Savings/Investment Part 6 Flashcards
What kind of fees are incurred during the purchasing of shares?
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
What is brokerage?
A fee charged by the stockbroking firm for buying and selling shares on your behalf
What are dividends and what is the relationship between shares and dividends?
A payment from a company to its shareholders, and the more shares you own, the more dividends you will receive
How is dividend yield calculated?
Annual dividends per share divided by price per share
Why may a company wish to float on the ASX and not go public?
By going public, they must sell some of their ownership to the public to raise funds
How is capital gains tax attracted in the purchasing of shares?
When you buy shares at a lower price than when you sell them, capital gains tax is attracted
What is capital gain?
The difference between how much you purchase shares for and how much you sell them for
What is the relationship between share market costs and allowable deductions?
Any cost involved in investing in the share market will be an allowable deduction, which results in your assessable income being reduced
What is a brokerage fee usually priced at?
$20
What are the risks associated with owning shares?
It can result in a loss of capital and unexpected events outside your control can affect your portfolio
What is the All Ordinaries Index?
The oldest index of shares in Australia, made up of the share prices for 500 of the largest companies listed on the ASX
What are blue-chip shares?
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
What are speculative shares?
High risk shares with the possibility of high returns, however they are not yet proven in the market, such as AfterPay
What is a balanced portfolio?
An investment that combines different types of shares across different sectors such as high-risk and low-risk, including shares, property, funds, super
When did superannuation become compulsory in the Australian workplace?
1992
What are the 3 common options for you super funds to be invested in?
Cash option, balanced option and growth option
What is a cash option super fund?
A conservative option, popular for those nearing retirement and who do not want to take risks.
Funds are mainly invested in bank deposits
What is a balanced option super fund?
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
Where are funds spread across in the balanced option fund?
A range of assets, including bank deposits, shares, property and government bonds
What is a growth option super fund?
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
What is the purpose of compulsory superannuation?
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
Why is superannuation seen as a tax effective investment?
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
Over the next 5 years, how is the employer contribution for superannuation going to change?
It will increase from a rate of 9.5% to 11.5%
What do superannuation investors need to be wary of?
Fluctuation in shares, fees and the state of the economy
What super fund would a 56 year old looking to retire in a few years time be suited to?
A cash option super fund
What super fund would a 28 year old who has only built up a small sum of money so far be suited to?
Growth option super fund
What is the rules regarding retirement and retirement age?
You can retire whenever you want, but the retirement age for females is 65 and males is 67
When can you access your superannuation?
When you reach the retirement age, or when there is a need for income such as during a pandemic
What is a managed fund?
A professionally managed investment portfolio that individual investors can buy into, purchasing units rather than shares
What happens when you invest in a managed fund?
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
What are the benefits of managed funds?
It is easy to diversify your investments, experts are managing your money and you can start investing with as little as $1000
What are the disadvantages of managed funds?
They involve entry and exit fees and annual movement charges
