Hey team,
Happy Monday.
Over the last few weeks, we’ve been running a giveaway for our Smart Money Accelerator, and we’re stoked to announce the winner. Jade from NSW has won a full year of access to the Accelerator + 1-1 private coaching for a full 12 months – massive congratulations from team Pivot and we’re pumped to see the results Jade creates. A reminder that our Foundations membership is ending next Sunday with discounted pricing and a bonus stack that won’t be repeated – check out the details and jump on board here.
In money news, the RBA is in the middle of a shake-up. A review into the current process of how the Reserve Bank operates started in July and has resulted in a whopping 51 recommendations. The Albanese government is in support of all of the 51 recommendations. The treasurer has also stated that the federal government is still committed to maintaining the RBA’s independence.
The review has recommended the establishment of a separate ‘monetary policy board’ to try to make decision-making and governance arrangements more effective. This new board will be responsible for setting the official interest rate as well as a host of other recommendations. Maybe this new board won’t sting us with 10 consecutive rate rises in the future like the current governor Phillip Lowe has this past year.
Smart Money Upside #114
Here we unpack the numbers from a recent client we helped, what they were doing with their money when they came to see us, what they chose to do as a result of going through the financial planning process, and the financial impact and upside we helped them achieve.
To chat about how to get these sorts of results, you can book an intro chat with us here.
Numbers/Background
Couple, late 30’s; household income ~ $270k; total assets ~ $350k; saving ~ 50k annually.
Frustrations
No structure or clarity on goals, not on track with their desired savings and a lack of financial education.
What they wanted from us / the advice process
Clarity on goals, some structure with their money, automation of their finances where possible and importantly, education.
What success looks like for them
Clarity on their first home purchase as well as having a solid plan in place and staying accountable to that plan.
What money strategy they were following before we went through the planning process
The ability to save but at times compromise their current lifestyle, ad-hoc investments into direct shares and cryptocurrency.
What money strategy they chose to pursue from our planning work
Family planning strategies, buying an investment property and redirecting the remaining surplus to a tailor-designed share portfolio that meets their goals.
Key benefits of going through the process
Clarity on goals and a better understanding of what is achievable, automation of a financial plan and financial finances, simplification of their investment strategy and a robust financial education.
Value of advice after all advice fees year one: $8k
Year 20 upside after advice fees: $3.2m
If this story resonates you can book an intro call with us here.
Video of the week
The statistics show that index fund investments perform best more than 80% of the time, but knowing how to get started investing isn’t always easy. Check out the full video here.
Client story of the week
Because people don’t often talk about the full details of their money, it’s hard to know what might be possible for you – so I wanted to share. In this recent client story, we unpack all the numbers, what was and what wasn’t working for them, and what they chose to do with the support of Viser to guide them through their money and investment decision-making. Check out the full video here.
Podcast drop
Learn the tips, hacks, and strategies to help you level up your money game. Pods released last week:
Upcoming events:
Free online money education to help you invest smarter and create a life not limited by money:
- How to adult with money – May 3, 2023, 12pm
- How to get started investing – May 17, 2023, 12pm
- Get tax smart – June 21, 2023, 12pm
Blog of the week: How to increase your investments by $172k when the market is crashing
Is now a good time to buy shares?
Off the back of the Silicon Valley Bank (SVB) collapse, we’ve seen over US$1 trillion wiped off the value of the share market in less than a month. Investors are nervous, governments are nervous, and the fear cycle has gone into overdrive.
In the current climate, I’m seeing more and more people that are talking about the potential for a full market meltdown and some are even talking about the end of the financial system as we know it. In the opposite corner, we’re hearing from some that markets today are giving us the best investing conditions seen in decades.
So who should you listen to? And is investing today a dumb move, or a genius one?
What’s going on?
This disruption all started with the collapse of SVB shortly followed by Signature Bank, which sent shockwaves through the global banking sector and resulted in a number of other banks coming under pressure. Investors started panicking, and that panic caused a wide-scale sell-off in the share market.
This all sounds like a bad thing, and clearly, investments going down in value is never good, but there were some positives that came from this – the main one being the impact on the forecasts of interest rates and the potential for recession in the US and around the world.
Following the SVB collapse, within three days we’ve seen the most reliable indicator of a potential recession (US two-year treasury yields) reduce by 58%, and interest rate predictions have been significantly reduced.
The market is now expecting the US Central Bank to reduce interest rates by 0.5% this year, that rates will be 1.5% lower by the end of 2023, and that the ‘peak interest rate’ will be 1% lower than expected just a few weeks ago.
This shows how quickly financial markets can change. And while these changes to expectations have come from an undesirable event, the impact is positive for investors.
What does it mean for investors?
Investing today is scary. A heap of people are talking about the potential for things to get worse before they get better. There are some that are talking about a complete bloodbath in markets and the potential for a massive crash.
But it’s worth noting here that in all but the most severe of predictions, there are going to be a heap of quality investment opportunities over the next 12 months. And if the worst of the predictions are right – it means there will be even more opportunities.
Consider this example, and I have to give full credit for this one to investment powerhouse Pearler who put out these figures.
If you’d invested $10k into the 500 largest US companies 30 (S&P500) 30 years ago, that money would be worth around $208k today, reflecting a total return of 1,980%.
But here’s the thing – if you weren’t invested during the downturns and missed the best days in the markets over that time, your $10k would only be worth $36k today – meaning your investments would have grown by $172k less.
And the kicker here is that over 83% of the ‘best’ days in markets happened during bear markets when the share market was in decline.
This shows how difficult and costly it is to try to ‘time’ the market, choosing not to invest when the market seems risky. The lesson here is that consistent investing, even in periods when markets seem wild, pays off.
In my opinion, we’re at the beginning of what could be a golden period for wealth building. And the reality is that as an investor, you only get so many of these golden years. The 2020 COVID crash was one of those periods, as was the 2015 Euro debt crisis, and the 2008-09 GFC was the first one I saw in my investing career.
These periods are times when investors had a huge opportunity to accelerate their wealth building and come through disruption in a much stronger position. Some investors bunkered down, caught up with all the fear and noise, and did the financial version of treading water.
Others took the time to plan out a smart approach and took action. This group came through the disruption stronger. With any short-term opportunity, you need to take advantage while it lasts.
At the moment I’m seeing a lot of people fearful, thinking the least risky thing they can do is to save money in cash or park it in an offset account. What these investors don’t realise is that doing nothing is risky at the best of times, but in periods like we’re seeing today, doing nothing is extra risky – and could be seriously costly.
What can you do?
That being said, investing without a clear strategy or plan isn’t a good move at the best of times, but investing without the right plan today is borderline crazy.
There is a heap of quality, once-in-a-generation investment opportunities out there today, and most likely more coming up over the year ahead. But what happens in the short term is anyone’s guess, and market conditions absolutely could get worse before they get better.
What that means is that you shouldn’t invest any money you need to access in the shorter term. This way, even if investment markets continue trending down in the short term, you won’t be forced to sell your investments at a loss.
While seeing your investments go down is never a comfortable thing, you should rest assured this is actually an opportunity to invest more at an even bigger discount – that will then pay off even more when markets eventually recover.
If you’re not an experienced investor, or even if you are, take the time to put together a solid strategy before you jump in and invest. That way you’ll have confidence your risks are well managed, and you can then have peace of mind and confidence that comes with knowing you’re playing the long game.
Given the size of the opportunity and the potential to seriously set up your future from the investing moves you make today, putting yourself in a position to take confident action will be valuable. If you’re struggling to do this on your own, consider getting some quality professional help to help get you started.
The wrap
The collapse of Silicon Valley banks has sent ripples throughout the financial world, and fear levels are high – but that doesn’t mean you should bury your head in the sand waiting for the world to end.
We’re coming into one of the golden years for investors. Some people will struggle to keep up, but those that make the smartest moves today will come out the other side in a stronger position than they are today.
Which group will you be in?
To your success,
Ben
PS: Pivot Wealth exists to help people invest smarter to create a life not limited by money. If you want help to make your next steps easier, you can book a 10 minute, no BS chat with us here.
Founder and Adviser
Pivot Wealth
The information in this note is not personal advice, a guaranteed pathway to that elusive beach bod, or the lost script of Edna St. Vincent Millay’s Pulitzer Prize-winning Conversation at Midnight. This is just a bulk communication pushed out into the internet, and it doesn’t even have your name on it. Your personal situation, needs & objectives, and financial situation have not been considered in putting this together – nor have we considered your dietary preferences, the way you like your hair cut, or your favourite travel destination – but we have spent a lot of time thinking about the future of urban society, whether there is other intelligent life in the solar system, and the pervasion of soy and linseed bread in Australian metropolitan hubs. You should consider the appropriateness of any general advice in relation to your own objectives, financial situation and needs and seek advice before taking any action. You should also consider using a variety of eau de toilette fragrances to keep your partner interested and colleagues on side, not using plastic straws, and minimising your screen time. Where information relates to a financial product, you should read and understand the relevant product disclosure statement. Where information relates to your own potential for awesomeness, you should consider backing yourself totally and completely. Past performance is definitely not an indicator of future performance when it comes to investments and financial products, as well as the likelihood of your children sitting still and quiet for an hour being satisfied playing with a used piece of wrapping paper. Financial services guide.