed events, unrelated to whether he was able to work.  This type of cover generally extends to diagnosis of a serious listed event including cancer, stroke and heart attack (which make up approx 80% of claims).  There are approximately 40 events covered.
 
Considering 1 in 2 people, before the age of 85 will be diagnosed with a form of cancer (source – Cancer Council, Aust,  August 2011) it gives good reason to protect yourself.
Even a small amount of cover can go a long way.  In this case our colleague did not need to have much time off work, however the lump sum payment  has provided him one less worry during treatment and a difficult period in his life, as he has a young family to think about.

Thanks to the advancement of modern medicine, we are living longer lives.  Statistics show that from our 30's to 50's we are more likely to suffer a traumatic illness and survive, than die.

Business Expenses
This type of cover is the most under-insured in today’s market for self employed persons.  It essentially is a form of Income Protection, as it covers against sickness and accident on the ability to work and generate an income, however it covers the fixed costs of running your business.

Without it, if you did claim on an Income Protection policy, you may end up paying any associated fixed costs such as rent, non-income producing employee wages, electricity, accounting fees, etc  from your own income.

This would therefore affect your personal income, as you may have to meet these costs to keep your business running.  As it is generally a 1 Year Benefit period, it is substantially cheaper than an Income Protection policy, and is a tax deductible cost.

Please contact us on 03 9510 0788 to learn more about these two products and how they can protect you.

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FINANCIAL PLANNING

INVESTING IN TIMES OF UNCERTAINTY

There are some fundamental investment principles you should remember no matter when you’re investing, in order to add to your wealth over time.

Short term volatility is not a new concept

When thinking about your investments, it helps to remember that market down-times are a normal part of the market cycle.
While it’s natural to feel unsettled during uncertain times, history is littered with examples of market corrections (falls of more than 10%) and in every case, the market has bounced back and continued on an upward trend.

It may not be appropriate to bail out

When there is uncertainty, it can be hard to resist the temptation to bail out of the market. But in doing so you’re effectively accepting losses and preventing yourself the opportunity to benefit from the market recovery. As you can see on the table below, after these major corrections, it’s not usually that long before the share market has not only recovered, but gone on to higher returns.

It’s TIME IN the market, not TIMING the market that counts

In reality, no investor is able to ‘buy low, sell high’ consistently. Trying to predict, with any certainty, what markets will do over short periods is impossible and can actually be detrimental to building wealth.  Each year, the DALBAR study in the US calculates how much money the average investor loses when they change their investment strategy to chase the latest trend or escape negative returns. Over a 20-year period, an investor in equity funds would only achieve an annual return of 3.8% doing this compared to the average market return of 9.1%!

Diversify your investments

The golden rule of managing investment risk is diversification. By diversifying, you’re effectively spreading your risk and giving yourself the opportunity to benefit from a range of investments which may be performing differently in different market environments. You can diversify your portfolio at many levels. This means you don’t have to try and guess what the best performing asset class is going to be because, as the attached chart shows (click here to view), if you invest in the best performing asset class from the last year, you may be on a wild goose chase!

Most importantly, SEEK ADVICE

In the same way you make other important decisions in life, it often pays to speak to a qualified professional. Everyone’s needs and goals are different, so you’ll need an investment strategy that’s designed specifically for you. While your strategy is designed to accommodate for uncertainty in the market, because it will inevitably happen at some time in your investing life, it never hurts to review your strategy and make sure you’re still on track to achieving your goals.

If you would like to discuss your current and future investment strategy, give us a call on 03 9510 0788 and speak to one of our financial planners – Ross Hennig, Andrew Lord or Mick Taylor.

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LEGAL

WOULD YOU BE COMFORTABLE DYING WITHOUT A WILL???

You would be surprised how many wealthy people die without a Will, OR die without updating their Will to reflect a change in circumstances.  Please read on – here are some good examples of leaving things until it’s too late!

Howard Hughes
The eccentric billionaire who founded Pan American Airlines, died in 1976 at the age of 70.  His Will was discovered at the headquarters of the Mormon Church in Salt Lake City.  However, the Will was proved a forgery and his estate was divided among his 22 cousins.

Stieg Larsson
He wrote, amongst other titles ‘The Girl with the Dragon Tattoo’, and died in 2004.  He too died without a Will.  Swedish law dictated that his Estate be divided between his father and brother.  His lifelong partner of 32 years, Eva Gabrielsson received nothing.  The family did grant her ownership of the couple’s apartment.

Jimi Hendrix
The famous musician died in 1970.  He did not leave a Will regarding the distribution of his Estate.  The battle over this raged on for more than 30 years for one simple reason.  His Estate continued to generate income long after his death.

Heath Ledger
Heath died in 2008.  He had a Will which left everything to his parents.  The problem was, since he made that Will in 2003, Heath had a child Matilda.  By not updating his Will to accommodate his new circumstances, Matilda received nothing.  Fortunately, Heath’s parents made sure she was looked after, but without the aid of any tax protection like a Testamentary Trust.

Don’t leave it to the Courts to decide the fate of YOUR assets.  Even worse, if you don’t have a Will and there is no next of kin, the Government takes it all as the default.  You have already paid tax in your lifetime, so why give the Government more when you die?

If you do not have a Will, or if your Will does not reflect your current circumstances, or you have not prepared a Testamentary Trust please call Doug Patrick at Lakeside Legal on 9510 0788 today.

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