Financial Advice | Slack Investor

Things a Financial Advisor might tell you … and May 2023 – End of Month Update

Slack Investor has blogged about financial advice before – and although an advocate of trying to do as much as you can by researching finance world yourself, it can be a very difficult journey to be across all the fields of saving, mortgages, investment loans, insurance, superannuation, taxation, and investment.

Most people want financial advice but the problem is that it is so expensive. MoneySmart.gov.au outline a case study where “Rhett” has $400 000 to invest – He might be hit with fees of $13 600 in his first year of advice . These fees include a Statement of Advice and Insurance premiums and layers of platform and investment advice fees.

Where to invest your money is the easiest thing to sort out for yourself – with the key words being diversification and low fees. There are cost-effective ways of investing in a diversified way that will suit your risk tolerance without involving a financial advisor (e.g. Stockspot, Pearler). But some people (Not Slack Investor Readers!) need a trigger to just start investing. Finance world is much more complex than just investing your money. Slack Investor can see the need for finance professionals

Things a Financial Advisor might tell you

Firstlinks have trawled the data to determine the most recommended strategy used by financial advisers – the most common of these are listed below.

Let’s just have a look at some of these in more detail.

Rollover Your Super – “Rolling Over” your superannuation is just a way of describing the transfer of your “protected” super into another protected super fund. Slack Investor readers will be all over this one – Of course it makes sense to put all of your super with one provider to avoid multiple administration fees. Combine your super into one fund – preferably an industry fund (lowest fees) with a good 5-10 yr performance record.

Retain Your Super – This is again good advice for the long-term accumulators of wealth. Unless under extreme hardship, resist all attempts for early access to your super. During the COVID-19 outbreak, $4 billion was paid out to 456,000 people under the early super access scheme. This would have helped distressed businesses and individuals in the short-term but may not have been a great idea in the longer term.

Super Contributions – This is a more complicated area and, it might be good to have advice on when, and by how much ,you should boost your super contributions above those which are compulsory. This is tricky when you have competing loads on your take-home pay (Family, Mortgage, etc). Slack Investor was big on maximizing his super contributions once he had a firm grip on his home mortgage.

Apply for Insurance – When you have a family or debts (home loan?) to cover, life and disability insurance is a good idea. You don’t need an advisor to tell you this. Insurance through your super fund is usually the most cost effective way to do this.

Estate and Aged Care Planning – This area is really complicated for the layman. Professional Advice, or much research, needed.

Commence, Rollover, Retain Pension – You may need advice here if planning to mix aged-pension and super to fund retirement. If there are no aged-pension issues, Slack Investor believes that it is best to start an account pension (from your super) as soon as possible and re-contribute any surplus funds as non-concessional contributions.

Commence, Rebalance Investment – An old truth – Best time to start investing? 20 years ago. Next best time to start investing? Now! Rebalancing can be done automatically with cost-effective platforms e.g., Vanguard Super, Stockspot.

What Types of advice Do You Really Need?

The current financial advice system is complicated by well-meaning regulations that are in dire need of reform. In 2022, the Australian Treasury provided a consultation paper seeking feedback on changes to the regulatory regime that would allow financial advice on specific matters without the obligation that the advisor should know everything about your financial situation – No need for the expensive Statement of Advice (SOA).

Ideally, in a future world, you could get advice at various stages in your life from finance professionals at an hourly rate – perhaps in the same way you would consult a medical specialist about a problem. For Instance

Early/Mid-Career Advice: Am I on track with my savings, super contributions and retirement plan? What strategies should I employ to achieve my goals?
Pre-Retirement: Am I ready? Taxation Issues? Aged-pension/Super mix?
Estate and Aged Care Planning: Complicated – Many issues to discuss here.

Alternatively, you could just turn your financial future into a hobby (Like Slack Investor did), and use the internet and books to educate yourself.

May 2023 – End of Month Update

Slack Investor remains IN for Australian index shares, the US Index S&P 500 and the FTSE 100. It was a dreary month for the Slack Investor followed markets. The ASX 200 performed poorly this month – down 3.0%, and the FTSE 100 even worse – down 5.4%. The S&P 500 was flat (+0.2%) for the month.

In this month of turmoil for stock indexes, the Slack Portfolio did quite well. This is because it is heavy with technology stocks that are having a moment in the sunshine. The Nasdaq 100 index was up 7.7% for the month of May.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

Let’s Lay a Few Bricks … and Mid-Month Update

A 1999 extract from The Sydney Morning Herald showing a 13-yr old Chris Brycki – smartcompany.com.au

Slack Investor will admit to being less than young … but I am still capable of being a “Fan boy” when I see something impressive happening in the financial world.

After a series of schoolboy stock picking successes – winning the ASX’s Share Game a remarkable 3 times and, at university, he entered the JP Morgan Trading Competition, which he also won several times. The talented Chris “the Brick” Brycki, launched into a career with stockbrokers and financial houses. After a while, he started to question the long term performance of fund managers.

“… The problem is that over time, even by being right, the value added is not big enough to counteract the 1% fee that a lot of these fund managers charge.”
Chris Brycki – Stockspot – Livewire

Chris founded Stockspot in 2013 as an alternative way to invest. Their Robo Advice model offers a low-cost automated alternative to traditional fund managers and advisors. After a simple online survey to determine your investing stage and risk tolerance, an investment portfolio type is recommended to you.

Stockspot Building Blocks

Chris, founder and CEO of Stockspot, in 2020 – From smartcompany.com.au

Chris (and Stockspot) have come up with the breathtakingly simple, yet genius (Both Slack Investor and Donald Trump have a loose definition of genius), strategy. After researching thousands of ETF’s and, based on exposure, performance and low fee costs – Stockspot has selected just 5 of them as the building blocks for a range of different portfolios. The portfolios are based on risk tolerance, financial situation and the investor’s appetite for volatility. The five component ETF’s are in Australian Shares (VAS), Global Shares (IOO), Emerging Global Markets(IEM), Australian Fixed Income (IAF), and Physical Gold (GOLD).

ETF	Symbol (ASX)	1-yr Performance	Growth since Inception	Management Fee
Vanguard Australian Shares Index	VAS	-7.92%	8.25%p.a (13+ years)	0.10%p.a.
iShares Global 100	IOO	-4.43%	7.37%p.a. (15+yearsr)	0.40%p.a.
iShares MSCI Emerging Markets	IEM	-20.59%	7.18%p.a.(19+ years)	0.69%p.a.
iShares Core Composite Bond	IAF	-11.42%	2.73%p.a.(10+ years)	0.15%p.a.
ETFS Physical Gold	GOLD	+7.34%	7.75%p.a.(19+ years)	0.40%p.a.

The five ETF’s that Stockspot use to build their portfolios (1-yr Performance is to 13Oct 2022) – most of these ETF’s have a $500 minimum if you are investing directly.

It is best to disregard the above 1-yr performance – It has just been a bad year for most assets. The ETF management fees are low (depending on ETF complexity), there is good long term performance (Growth since Inception) and they have selected Physical Gold for inclusion.

Slack Investor does not naturally lean into Gold as it is a speculative, non-income producing asset. However, I might have to change my mind here. The reason Stockspot include Gold in all their portfolios is based upon historical data and the way gold tends to outperform in times of crisis. The results in this last year performance of +7.34% for Gold, speak for itself – as other asset classes flounder.

Mixing it all up

Slack Investor has written about Stockspot before in terms of Robo Advice and their valuable Superannuation reports. By using these 5 ETF’s in various combinations, Stockspot is able to give their customers a combination of returns and risk at a relatively low cost. There are even sustainable versions of each of the below portfolios available. As an example, the moderately conservative Sapphire portfolio is constructed with the following portions.

VAS: 27.2%
IAF: 35.2%
IEM: 14.4%
IOO: 7.9%
GOLD: 14.8%

A chart showing relative risk and return (grey line) of a portfolio varying between 100% Australian Bonds and 100% Australian Shares. The Stockspot portfolios have historically yielded lower returns than 100% Australian Shares) – but only slightly in their most aggressive Topaz portfolio. **Overall, through their diversification, the portfolios represent much lower risk.**

After fees, over a 5-yr period, Stockspot has outperformed 99% of similar funds over 5 years.

AMETHYST Conservative	SAPPHIRE Moderately conservative	TURQUOISE Balanced	EMERALD Growth	TOPAZ High growth
3.1% p.a	4.8% p.a	5.3% p.a	6.1% p.a	6.8% p.a

5-yr annual performance (After Fees) – to 30 September 2022 – From Stockspot

There are fees involved for Stockspot to manage your money. For a balance of $200000, they amount to 0.66%. At first blush, these fees (on top of the ETF fees) sound a bit steep to Slack Investor. However, for all types of investors, with a time horizon of at least 3-5 years, for a stress-free place to put your money, this might be exactly what they are looking for. Stockspot do a tailor-made portfolio construction, all the re-balancing of assets and, they take care of all brokerage costs – Not Bad! They even have zero management fees for children accounts up to $10,000 (for under 18s) and the ability to dollar cost average with regular top-ups.

Stockspot does not earn fees from or have a commercial relationship with the ETFs we recommend. We don’t pay professionals for recommending our service to their clients.
Stockspot

Slack Investor can think of lots of situations where people would like a decision-free, low-fee, diverse investment that is designed to grow in the long term. Well done Chris Brycki (and Stockspot), for advancing the investing cause with particular attention to keeping the fees down … you are a Slack Investor Hero.

October 2022 – Mid-Month Update

This image has an empty alt attribute; its file name is trend-1445464__180.jpg

Despite the above discussion, my small-scale market timing experiment continues until its projected end in 2024. My frustration with this experiment continues – as it often goes against one of Slack Investors firm beliefs. If you can avoid it – Do not sell an asset when it is undervalued. Using historical CAPE values, at the end of September 2022, the UK Index (FTSE 100) was 13% below its long term mean, the US Index (S&P 500) was 9% above its long term mean, and the Australian Index (S&P 500) was 7% below its long term mean.

At the end of September 2022, Slack Investor was on SELL ALERT for Australian index shares (ASX 200), the US Index (S&P 500) and the UK Index (FTSE 100). Each of them had broken through their monthly stop loss.

I have a “soft sell” approach when I gauge that the market is not too overvalued. I generally will not sell against the overall trend but monitor my index funds on a weekly basis once the monthly stop loss has been triggered.

Well … I can see no obvious up-trend at the end of the week for the US and UK markets and will exit at the end of week price of 3583 for the S&P 500 and 6858 for the FTSE 100. I am still just hanging in with the ASX 200 as they had a strong finish to the week.

The Index pages and charts have been updated for the UK Index and US Index.

Ride Your Own Bike

Like Sally, one day the realization will come that your best interests rely on you steering your own bike – in the direction that you want to go!

The ultimate goal is to get your three substantial piles going – house, income and investments. But before any of this happens you have to develop a mindset … I want to be in control of my financial life.

You must gain control over your money or the lack of it will forever control you. —
Dave Ramsey – Author of The Total Money Makeover

If you don’t take control, perhaps you’re plan is to take all your affairs to a financial adviser one day. Most people will feel the need for financial advice at some stage but only 20% of Australians have a financial advisor. The current structure makes getting advice a difficult step – and it’s not the financial advisors fault.

The pricing problem of Financial Advice in Australia

64% of survey participants agreed that financial advisers were too expensive.
ASIC Survey August 2019 – Financial advice: What consumers really think

The Australian Government passed a piece of legislation known as the Future of Financial Advice (FoFA) in 2012. FoFA was a series of laws that were supposed to improve the quality and transparency of financial advice. One of the main purposes was banning conflicted remuneration – where advisers were recommending products that gave them good commissions. While FoFA and the Hayne Royal Commission were well intended and vital in restoring some trust in the sector – there have been some unintended consequences.

(The Financial Services Royal Commission) identified the problem of conflicted remuneration without providing a mass market solution.
Graham Hand, Firstlinks – FoFA, the Failure of Financial Advice

There has been a huge rise in regulatory red tape and the associated compliance costs for financial planners. A combination of these costs, the big banks dumping their financial advice arms, and the need for upgraded qualifications has put this sector in crisis. The total number of licenced advisers is set to drop by a third in the next few years.

There is broad recognition that financial advisors have expertise that the normal punter does not have. However, the biggest barrier to getting financial advice is the expense. One of the big problems is that when you engage a financial advisor, they are obligated to present you with a full Statement of Advice (SOA). On the surface this makes sense, the client would want a document that takes into account your own circumstances and outlines the fees and risks of each strategy. However, according to one planner, the SOA has turned into pages of jargon, repeated disclosure and boring generic graphs. These statements are weighty tomes that take many hours to prepare. Sadly, they seem to confuse the actual advice and provide no real value to the client.

A full Statement of Advice (SOA) runs over 100 pages and the need to review all circumstances and develop a plan takes 10 to 15 hours and costs between $3,000 and $5,000 depending on complexity.
Graham Hand, Firstlinks – FoFA, the Failure of Financial Advice

From FirstLinks – FoFA, the Failure of Financial Advice, Take 2

James Kirby from The Australian uses the example of paying annual adviser fees fees of $3000 and he supposes that the structured advice that you receive will match the 4.3% pa return of the new Magellan retirement income product Magellan FuturePay (FPAY). He points out that for an investment of $500 000 and an expected FPAY return of $21 500, your advice fees would be 14% of your earnings. This does not make sense to him … or Slack Investor.

James Kirby suggests that a better model for the regulators to adopt would be that you could approach a financial adviser for advice that you need at the time … and pay the financial adviser for this “niche” advice. This is not possible under current legislation.

Take charge

So, with full service financial advice gravitating towards high net wealth clients, what is the average punter supposed to do? Robo-advisors such as Stockspot could be part of the solution. This automated service can provide help with allocation of assets other services that will suit your age and risk profile. But there are so many more financial questions you might want to handball to your financial adviser if you could afford one. Well, if you can’t … it’s up to you.

Decide what you want to achieve in the finance sense. Go through the savings basics and get your savings rate up. Take charge on where your money goes, get your superannuation set, reduce any unnecessary fees that you are paying, set a target on your financial piles.

Educate yourself on things financial. There are some great books. The Barefoot Investor is an excellent start. Some fabulous podcasts The Australian Finance Podcast will get you going and there are heaps of other Slack Investor favourites. Get involved and start to enjoy the immense freedom and satisfaction of riding your own bike.

Happiness is not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort.
Franklin D. Roosevelt

August 2019 – End of Month Update … and “I’ll Give you a Yield Curve!”

Slack Investor remains IN for Australian index shares, the US Index S&P 500 and the FTSE 100. The Slack Investor followed overseas markets have taken a bit of a savage beating this month ( ASX 200 -3.1%; FTSE100 -5.0%; S&P500 -1.8%). Thanks Boris and Mr Trump!

As well as this turmoil (kind of normal), my monthly looking at the charts this month has revealed that I have forgotten to adjust the stop loss upwards – I should have done this last month. My rule is that when the monthly index chart forms a new “minimum” and the monthly range drops below the black 10-month average line, a new minimum is formed and I should adjust upwards the stop loss. I have done this for the UK index (shown above in the green circle) and also the US Index (see the index pages for details).

I still remain nervous about the current situation. However, checking out the US Yield Curve indicator at GuruFocus , this indicator has oscillated to negative again. Because of its fluctuations, I have decided to switch to a “Probability of Recession” Indicator (see below). My monthly stop losses for Index funds are now “switched ON”(see below).

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

Inverted Yield Curve … Probability of Recession … Yeah Baby!

Tributes to the great Mike Myers for creating the most excellent character Austin Powers … I could see Austin becoming obsessed with the yield curve… Maybe not … Credit to Austin Powers: International Man of Mystery (1997)

The Inverted Yield Curve has been all over the financial and even mainstream press lately – as a possible predictor of recessions. There is some contrary evidence of an imminent recession due to continued good employment in the US, but most economists have some faith in the predictive power of the yield curve. Slack Investor will admit to not knowing much about this till recently … and is still learning. I wanted to develop a way for me to know when a slip of my index funds below a stop loss was Really Serious! – and not just a temporary downturn that would shake me out of a position … and then recover. This is the battle that a trend trading investor often has.

Trend-following systems either suffer from a large number of shake-outs or are slow to exit when the trend reverses; and often both. You can’t have your cake and eat it.
Colin Twiggs, founder of the excellent Incredible Charts and The Patient Investor

Slack Investor typically wants his cake and to eat it! – and is always on the lookout for a way for this impossible thing to happen.

Slack Investor has often made a virtue of using other peoples work in areas that require a lot of effort and research. I am happy to outsource my Inverted Yield Curve study to the boffins at the Federal Reserve Bank of Cleveland who supply a monthly prediction of the likelihood of a recession using the slope of the yield curve and GDP growth to provide predictions of future GDP growth. Like all good researchers, they caution not to take their predictions too literally but a glance at the chart below show that when the Reserve Bank of Cleveland Fed predicts a probability above say 20%, a recession (the grey columns) usually (not always) follows. As I am feeling my way on this one … I will use the predictions above 20% barrier to make my stop losses live! They currently have the likelihood of recession within one year at 44.1% … so all my stop losses are “live” at the moment.

The Fed Reserve Bank of Cleveland are predicting a 44.1% chance of recession within one year based upon end of August data. The Grey columns are the recessions, the blue line are the Cleveland Fed’s past predictions and the red line “gazes” into the future.

July 2019 – End of Month Update … and FY2019 Nuggets and Stinkers

Slack Investor remains IN for Australian index shares, the US Index S&P 500 and the FTSE 100. The Slack Investor followed overseas markets are all in positive territory this month ( ASX 200 +2.9%; FTSE100 +2.2%; S&P500 +1.3%). All markets are still “exuberent”. However, checking out the US Yield Curve indicator at GuruFocus , the indicator again shows a weak positive result (Near zero, Just … +0.09%) so my monthly stop losses for Index funds are temporarily “switched off”.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index).

Slack Investor Stinkers – FY 2019

Stinkers are part of investing in growth stocks. Growth stocks usually have a high Return on Equity (ROE>15%). By their nature, they have a relatively high PE ratio and are usually punished in the markets during reporting season if there is any bad news – and I am not too worried when this occurs – It is the total performance of the portfolio that counts. If they breach their monthly stop loss – I will review the stocks and ask myself the question – Factoring in what I know now about this company, would I still buy this stock at its current price? – If not, out it goes!

The percentage yearly returns quoted in this post include costs (brokerage) but are before tax. This raw figure can then be compared with other investment returns.

Costa Group (CGC) -34%

This should be a lesson to Slack Investor … try to avoid growth companies that do not set the price of its products i.e. are “price takers”. This agricultural company had some earnings revisions during January and May due to weather and some difficulties in their Morocco operations. I have hung in and still own the company as it looks cheap on projected price earnings … but another downgrade would test my good humour.

Costa Group (CGC) Daily Chart with some bad news in January and May 2019

Challenger (CGF) -30%

I have been listening to the story of this company for ages. Its income products (annuities) should really appeal to the retiring baby boomers. However, there has been a long slide in price of its shares. In a bit of “hands on” research, I had a look at their CarePlus product for a relative moving into Aged Care – Their package was difficult to sign up to, and the web examples used were underwhelming. Perhaps they market more to financial advisors than for retail investors. The good thing about reviewing the chart of a stock every week is that eventually you “wake up”. I sold the shares in March.

Dishonourable mentions to Corporate Travel (CTD), Platinum Capital (PMC) and Worley Parsons (WOR), which all lost more than 10% this financial year.

Slack Investor Gold Nuggets – FY 2019

By investing in companies with high return on Equity with a track record of increasing earnings, you can expose yourself to some pleasant surprises. The Return on Equity (ROE) and forward Price Earnings (PE) ratio values for each stock are found on the excellent Market Screener site.

ProMedicus (PME) +148%

Pro Medicus is an Australian company that produces medical imaging software for hospitals and medical specialists. Their products are used worldwide and there are e projected increasing sales. Their ROE 2020 is an excellent 41%,however, their projected PE ratio for 2020 is over 100. This is dangerous over value territory – and I am watching this stock closely for any price declines. But until then, I am riding this horse home.

Appen (APX) +101%

Appen supplies data services to global tech companies and their language division provides machine-learning technologies for devices. Perhaps because I don’t really understand what they do and because of their high estimated 2020 PE ratio of 61. I said thanks very much and then I got out of this stock last month. However, the price of this stock is still climbing! Ouch!

Rhipe (RHP) +79%

Rhipe is another tech company that I had a speculative interest in. It provides software licences that help their clients transition into a “cloud” environment. Rhipe has a working relationship with Microsoft in Australia but their high 2020 projected PE of 39 makes it another stock that may be overvalued and I am watching it closely.

Altium (ALU) +53%

Another fantastic year for ALU The designing of integrated circuit boards for technology products is proving to be a lucrative business. A high 2020 projected PE of 39 is a concern -but I really am smitten with this company – as they have been great growers of their business.

Service Stream (SSM) +52%

Service stream provides network services to Utility companies. This is the sort of company that Slack Investor loves. A high ROE of 20% and a reasonable 2020 projected PE of 19 with anticipated earnings growth.

Honourable mentions for Slack Investor portfolio stocks AMC and RHC that increased more than 20% in this financial year.

Slack Investor Total SMSF performance – FY 2019

In another good year for shares where Chant West reports median growth super funds made 7%, the FY 19 Slack Investor preliminary Total SMSF performance looks like coming in around 20%. Anyone can fluke one good year so 5-yr performance is a more useful benchmark to me and the Slack Portfolio now has a compounding annual 5-yr return of over 18%.

Not bad Slack Investor … now get back on the couch … with full FY 2019 results and benchmarks next post.

Robo On

When Robo Advice gets it wrong … Exterminate Financial Freedom! – Image from aminoapps.com

Last month’s post on robo advice had a look at a couple of options … but there is more. They all work in much the same way. In the “old days”, to enter the investing world you would have to register with a broker (e.g. Self Wealth, CommSec) to get access to shares or Exchange Traded Funds (ETFs) – and you would be charged brokerage for each buy and sell. Each ETF also has a management fee (usually 0.10% to 0.50% per year) but that is deducted from your returns internally.

A recent Choice article outlines two things have worked against young people investing in the stock market. Firstly, a lack of knowledge about how to start investing, and then, not having a decent stash of money saved up to make broker fees worthwhile.

With the robo advisors, small amounts are no problem. For a monthly fee they take care of the purchasing and the brokerage – This is usually a much easier experience as it takes less thought and action.

From the robo advice website you open an account and establish your identity.
After a few questions to get your risk profile, the robo advisor will suggest a portfolio of ETFs.
Your bank account details must be given to fund your initial portfolio of ETFs.
You might also setup a regular investment and some of the robo advisors ( Raiz and FirstStep have a cool rounding feature where your everyday card purchases are rounded to the nearest dollar – and the rounding excess will go towards your portfolio.
The Robo Adviser does regular rebalancing of your portfolio.

Robo your Investing

Lets Robo On, Six park, Stockspot, Raiz, Clover, QuietGrowth and FirstStep have some great offerings and are worth a look.

ROBO ADVISOR	Fee Schedule	$2,500 portfolio fees pa	$10,000 portfolio fees pa	$200,000 portfolio fees pa
Six Park	Minimum $10000. Management Fee 0.4% to 0.5%	……	$50	$1,000
Stockspot	Fixed fee of $66 pa for balances < $10k with asset based fees of 0.396% to 0.66% pa	$66	$66	$1,320
Raiz	$1.25 per month <$5K; 0.275% pa >$5K	$15	$27.50	$550
Clover	Minimum $2500. $5.50 per month <$10K; 0.45% -0.65% pa >$10K	$66	$71.50	$1,210
Quietgrowth	Minimum $2000. Promotion No Monthly Fees <$10K; 0.40% – 0.60% pa >$10K	$0	$0	$1,045
First Step	$1.25 per month <$5500; 0.275% pa >$5500	$15	$27.50	$550

The above prices were compiled July 2019 and should be checked before you start investing.

Robo your Super

All of the above Robo advisors will help you build up your ETF investments as a “side hustle”. But, there is a new way of adding to your existing super (hopefully you have made an effort to make sure it is an Industry Fund!) in a relatively painless way. Longevity has a mobile phone app that automatically tops up your Super calculated as a percentage of your everyday purchases – into whatever super account you choose. It is based on your everyday spending and then calculated as a percentage of your spend (default 1% – but go higher if you can -and maybe a set amount each payday!). At the minimum, if you spend $200 on groceries, this will generate a 2 dollar deduction at the end of the month. You can limit your monthly deductions to an amount – so that you don’t go negative in your everyday account.

Because Longevity operates in the superannuation environment it is taxed favourably compared to investments outside of super where earnings are taxed at your marginal tax rate.

What to do Now?

There is always a bit of inertia involved to enter the world of investing. More experienced investors who already have a lump of cash and a disciplined approach to saving perhaps don’t need savings apps like Raiz. They could buy ETF’s directly through a discount broker (e.g Self Wealth), or setup a more sophisticated robo account with Stockspot. Robo investment apps such as those in the above table aren’t after this demographic. Most Robo Advice platforms are targeting younger people who might not otherwise start investing until much later in life.

“Raiz aims to encourage its customers to be mindful of their spending and to start saving and investing some of their income … the average Raiz customer has made 11% per annum since launch
Raiz’s Managing Director, George Lucas. from Choice

Simple steps

When in doubt, do something.
Singer-Songwriter Harry Chapin of “Cats in the Cradle” fame

The beauty of Robo Apps and instruments is that they are an easy way for anyone to start investing. Slack Investor says … just start! The rounding and transactional nature of Raiz and Firststep really appeal to me. Slack Investor likes this sort of painless saving and would get either of these apps as a great first step into investing. I wish these vehicles were around in my younger days. There are risks involved (i.e. share prices going down!) – but hey, That’s Investing – and the risks diminish over period of time (say, 5 years) – According to ASIC, Risk is part of the investing experience.

Given the huge returns money invested early in life can generate, the costs of the lower priced robo devices (e.g Raiz, FirstStep, Longevity) of around $1.25 a month is very reasonable. Pick a platform, install their app and set your contributions – You are launched into the wonderful world of investing – get on that road!

June 2019 – End of Month Update … and “nudging” to good financial habits

Slack Investor remains IN for Australian index shares, the US Index S&P 500 and the FTSE 100. If last month was a “Risk Off” then for the month of June they have slapped on the crazy pants and become definitely “Risk On”. The Slack Investor followed overseas markets have bounced back from a shocker last month (FTSE100 +3.7%; S&P500 +6.9%) and the ASX 200 powered on with +3.5%. All markets are above the monthly stop losses – but feeling a bit “frothy”. However, checking out the US Yield Curve indicator at GuruFocus shows a weak positive result (Near zero, Just … +0.09%) so my monthly stop losses for Index funds are temporarily “switched off”.

All Index pages and charts have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index). – As it is the end of the Financial year and quarter, the Slack Portfolio has been updated with some stock exits and a gradual build up of cash. Now over 8% – A slack record!

Give us a Nudge

The classic Monty Python “Nudge Nudge” sketch – the full delights of this 3-minute romp can be found on youtube

We frail human beings do not behave rationally. It is easy to project a path to a well funded retirement on paper – yet so few really achieve it. A couple of clever cognitive psychologists , Danny Kahneman and Amos Tversky put some effort into studying human behaviour.

Mr Kahneman, an Israeli-American psychologist and Nobel economics laureate, has delivered a full catalogue of the biases, shortcuts and cognitive illusions to which our species regularly succumbs. In doing so he makes it plain that Homo economicus—the rational model of human behaviour beloved of economists—is as fantastical as a unicorn.
From The Economist – Not So Smart Now

To account for our lack of rational behaviour -it is sometimes necessary to give ourselves a nudge in the right direction by tricking our feeble brains into good habits.

Compulsory Saving

The best way to save money is to convince yourself that you didn’t really have it in the first place – and, as the new financial year starts, this is the time … seize the day and quarantine some of your hard earned cash.

There are lots of ways to do this

Direct debit funds to your Savings account from your transaction account – After every payday, set up a regular direct debit instruction with your bank to divert funds to your online savings account
Add to your Super – Set up with your paymaster to add to your superannuation through salary sacrifice – the first $25000 is taxed at only 15%. Or, you can make a contribution straight from your bank account directly to your super fund but there is a bit of ATO paperwork to claim its tax-free status.
Use a bit of robo technology to set up periodic payments and rounding up of your daily transactions – Use Raiz to set up a savings account that invests your savings in shares and bonds or Longevity to add to your super account – More on these robo bits next post.

Robo-Advice – Disruptor Beams are ON

The Class M-3 Model B9 (Pictured) was one of the first examples of Robo-advice and would always issue Will Robinson, of the 1960’s TV show, Lost in Space with sage guidance. Can we expect the same from this new generation of Robo Advisors? My Star Trek knowledge tells me one thing for sure, the Disruptors are on!

Slack Investor has already had a bit of a rant on the layers of fees that you can expect from seeing a Financial advisor. But many would benefit from financial advice – Can we get it from the Robots? There are quite a few Financial Robo-advice companies emerging. Lets begin with a couple that have caught Slack Investor’s eye – Plenty and Stockspot.

Plenty – A Good place to start

Plenty is a new service that, after a 15-minute online questionnaire, develops tailored (up to a point) financial advice for no cost. Plenty offer more than most robo advisors. In addition to an automated platform for investing, they offer a whole advice product similar to more conventional financial advisors. Their basic service is free and, if you need it, they charge fees to help you implement the plan. Their Blog is pretty good too. Due to high demand, unfortunately, Plenty are not taking on new clients at present. But this doesn’t stop us using their structure to develop your own financial roadmap. An example of the financial plan that it robo-generates is here.

Image from From Plenty Blog – What Do Financial Planners Do?

When Plenty takes on clients again, to get their online plan you must divulge your financial details (bank accounts, super, etc) – this is a bit scary and is usually the point where Slack Investor … Says NO!

However, the way that Plenty provides a free robo-way towards your financial goals is fully Slack Investor approved. They claim to be “product agnostic” and will only recommend the lowest fee (best!) products that aim to get you in a good financial state. The Plenty example financial plan contains plenty of good ideas!

Lower Fees – Oh Yeah!
Smarter Investments – Through ETF’s and Listed Investment Companies (LIC’s) – Sounds easy doesn’t it!
Lower Interest on Debt – Making sure you get the lowest interest rates on your debts
Save Tax – Thanks Kerry Packer!
Spend appropriately – Budget … and measure what you spend
Protect your financial position with insurance – Very important for those with dependants or a big mortgage. Slack Investor does not have financial insurances now that he is in retirement mode with little debt. However, when I did need insurance, I would get my income, death & disability insurance through my super fund – as this was the cheapest way.

Stockspot

“I started Stockspot five years ago because I saw too many people getting poor investment advice from stockbrokers and financial advisers”
“The evidence shows that simple, low-cost ETFs [exchange traded funds] beat picking stocks or paying expensive fund managers over the long run.”
Chris Brycki – From article in Business Insider

Stockspot was started by Chris Brycki, is Australian owned, and has excellent intentions. Their investment vehicles are low-cost ETF’s and through a quick online questionnaire you can determine your risk profile and suggested pre-determined mix of investments. For example, the Emerald growth portfolio is shown below

An example of one of the five Stockspot recommended portfolios

There are no entrance and exit fees, the fee structure is based upon the amount invested. For a $30 000 account, the fees are .055% (or $16.50 per month). This works out as a yearly fee of 0.66% (or $198). The fees are a bit annoying on first glance – However, Stockspot do not charge for brokerage and rebalancing your portfolio – this is a good deal for the more hands off investor.

You could save $100 per year to set up a similar bunch of ETF’s as those shown above and do the rebalancing yourself. Let us say, your target portfolio had 5 ETF’s and you rebalance them once per year, using the rock bottom brokerage of SelfWealth at $9.50 per trade – 10 trades per year would cost $95.

However, the whole idea about Robo Advice is to make things simpler and combat the inertia to action that gets in the way of our accumulating wealth. If embracing the full robo, then the extra hassle of doing everything by yourself is probably not worth the money saved.

Lets Robo On, there are plenty of other players in this exciting new area. Six park, Raiz, Clover, QuietGrowth and FirstStep will get a bit of a look next month.