Superannuation / Personal Investment 

Superannuation Contributions

  • Contributions made to your super can be either Concessional or Non-Concessional
    • Concessional contributions (Such as employer superannuation guarantee or salary sacrifice contributions) are made from pre-tax income and are taxed at 15% when deposited into the fund.
    • Non-concessional contributions are made from your post-tax income. No further tax is deducted when depositing these funds into your superannuation account.
    • Concessional contributions form part of your taxable component and
    • Non-concessional contributions are part of your Tax-Free component.
  • Your superannuation earnings are also taxed concessionally at 15%.
  • This is rather than the alternative which is your Marginal Tax Rate (MTR).
    • Marginal tax rates can be found on the Australian Tax Office (ATO) website.
  • You cannot access this money until you meet a condition of release or retirement age.

Personal Investment 

  • Investor Directed Portfolio Service (IDPS).
  • They are investments made in your own personal name
  • You may pay your marginal tax rate on any earnings or capital gain.
  • You can access these funds at any time.
  • Established to help you reach your goals in your specified time frame. For example,
    • a new car next year,
    • world cruise or holiday in 3 years,
    • children’s education in 8
    • or early retirement at 54.

Common to Both Super and Personal Investment

  • Investment Platforms
    • Administrative system for investments offering varying levels of service and investment fund options.
  • Share Market
    • A secondary market where shareholders transfer holdings in companies between interested parties.
  • Shares (also commonly known as equities)
    • Are a unit of ownership in listed companies.
      • Companies can be owned and operated as a
        • Sole proprietor
        • Partnership
        • Private corporation
      • An Index
        • A statistical measure of value represented by a portfolio of underlying investments. Originally constructed as a way to report the daily market fluctuations. I.e. the Dow Jones index, ASX all ordinaries index, S&P 500… etc.
  • Mutual / Managed Fund
      • A financial product that invests money on behalf of its members. It utilises its increased group buying power and size to access a diversified portfolio of investments.
    • Types of Managed Fund
      • Index Fund (Train following its tracks)
        • Low cost
        • Mirrors the movement in the index it tracks
        • Gives exposure to the portfolio that the index follows
        • Passive investment
      • Managed Fund (Cab Driver)
        • Invests according to the list of rules or the fund mandate. You can find definition of the fund’s mandate in its product disclosure documents. An example may be Large capitalised companies (certain size), Small or Micro Cap, long-short funds, geared funds, income funds, bond funds
        • Investments are made by a portfolio manager utilising research provided by in-house business analysts.
        • An Analyst may assess the merits of an investment and creditworthiness by;
          • Reviewing company reports and financials,
          • Contacting directors or management directly with enquiries,
          • Visiting/touring company facilities and assets,
          • Assessing competitors and market conditions,
        • Relative higher cost
        • Wide range of niche mandates and objectives
      • Multi-Manager
        • A pooled investment trust that holds interests in a range of other underlying funds and fund managers. They generally do not hold companies directly but can select fund managers to allocate percentage weights to that asset. Often referred to as a Fund of Funds.
  • Risk Reward
    • Refers to the trade-off between the potential return (capital growth and income) and the probability of reaching those returns. (Investment ladder)
  • Business Cycle
    • The average time between repeated market phases. Decline, trough, appreciation and peak.

Market Terms

  • Diversification
    • Holding investments across a wide range of asset classes. Property, shares, term deposits, bonds, cash, commodities etc – all have a different level of risk and reward. 
  • Liquidity
    • Refers to the ability with which you can turn your asset into cash. In the extreme examples think of the time it takes to sell a house (illiquid) in contrast to getting your money out of your bank account (liquid).
  • Tactical Asset Allocation (TAA)
    • is an active management portfolio strategy that shifts the percentage of assets held in various categories to take advantage of market pricing anomalies, economic conditions or outperforming market sectors.
  • Strategic Asset Allocation (SAA)
    • Refers to a portfolio strategy whereby the investor sets target allocations for various asset classes (generally growth and defensive) and rebalances the portfolio periodically back to its original allocation.