Savings/Investment Part 6

Question 1

What kind of fees are incurred during the purchasing of shares?

Answer 1

Fees are not charged to place an order to buy or sell shares, however you will be charged brokerage fees if your order results in a trade

Question 2

What is brokerage?

Answer 2

A fee charged by the stockbroking firm for buying and selling shares on your behalf

Question 3

What are dividends and what is the relationship between shares and dividends?

Answer 3

A payment from a company to its shareholders, and the more shares you own, the more dividends you will receive

Question 4

How is dividend yield calculated?

Answer 4

Annual dividends per share divided by price per share

Question 5

Why may a company wish to float on the ASX and not go public?

Answer 5

By going public, they must sell some of their ownership to the public to raise funds

Question 6

How is capital gains tax attracted in the purchasing of shares?

Answer 6

When you buy shares at a lower price than when you sell them, capital gains tax is attracted

Question 7

What is capital gain?

Answer 7

The difference between how much you purchase shares for and how much you sell them for

Question 8

What is the relationship between share market costs and allowable deductions?

Answer 8

Any cost involved in investing in the share market will be an allowable deduction, which results in your assessable income being reduced

Question 9

What is a brokerage fee usually priced at?

Answer 9

$20

Question 10

What are the risks associated with owning shares?

Answer 10

It can result in a loss of capital and unexpected events outside your control can affect your portfolio

Question 11

What is the All Ordinaries Index?

Answer 11

The oldest index of shares in Australia, made up of the share prices for 500 of the largest companies listed on the ASX

Question 12

What are blue-chip shares?

Answer 12

Lower risk, stable shares of a leading company that is considered to be a strong name in their industry and dominates their respective market, such as BHP

Question 13

What are speculative shares?

Answer 13

High risk shares with the possibility of high returns, however they are not yet proven in the market, such as AfterPay

Question 14

What is a balanced portfolio?

Answer 14

An investment that combines different types of shares across different sectors such as high-risk and low-risk, including shares, property, funds, super

Question 15

When did superannuation become compulsory in the Australian workplace?

Answer 15

1992

Question 16

What are the 3 common options for you super funds to be invested in?

Answer 16

Cash option, balanced option and growth option

Question 17

What is a cash option super fund?

Answer 17

A conservative option, popular for those nearing retirement and who do not want to take risks.
Funds are mainly invested in bank deposits

Question 18

What is a balanced option super fund?

Answer 18

Popular for those who are willing to accept a small amount of risk in the hope of achieving returns above those offered by the cash option

Question 19

Where are funds spread across in the balanced option fund?

Answer 19

A range of assets, including bank deposits, shares, property and government bonds

Question 20

What is a growth option super fund?

Answer 20

An aggressive option, popular for those who are happy to accept a higher level of risk as a trade-off for potential higher returns, usually for younger people

Question 21

What is the purpose of compulsory superannuation?

Answer 21

To ensure employees have an amount of money saved up by the time they retire and for the government to take pressure off themselves to have to pay retired people with taxpayer’s money

Question 22

Why is superannuation seen as a tax effective investment?

Answer 22

Because you pay less tax on your super when you withdraw it, as the rate is 30%, thus it is great for high income earners

Question 23

Over the next 5 years, how is the employer contribution for superannuation going to change?

Answer 23

It will increase from a rate of 9.5% to 11.5%

Question 24

What do superannuation investors need to be wary of?

Answer 24

Fluctuation in shares, fees and the state of the economy

Question 25

What super fund would a 56 year old looking to retire in a few years time be suited to?

Answer 25

A cash option super fund

Question 26

What super fund would a 28 year old who has only built up a small sum of money so far be suited to?

Answer 26

Growth option super fund

Question 27

What is the rules regarding retirement and retirement age?

Answer 27

You can retire whenever you want, but the retirement age for females is 65 and males is 67

Question 28

When can you access your superannuation?

Answer 28

When you reach the retirement age, or when there is a need for income such as during a pandemic

Question 29

What is a managed fund?

Answer 29

A professionally managed investment portfolio that individual investors can buy into, purchasing units rather than shares

Question 30

What happens when you invest in a managed fund?

Answer 30

You are allocated a number of units, and the value of your units is calculated on a daily basis as the market value of the assets in the fund rises and falls

Question 31

What are the benefits of managed funds?

Answer 31

It is easy to diversify your investments, experts are managing your money and you can start investing with as little as $1000

Question 32

What are the disadvantages of managed funds?

Answer 32

They involve entry and exit fees and annual movement charges