Adapt to thrive in 2020

By Teresa Dalla-Fontana, Senior Manager National Sales, Leveraged

June 15 2020
Share

Promoted by Leveraged

Many aspects of our lives have changed; how we work, greet and move. However, our financial goals are constant, so investors need to reimagine how to achieve their ambitions.

Charles Darwin didn’t say it’s the strongest of the species that survives. Survivors are those most adaptable to change. Investors looking for more than mere survival, need to understand the new landscape, find opportunities and be able to leap. Such investors could thrive.

The Reserve Bank of Australia recently said the cash rate would not increase until the economy approaches full employment and inflation is tame.¹ In other words, Interest rates are likely to stay at today’s low levels.

That’s good for borrowers, but most cash deposits are going backwards. A deposit earning 0.50% per annum² will have a negative total return after taking into account taxes, fees and inflation. We’re carrying less cash for everyday transactions, and idle money in bank accounts is evaporating.

Earlier this year, the Australian Securities Exchange (ASX) changed the limit on how much new equity a listed company can raise from 15% to 25% of issued shares. A rush of companies took advantage and since March have raised over $22billion.³ Some companies will be shoring up balance sheets. But some are focused on growth, recovery and green fields. One common factor is that the new equity was offered at a discount between 7% and 42%⁴ on already low market prices.

Good financial housekeeping is smart before making any changes to your investment strategy. What can you afford, and how big a financial safety net makes sense in your circumstances? After that, some investors will be able to prepay interest on a margin loan to get a tax-effective boost to the money available for investment. Those investors will be ready for the next round of capital raising and other market opportunities.

If you would like to find out more about gearing and the potential tax benefits of fixing and prepaying interest on a margin loan this financial year, click here. Alternatively, get in touch with our Relationship Management Team on 1300 307 807.

¹Statement by Philip Lowe, Governor Reserve Bank of Australia: Monetary Policy Decision; 2 June 2020.

²Average retail deposit rate in May 2020 based on Reserve Bank of Australia published statistics.

³ASX Group Monthly Activity Report; May 2020.

⁴ASX capital raisings are fuelling Australian market’s return, RaskMedia; 6 May 2020.

Disclaimer
Gearing involves risk. It can magnify your returns and your losses. Issued by Leveraged Equities Limited (ABN 26 051 629 282 AFSL 360118) as Lender and as a subsidiary of Bendigo and Adelaide Bank Limited (ABN 11 068 049 178 AFSL 237879). This Information is correct as at 15 June 2020 is general advice only and doesn't take into account your personal objectives, financial situation, or needs. Please consider your personal circumstances, consult a professional investment provider, and read the PDS and Product Guide, available to download from www.leveraged.com.au before making an investment decision.

sections

sections

sections

sections

sections

sections

sections

Resources