Before I get into the market movements, for anyone who has money on their radar for 2021, I’m doing a live online event on collaboration with General Assembly and Raiz Inves tomorrow: How to to avoid the most painful money mistakes in 2021 – check the details and book your place here.
Share market wrap
Markets were down this week with some profit taking happening on large company shares, and US tech shares leading the slide. Strong earnings calls from the current company reporting season also couldn’t slow the declines. Worth mentioning there was a strong argument for a minor correction off the back of the enthusiasm seen off the back of the US election.
Other key markets numbers:
- The ASX ‘All Ords’ (top 500 Aussie shares) finished the week 3.2% lower than last Friday, on 6,870.9 points.
- The US ‘S&P500’ (Top 500 US shares) finished the week 3.61% lower than last Friday, on 3,714.24 points.
- The US ‘Nasdaq’ (Top 2500+ mainly tech shares in America) finished the week 4.42% lower than last Friday, on 12,935 points.
- The Global ‘All World’ index (measured with the iShares MSCI world index (all share markets around the world combined) finished the week 3.34% lower than last Friday, at 111.49
Share story of the week
GameStop Corp (NYSE:GME): Share price increase of 235.75% over the week, 8,169.72% for the last year. For anyone who hasn’t been following this ultimate battle of nerds vs. jocks, you’ve been missing a serious rollercoaster ride. Best known for owning the popular gaming retailer chain EB games, the GameStop share price has been pushed through the roof off the back of a short-selling war.
‘Short selling’ is when a share trader or investor borrows a share and then sells it in anticipation of a decline in the share price. When the share declines in value they can buy the share back at a cheaper price and return it making a profit along the way.
Over the course of the last year the gamer community cottoned on to the fact a bunch of Wall Street traders had been shorting GameStop shares, and they revolted. The community took to Reddit and other online forums to call for a support of the GameStop share price to catch out the investment bankers that were trying to profiteer from the damage to the company share price. Based on the share price movements clearly the nerds are winning.
Money mistake of the week: Wasting money on average financial advice
We’ve recently been working with a new client to help with their financial planning. Through the conversations we’ve been having it came up that they’d spoken to a financial adviser a little while back. They had paid this adviser a bit over $3k to put together a financial plan for them, but they hadn’t actually done anything with the plan. I asked why you would pay money for a plan you weren’t going to do anything with or act on, and the response was that because there were a couple of conflicts of interest in the advice that made this client second guess what was driving the recommendations. The conflicts were around the adviser getting paid a higher amount based on the more money being invested, and a commission on some income replacement and life insurance products being recommended.
The interesting this was that after I took a look at the plan, the advice actually looked pretty solid. This highlighted to me the fact that it doesn’t really matter the quality of advice you get, where there are conflicts of interest that exist it’s hard for someone seeking advice to get the level of confidence needed to take action on a financial plan.
It also highlighted the importance of asking lots of questions when you seek advice, and being comfortable to ask these questions before you get too far down the path. This client could have avoided wasting their money and time by asking a bunch of questions before getting started on the advice process. Even if you’re new to advice, make sure you ask enough questions so you can be sure you’ll be able to actually take action and get the outcomes you’re looking for when you seek financial advice.
If you want some extra tips on how to find great financial advice you can check out the recent podcast mini-series I did on financial advice on your podcast platform of choice here: Apple, Spotify, Stitcher, Podbean.
Money hacks of the week
How tax works and tax saving strategies and investments:
This week I put together some practical guides around tax planning and strategies, tax tips and hacks so you can keep more of your hard earned income. Check them out here:
- How the tax system works in Australia
- How tax works on different investments
- Tax strategies to save you $$$$’s
- Tax saving strategies for business owners
- When do you need a trust for investing?
- When do you really need a good accountant?
Smart Money upside
Because people don’t often talk about the full ins and outs of their money, it’s hard to learn lessons from hearing what good and bad choices other people make. This story from one of our clients to help you take your money game to the next level.
Couple 30’s, household income ~$500k, home $3m w. ~$900k mortgage, $300k shares
Frustrations when first coming to see us
Strong employer share plan but no plan for tax, not making progress at the rate they wanted.
What they wanted from us / the advice process
Better understanding of their position and options, clarity on where they were headed financially, strategies to save tax, framework to make day to day money management easier.
What an awesome result looked like for them
Pay down home mortgage, grow investment assets through property and shares to create strong second income stream.
What money strategy they were following when we started working together
Paying down home mortgage (slowly), investing into mainly tech shares, minimal saving.
What money strategy they chose to pursue from our planning work
Clear banking framework to make day-to-day savings easier, plan around RSU shares, purchase investment property, build share portfolio.
Key benefits of going through the process
Asset growth through property and share investments, tax optimisation through debt restructuring and investment plan, increased savings rate, clarity on where they were headed financially, kids investment plan.
Total quantifiable value to be received in year one from plan after all advice fees (i.e. tax savings, increased savings rate, growth on investments): $74,813, reflecting a 427% return on investment
PS: Our January fundraising via our Money Breakthrough sessions has kicked off with a bang – we’ve raised over $4,500 since 1 January and are now going to need to recalibrate our giving targets for 2021 as a result. If taking your levelling up your money game is something on your hit list check out the details and book your place here.
PPS: Next live online event coming tomorrow: How to to avoid the most painful money mistakes in 2021.
I know you’re smarter than someone that would need me to write the words that come next, but our compliance peeps are real hard-asses so here we go… This information is not personal advice, poetry, or a map to where Jimmy Hoffa is buried. It may only be regarded as general advice, and definitely shouldn’t be considered something worthy of inclusion for Donna Hay’s next cookbook or the Archibald prize. This is actually just an email communication that has been sent to a bunch of people, and doesn’t even have your name on it. Your personal objectives, needs or financial situation have not been considered when preparing this email, but I want you to know that I have spent a lot of time thinking about the venn diagram intersection of poetry, landscaping, and essential oils – if you’re fascinated by this same phenomenon please reply to this email so we can compare notes. You should consider the appropriateness of any general advice we have given you, having regard to your own objectives, financial situation and needs, and if necessary, seek advice before acting on it. You should also consider other people when getting on and off public transport, smiling more, eating healthy, and listening to your mum when she tells you that you’ve been working too hard. Where information relates to a financial product, you should obtain and consider the relevant product disclosure statement before making any decision to purchase that financial product. Where the information relates to a hilarious joke I’ve made, you should consider belly laughing deeply. Financial services guide.