Q: Is now the right time to be investing in shares? I am extremely concerned about my exposure to the share market given recent movements.
A: In a volatile market it is often difficult to stay on track with your investment strategy. Before making any changes, here are some important factors to consider.
Whilst it can be tempting to jump out of the market when it is declining, investors who park their assets in cash often fail to recognise the time to get back in the market. If you are investing for the long term, you may do more damage trying to time your exit and entry to the market.
If you can’t sleep at night or worry about your money, your appetite for risk may have changed. It could be your time frame for investing is now shorter, your circumstances have changed or there has been a change in market outlook. Assess if your change is permanent or a change based on short-term factors such as markets volatility or valuation.
If your investment time frame has changed, do you have the time for your investments to recover through the cycle? All Investment markets run in cycles, some are short-term corrections, some are medium-term business cycles of 3 to 5 years and others can be long-term secular swings of 20 years. Eventually, they will revert. The key is making sure your portfolio can weather the particular cycle and you have sufficient time to allow your portfolio to recover.
Assess the quality of the assets within your existing portfolio. If they are direct equities, consider the short and longer-term prospects of the company. Will they continue to generate a return to shareholders and will the company grow? Just because a particular share has fallen dramatically in value doesn’t mean it will automatically recover.
If you invest in Managed funds, ensure you are comfortable with the investment approach of the manager and their approach to managing risk within the portfolio. Monitor where they invest, assess if they have been true to their investment philosophy and invested where they said they would.
Diversify your portfolio into a range of sectors, companies and regions. Avoid concentrating your portfolio risks. How concentrated is your portfolio in particular sectors such as banking and mining or exposed to one particular country (perhaps Australia)?
Recognise that market volatility can create attractive opportunities. A stock market correction can be a good time to invest in equities as valuations become more attractive, giving investors the potential to generate above-average returns when the market rebounds.
Over the long term, equity risk is usually rewarded. Empirical studies have shown the value in long-term compounding returns and the benefits of regular investment through dollar cost averaging; investing a regular amount into a portfolio on a regular basis regardless of whether markets are rising or falling.
The sheer volume of information and opinion available in the media to the everyday investor has grown enormously in the digital age. If your circumstances have not changed, it doesn’t hurt to tune down or turn off the flow of information that distracts us from our main game which is investing for our future goals.
Most investors already know that the best way to navigate a choppy market is to have a good long-term plan and a well-diversified portfolio. But sticking to the fundamentals is sometimes easier said than done. Seek advice from a qualified professional. That “sanity check” should provide you with a definitive answer to the future steps you should take.
Q. I am preparing my own tax return, what is the deadline for submission?
A. If you are over age 18, with a taxable income of greater than $18,200, you are obliged to lodge a tax return. The deadline for lodgement is 31 October 2018, if you are lodging your own tax return.
If you fail to lodge your tax return late by the due date, the ATO may issue you a Failure To Lodge penalty. In addition to penalties, the ATO may levy a general interest charge (GIC) to overdue unpaid tax liabilities. The GIC rate is currently 8.96% p.a and is reviewed quarterly.
Even if you lodge your tax return late, you could still receive a tax refund. The ATO estimates that 200,000 individuals failed to lodge a return for the 2017 tax year that would have been entitled to a tax refund or owed a small amount of tax.
If you are having difficulties submitting your return on time, you need to contact the ATO before the due date.