Question 1: Like many self-funded retirees, we are having to climb the risk curve to find some income. I see clear signs of some significant inflation on the horizon. This presumably will push up market interest rates? Do you agree? If so, the likely effect on equity markets will be negative. In an inflationary environment, what is the best asset class to focus on?
Answer: Notwithstanding the “signs”, I don’t share your concerns about inflation. I feel it is transitory as “digital disruption” is a hugely moderating influence on companies rising prices.
Gold for inflation bulls. When long term bonds have risen in yield and short-term rates are rising to “slow the economy”, long duration bonds.
There are some stocks that could win, including those with real pricing power. Insurance companies, who can raise premiums and benefit from higher bond rates, could be winners. A company such as Challenger with its inflation linked annuities could be a winner.
Question 2: I’d like to invest in the BetaShares Nasdaq ETF. It has both a hedged and unhedged version. Could you give me a reason why you would choose one over the other?
Answer: You would take out the currency hedged version (HNDQ) if you expect the currency to increase over the medium term. That’s our assumption, and why we have been suggesting to subscribers that they consider currency hedged versions (where available). The only real downside is the additional cost – the management fee for the hedged version for HNDQ is 0.51% pa vs 0.48% pa for the unhedged version (NDQ).
If you feel that the Aussie dollar is fully priced near 80 US cents and is more likely to head down, stay unhedged and potentially, pick up the “extra” return from a currency depreciation.
Question 3: I keep on hearing good things about Xero (XRO). The share price is currently at $130. Do you think it is over-priced at the moment or good value?
Answer: I am a huge fan of Xero. I wrote about it a couple of weeks ago when it was $112, suggesting that it was good long term buy. You can read about it here: https://switzerreport.com.au/why-xero-should-be-a-core-stock-in-your-portfolio/ It is expensive, but not too expensive, at $130.
Question 4: My son is 20 years and earns approx. $40,000 a year. My daughter is 19 years and works in the hospitality industry and earns approx. $25,000 and her super is with Hostplus. My understanding is if we put $1,000 into their super funds, the Govt will put in $500? Do I just put the $1,000 in and the Government automatically puts the $500 in?
Answer: All you need to do is make a personal (non-concessional) contribution to the super fund. The Government through the ATO will automatically make the co-contribution when the fund reports member balances and contributions.
The income threshold to obtain the full co-contribution is $39, 837. It phases out, cutting out completely when the income is above $54,837. Importantly, at least 10% of the income must be from employment sources.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.
