Many people use the Christmas/New Year period to reflect on the year that has just passed, often in a blur, and begin thinking about the future and how to achieve their hopes and dreams. The new year is a good opportunity to reconsider financial strategies and goals. Below is an easy-to-follow guide to getting your finances tidied up for the year ahead.

Have your key financial goals changed?

Our lives are not constant and our goals change slightly from year to year. Also, major life events such as serious illness, the birth of a child, inheritance, marriage and the death of a parent or spouse can all result in significant changes to our wealth management goals.

Prioritise your goals

Not all goals are equal and to ensure you aren’t overwhelmed with the task ahead of you, it is important to rank and prioritise goals and decide what timeframe you want to achieve them in. Being realistic about your timeframe is essential to ensuring that your goals will be achieved.

Short, medium or long term?

Most industry experts agree that a short-term goal is one that can be achieved within a year or so. Medium-term goals typically require two to five years, and long-term goals usually take longer than five years. For example, reducing credit card debt is likely to be a short-term goal, whereas saving for a home deposit would often be a medium-term goal. Depending on your age, providing for retirement is a long-term goal. If your financial goals have changed, how will this affect your financial strategy? This is where the advice of a financial planner is critical. We have the tools and knowledge to create projections that take into account changes to your goals, and changes to your timeframes for achieving them. These projections will help you to see where your plans for savings, assets or investment contributions may need updating.

Be investment savvy

Make sure that your investments support your level of risk and your goals. We can develop a tailored analysis that best suits your individual risk preferences and goals. We can also review your portfolio and advise on any sell-downs or top-ups that would benefit you. Working with your accountant we will ensure changes are implemented in a tax-effective manner. Reflecting and thinking about your financial position and setting a clear path is critical to making sure you reach your goals.

Talk to your Wealthwise adviser to ensure you remain on track.

Source: www.financialarticles.com.au

 This article is reproduced with permission.

The information within this article contains general financial product advice and factual information only and is not intended to constitute personal financial advice. It has been prepared without taking into account the personal circumstances, financial needs or objectives of any one person. Individuals are advised not to rely on this information when making their own investment decisions. Instead, they should seek professional advice. Where appropriate, you will be provided with a Product Disclosure Statement in relation to the product recommended. You should consider this document before making a decision to acquire the product in question. Whilst all care has been taken in the publication of this article (using sources believed to be reliable and accurate), no person, including Wealthwise or Financial Wisdom or any other member, accepts responsibility for any loss suffered by any person arising from reliance on this information.

It’s been another rollercoaster ride in financial markets, the Eurozone debt crisis front and centre. Sharemarkets have suffered, ‘safe haven’ bonds have been back in demand, lower-quality debt sold off, listed property markets have been mixed, and currency markets volatile. Looking ahead, the evolution of the Eurozone issues is difficult to predict, and extensively-diversified portfolios appear to be the best response to a wide range of potential outcomes. This will also allow for the possibility that current market sentiment is overly bearish and failing to allow for constructive developments both in the Eurozone and elsewhere.

Australian Equities – Review

The S&P/ASX200 Accumulation Index yardstick of Australian shares has for the most part tracked what has been happening in sharemarkets overseas.

The sharemarket began October positively at a time when markets believed that the Eurozone’s debt issues, and in particular Greece’s problems, were finally being addressed. Australian shares rose by 12.40 percent between 4 October, when Eurozone worries were very high, and 28 October, when the optimism ran out of steam. Prices have subsequently dropped back again, again mirroring overseas trends, the index declining 4.40 percent. The overall effect is to leave share prices up marginally on a month ago (+0.50 percent), and up two percent on three months ago. However, both figures flatter the performance of local shares – a better description would be that prices have not recovered from the sharp losses of early August, when the latest Eurozone debt issues kicked in.

International Equities – Review

The Eurozone debt crisis, and worries about its ramifications for global economic growth, dominated world sharemarkets over the past month. World sharemarkets were initially optimistic: between 3 October, when the MSCI World Index had hit its lowest point, and 28 October, when it seemed that a Greek bailout plan had finally been locked down, world shares rallied by 13.60 percent, regaining about half the ground they had lost since the onset of the latest Eurozone worries in early August. Since then, however, shares have slid again by six percent as investors’ concerns have shifted from Greece to some of the larger Eurozone economies (Italy, Spain, and even France). For the past quarter, world shares are showing a loss of three percent.

The emerging markets have been faring better, with prices unchanged over the past quarter: strong Latin American markets (+6.90 percent) have offset static Eastern Europe (+0.50 percent) and lower Asian sharemarkets (-3.60 percent). All that said, there are two factors in the background that are getting little or no attention in the current bear market mentality. One is that even on the latest downbeat assessments, the world as a whole is a long way from a recession. Asia is still in good shape, led by China and India, as is Latin America and most of eastern Europe (Russia and Poland in particular). The second factor is valuations: ‘the sky is falling’ thinking has meant that the dividend yield on German shares, for example, is now 3.60 percent, substantially in excess of the returns from cash or bonds, while the price/earnings ratio (accepting that this is not a perfect measure of value) is an undemanding 9.2 times profits. The same is broadly true of a number of other sharemarkets.

The sky might yet fall, but this is not the only possible outcome, although sharemarkets are behaving as though it is. Uncertainty and risk are certainly high, but a well-diversified portfolio ought to allow for the possibility that the outlook for world sharemarkets may not turn out as black as the media headlines might lead you to believe.

Source: Morningstar Economic Update: November / December 2011

This article is reproduced with permission from Morningstar.

The information within this article contains general financial product advice and factual information only and is not intended to constitute personal financial advice. It has been prepared without taking into account the personal circumstances, financial needs or objectives of any one person. Individuals are advised not to rely on this information when making their own investment decisions. Instead, they should seek professional advice. Where appropriate, you will be provided with a Product Disclosure Statement in relation to the product recommended. You should consider this document before making a decision to acquire the product in question. Whilst all care has been taken in the publication of this article (using sources believed to be reliable and accurate), no person, including Wealthwise or Financial Wisdom or any other member, accepts responsibility for any loss suffered by any person arising from reliance on this information.

 A high Australian dollar comes at a price.

The positives of a strong Australian dollar are relatively well known especially if you’re planning on travelling overseas or doing some online shopping, but are there drawbacks?

Australian dollar at a glance

• Fifth most traded currency in global financial markets

• Australia is the 17th largest economy

• Internationally there is a rising demand for Australian dollar investments

• 69% of all Australian government bonds are owned offshore

• Between the start of 2009 and March 2011, the Australian dollar has risen 62% against the US dollar, 47% against the euro, 46% against the pound and 50% against the Japanese yen

The high cost of cheap imports

Traditional sectors of the Australian economy, including exporters and those that compete with cheap imports, have suffered. Manufacturers, education providers to overseas students and car producers are just some examples of industries that have been struggling because of a strong Australian dollar.

Consumers appreciate paying less for goods and the Australian dollar has assisted with this. We now have more money left in our pocket for other items, particularly as food and energy prices are rising. It is the other benefits that stem from cheaper imports that are less apparent.

The services sector benefits

With lower amounts spent on household goods, more money is being saved, used to pay down debt and also used to buy services. In fact the services sector of the Australian economy, which makes up 60% of the economy, should be a clear beneficiary of a strong Australian dollar. More money will be able to be spent at the local hairdresser, dentist, dry cleaner, gym or café. This helps create jobs for the 3 million small businesses in Australia.

While there are winners and losers, what we do know is that there are fundamental reasons why the Australian dollar has reached these high levels and it could be some time before we see the Australian dollar adjust significantly lower.

What moves currencies?

Interest rates

A big driver of currency moves. With a relatively high interest rate compared to other developed nations Australian fixed interest securities have become more attractive and encouraging foreign money to flow into our borders.

Commodity prices

Thanks in part to strong demand from China and India, the Reserve Bank of Australia Commodity Price Index, which measures price gains for Australia’s key commodity exports, has risen 151% in Australian dollar terms and 244% in US dollars terms since the end of 2003 to the end of March 2011.

Confidence

The Australian dollar is generally regarded as a barometer of economic confidence especially in the Asian region. If global and local investors are feeling more confident about the economic outlook, the Australian dollar is in demand and this pushes the price up.

Investment flows

The Australian dollar is the fifth most traded currency in global financial markets. This is an impressive statistic given the Australian economy is only the 17th largest economy globally. Internationally there is a rising demand for Australian dollar investment (given higher interest rates) and much of this is being driven by large investment funds, including sovereign wealth funds which are increasing their allocation to Australian assets. The view is that Australia is an attractive investment destination given our strong links to Asia (70% of our exports are now to Asia) and a high, relatively safe rate of return is expected.

Also large investment funds have been lifting their holdings of Australian government debt, with 69% of all Australian government bonds owned offshore. With the mining investment boom in full swing, further investment in the Australian economy is needed and could see demand for Australian dollar investments continue to rise.

Colonial First State website: www.colonialfirststate.com.au/market-iq-news

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This article is reproduced with permission from Colonial First State.

The information within this article contains general financial product advice and factual information only and is not intended to constitute personal financial advice. It has been prepared without taking into account the personal circumstances, financial needs or objectives of any one person. Individuals are advised not to rely on this information when making their own investment decisions. Instead, they should seek professional advice. Where appropriate, you will be provided with a Product Disclosure Statement in relation to the product recommended. You should consider this document before making a decision to acquire the product in question. Whilst all care has been taken in the publication of this article (using sources believed to be reliable and accurate), no person, including Wealthwise or Financial Wisdom or any other member, accepts responsibility for any loss suffered by any person arising from reliance on this information.