Jargon Juggernaut

Please note the following article is general advice only and may not reflect your current financial situation. Please refer to the Disclaimer on our website for more information – www.financialservicespartners.com.au/information/disclaimer

Financial DirectionsSelf Managed Super Funds (SMSF):

An SMSF is a superannuation fund that can be controlled and managed by the individual. Anyone who chooses to manage their own SMSF must do so in accordance with the law and ensure they are aware of legislative changes as and when they occur.

An individual with an SMSF is the trustee of the fund and many have a professional financial planner manage the SMSF on their behalf as they do not have the time or all the necessary skills to manage the SMSF entirely by themselves within the ever changing financial and economic landscape.

Within an SMSF, the investments must be separate to any personal and business investments.

If your SMSF is a complying fund, it is taxed at a rate of 15%.

If you would like to know more about whether setting up an SMSF is the right strategy for you, speak to a financial adviser who can give you more information related specifically to your personal financial situation.

Gearing and Geared Investments:

One option for building wealth is to look at gearing which is the borrowing of money to invest in assets that will produce an income. Examples of gearing include shares or managed funds.

Gearing is a high risk investment option as you need to be aware that the investment may decrease in value and if you have borrowed to invest then you will be paying interest on the loan.

However, if the investment returns exceed the after-tax cost of borrowing to invest, then you will make a profit on your investment.

Negative gearing is when the return is less than the cost to borrow to invest. In some cases you can claim the loss as a tax deduction against other taxable income which will turn the negative loss in to a benefit for the investor.

If you are interested in finding out more about gearing and how geared investments might be incorporated in to your wealth management strategy to accumulate wealth with a long term view, speak to a financial adviser who can discuss how gearing might affect your overall financial plan.

Dollar cost averaging:

This is an investment technique that is favoured by some investors who want to reduce their market risk. Instead of investing in one lump sum, the investor will spread out the amount they wish to invest over a period of time, usually several years, and will invest a certain amount at regularly intervals over this time period.

By spreading out the time frame in which investments are made, the number of shares held in an investment may be higher than if you were to purchase in one lump sum, so the closing price of the shares when you wish to sell, may increase the value of your shares due to market volatility.

Dollar cost averaging as an investment technique is not right for all investors. It depends on your individual financial goals, whether you have a long term or short term view of investing and your tolerance to risk.

If you would like to find out more about dollar cost averaging and if it is right for you, speak to a financial adviser who can give you more information specifically related to your situation and how this particular investment technique may affect your financial portfolio.

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