McCarthy Financial provides advice on Wealth Creation through the use of investment vehicles including both Superannuation and Non-Superannuation Investments.
Superannuation
Superannuation has been specifically designed and endorsed by the Federal Government as the preferred way to save for your retirement, and has added tax benefits that make it particularly attractive.
Why invest in superannuation?
Superannuation can be a tax effective way of building wealth for your retirement. The tax rates imposed on superannuation funds are as follows:
- Contributions Tax is a maximum of 15%.
- Investment income is taxed at a maximum of 15%.
- Capital Gains are taxed at a maximum of 15%. If the asset has been owned by the superannuation fund for more than 12 months the maximum rate of capital gains tax is 10%.
When an income stream is commenced upon retirement, the tax rate imposed on income and capital gains in the pension account is reduced to zero. Pension payments are also tax free for those aged over 60. For those aged between 55 and 60, pension payments (less any tax free amount) will be taxable and receive a 15% tax offset.
These superannuation tax rates are in contrast to your personal marginal tax rate, which could be considerably higher. Your financial planner can provide you with further information in relation to personal tax rates.
Investments
There are four (4) main options available for your investment portfolio. We may choose to:
Purchase direct investments
This would involve buying many individual shares through the Australian and global share markets, fixed-interest products through various financial institutions and then continuously monitoring these individual securities and ensuring your portfolio is re-balanced to align with your strategic asset allocation.
However, selecting which of the millions of securities around the world are most likely to meet your goals is almost impossible. Specialist investment managers are able to focus on researching and selecting the most appropriate securities.
Purchase a variety of specialist managed funds
This would involve selecting a range of specialist managed funds for your portfolio, and continuously monitoring and rebalancing these funds to ensure your portfolio remains in line with your strategic asset allocation.
However, choosing investment managers is also a complicated and involved process, and it is next to impossible for any individual to replicate the depth of resources available to research houses. This can also be a more expensive outcome due to the lack of scale.
Use a ‘core and satellite’ portfolio approach
This involves selecting a fund to be the core of your portfolio, and using a range of specialist funds as ‘satellites’ to tailor the portfolio to your needs and circumstances.
Generally, we use a multi-manager core where our nominated research provider reviews and invests the large portion of your portfolio. We then focus our resources and energy on the satellite options to ensure that your portfolio is tailored to your unique objectives and requirements. This approach gives us the efficiency of using a multi-manager core portfolio, and allows us to focus our research effort on achieving the specific needs and objectives of your investment portfolio.
Use a specialised multi-manager service
This would involve appointing a specialised facility that researches and invests on your behalf using the appropriate asset and investment managers. This also rebalances your investments between asset classes and investment managers, so your portfolio remains in line with your strategic asset allocation.
This is a more practical approach, which employs one of the best and most focused research houses, who provide multi-manager portfolios for all types of risk/return profiles.