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John Howard

What’s the Difference Between Saving and Investing?

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16 hours ago, Whey aye said:

My super fund has averaged 9% compound annual growth since 1884 ( 5?).

The first super funds were introduced in 1991. You were doing quite well to have one recording growth since 1884.¬†ūü§Į

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Chartered Accountant (England & Wales); Registered Tax Agent & Fellow of The Tax Institute (Australia)

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3 minutes ago, Ken said:

The first super funds were introduced in 1991. You were doing quite well to have one recording growth since 1884.¬†ūü§Į

And that's not even considering his longlivity.


Nearly there! Don't drop the ball now guys! Vaccines are weeks away. Stay safe!

 

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13 hours ago, newjez said:

I've twice bought expensive things which never arrived and got my money back because I used a credit card. I'm not sure you get that guarantee with a debit card.

It’s slightly different but you certainly can raise a dispute and get your money back if you’ve used a debit card. 

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My Platinum Debit Card does include those insurances as well as no foreign currency fees. 

Unfortunately it comes with a $10 per month fee which is credited back depending on the number of tap and go purchases you make. 1% is credited back up to the maximum of the $10 fee.

Basically I need to tap for $1000 a month to get the fee credited back. Sometimes i pay nothing other times end up paying $3 or $4 a month.

I have been thinking of switching to the basic debit card which is free but i haven't got around to it.


I want it all, and I want it now.

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4 hours ago, Ken said:

The first super funds were introduced in 1991. You were doing quite well to have one recording growth since 1884.¬†ūü§Į

I would suggest you do a bit of thinking,and as said,a simple compound calculation.

Obviously a 'fat finger mistake'.You'll find super came in around 1986,as did union super funds .Aus super being the largest.We gave up a 3% pay rise to start super under the Hawke Keating accord.

 

Wages were around $25 K per annum.Compound that for 40 years @ 9% and it grows to $800K,how easy is that.

Today compound $85K @9% for 40 years and it grows to  $2.72 million,stretch it to 48 years and $5.44 million.

 

Just continue to buy lottery tickets shall we,a lot easier than thinking for a few seconds isn't it.

 

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Doing the obvious and checking my last statement in my union fund ( CBUS) average return since inception ( 1984) 8.98%.

This of course  includes the crash of last year.Prior to that the average was 9.29%.I would expect with the bounce back on world markets the average will be above 9% again when the next statement comes in August this year,if markets don't crash or pull back.Working on 9% just makes the mental arithmetic much easier for the compounding calculation.

 

Now the tricky bit,I think I was earning around $19K per annum in 1984.Would you be able to compound that @ 9% to the present day .The really clever bit,would you be able to work out the real return,and the nominal return?

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8 hours ago, Marisawright said:

Yes, I'm pretty sure that's how it works.  Lots of choice of fee-free credit cards.

I have a Visa card with the Commonwealth Bank.   I could've opted for no annual fee, but I decided to go for the version which costs me $59 a year.  For that I get rewards points when I shop.   I always take the rewards as either cash paid to my bank account or Coles gift cards (my local supermarket where I usually shop).  That way I'm not tempted to waste the rewards on stuff I don't need.    I always get at least $100 in rewards every year and it's sometimes a lot more (e.g. if we go on holiday and I buy the tickets with my card), so I'm well ahead.  The travel insurance is also handy.

It is now a mean,lean world.Super funds have screwed the little man/ woman to an extent.

Before they became the major shareholders in all companies the companies would have shareholder benefits.

Coles for example would offer shareholders 5% discount .The qualification was you needed to own 500 shares in Coles,then ( say 2000) that would cost around $2 to 3K .You showed your card at the checkout and got 5% discount,it was a good little scheme. Along with the discount you also picked up the annual dividends .Reinvest the dividends in more shares and there was a discount on the price of the shares,any where between 2.5% and 10%,depending how desperate they were for money.  Coles being a large company would probably have been 2.5%,an incentive for the small shareholder to increase their shareholding,and of course their wealth.

 

Banks were great at the shareholder benefits,an extra .5% on term deposits.Free travellers cheques,reduced mortgage rates,no monthly charges on mortgages when they had them.No fee credit cards .The super funds stopped it all on the basis of ,we own millions of shares in these companies and cannot use these benefits .Why should somebody with $5 or $6K in shares be rewarded .

My credit  card was always free,as a shareholder,long stopped,2006 I think. My card is grandfathered so I never pay any fees .Once or twice they have tried to move me to a different super dooper card,which means I am no longer grandfathered,and would pay fees.I have some good fun with them saying move it tomorrow,charge me fees and it is cut up as soon as you charge any fee at all on it.They are not happy with me,fee free until the day I die ,with all the benefits of the most expensive cards.I think there is 2 business class tickets to the UK sitting there that I can't use until travel is open again.

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On 02/04/2021 at 15:42, Whey aye said:

So you haven't got a clue about investing and neither has your mate,what do you feel you have proved .

Can you answer this.If I lose money I will go bust,if I make money and pay tax on it I will not go bust.Which will provide the better outcome?.

A slight increase to your total lack of knowledge.Use Commonwealth bank as the control ( CBA. .ASX ).

I bought them for $7 a share,not long after the float,probably a bit less than $7.Having a little bit of common sense I decided to reinvest the dividends.That original investment of $7K is now worth around $525 K.

My mate didn't buy them.During that period he died 72 times and was brought back to life 600 times .He has 23 children and they are all unemployed .He got divorced around 300 times.

 

I had a struggle,died 1600 times,brought back to life just over a million times.73 dogs died on me and 15 cats disappeared.My 400 th wife decided I was a keeper .

I wake up every day wondering which of my 400 unemployed children will kill me.Kill the old man and we will inherit a fortune,I need eyes in the back of my head to watch them all.

Neither of us are economists,can you believe that.

To further your education ( I know I'm trying the impossible,but here goes)

Across the 30 years that CBA has operated they have made a profit and paid tax on all of those profits .How could the board of directors be so stupid,how could they not work out that losing money and bragging about not paying tax would be the way to go.Perhaps they should get your mate the financially clueless economist on the board.

To further your education even more ( I know it is impossible,but God loves a trier),banks operate on  net interest margin.This is the difference between interest paid to the bank,and the interest the bank pays out to the people they borrowed the money off,savers.

Now gross assets in 1991 were approx $100 billion.They lent that money out @ 3%,say all of it on mortgages .They paid the people they borrowed that money off 1%.They collected $3 billion ,and paid out $1billion,difficult maths,perhaps a pencil and paper would help .

$3 billion collected,$1 billion paid out and $1 billion to pay wages,rent etc.That leaves $1billion in net interest margin ( commonly called gross profit),or 1% net interest margin I know interest rates change over the years,but try to keep up,and try thinking 

 

Fast forward to today,strange but the business model still works.Wages have gone up ( most people will deny that),and house prices have gone up,who could believe it.

So $1 trillion in gross assets ( lent out in mortgages to people we'll say),@3%.Income $30 billion ( greedy b#$&@&s comes the populist cry).

1% gross profit ( net interest margin) $10 billion( greedy f @#$_$#$___  comes the populist cry)

1% to pay wages,rent,computer systems etc ( you know what the populist cry is,why don't they give their workers a big pay rise greedy $&#_&+++&_.Look how much profit they make)

And of course 1% to the people that put the $ $1 trillion there,ahem,savers.

10+10+ 10  = 30( cue Ripley's,believe it or not).

Now this bit is rocket science,you and your mate the clueless economist are not going to believe it .

Over the coming 30 years I would expect wages to rise.I would expect house prices to rise,I would expect gross assets to rise.

Suppose gross assets rise to $10 trillion lent out Everything else remains the same,1% of $10 T as gross profit ( 30% tax paid on that).

1% of $10T paid out in interest ( to the savers)

1% of $10T paid out in rent etc.

 

Get your mate the clueless economist to explain to you where CBA have gone wrong over that 60 year period.Instead of aiming to increase profits every year and pay more tax.They should have been trying to lose money every year so they didn't pay any tax,and could brag about.

 

,

 

I didn't set out to prove anything. I'm not really into risking my money, anything me and the wife had spare went into the mortgage, now paid off.

We don't have investment properties or shares or bitcoin, we didn't rush to pay the mortgage and still spent a fair bit on having a good time. 

Worked for us.

 

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8 hours ago, Whey aye said:

Before they became the major shareholders in all companies the companies would have shareholder benefits.

Coles for example would offer shareholders 5% discount

Yes I know, I was a shareholder for that reason.  Nice while it lasted. 


Scot by birth, emigrated 1985 | Aussie husband applied UK spouse visa Jan 2015, granted March 2015, moved to UK May 2015 | Returned to Oz June 2016

"The stranger who comes home does not make himself at home but makes home itself strange." -- Rainer Maria Rilke

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8 hours ago, Paul1Perth said:

I didn't set out to prove anything. I'm not really into risking my money, anything me and the wife had spare went into the mortgage, now paid off.

I think @Whey aye misunderstood your post, thinking it was saying people shouldn't invest.  Hence the rant, which you didn't deserve.  To me, it was obvious it was a cautionary tale about what can go wrong when someone borrows to invest without proper thought to the risks. 

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Scot by birth, emigrated 1985 | Aussie husband applied UK spouse visa Jan 2015, granted March 2015, moved to UK May 2015 | Returned to Oz June 2016

"The stranger who comes home does not make himself at home but makes home itself strange." -- Rainer Maria Rilke

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On 05/04/2021 at 23:08, MacGyver said:

What an unnecessarily unpleasant post. If you hold more knowledge on a subject than someone, it does not make you better than them, nor does it give you the right to talk down to them. You could have made your point without the personal insults.

All he's posted doesn't prove he holds any more knowledge than me or anyone Mac, he just thinks he does.

I hope the blokes a millionaire, otherwise he's just another keyboard "expert".

 

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21 hours ago, newjez said:

Nope. Some cards do have one. Usually the ones with benefits, like free travel insurance. But ours is free.

I think every bank here offers a credit card with interest free days for purchases, you set up a limit on how much you can spend on it, organise with the bank to pay off some of the account from your current account so you don't pay interest, ever, have an offset account on your mortgage from your current account. You can save an awful lot that way. No fee and we earn a bit of interest on the current account.

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On 02/04/2021 at 13:46, Paul1Perth said:

A friend of mine came over absolutely cashed up. He emigrated and sold his house in Windsor for the equivalent of $1.5mil. Bought a 4 bed detached place, 2 mins walk from the beach for about $650,00. Then he went on an investment spree and bought investment properties galore. Used to brag about not paying tax as they were all negatively geared. 

Along came the GFC, he lost his well paid job because of it, house prices fell, he had bought houses off a plan that needed paying for when they were finished, he had thousands outgoing and hardly anything coming in. Pretty soon they couldn't afford their own mortgage repayments and nearly lost the house.

They are now over a mill in debt and I've no idea how he even manages to pay the interest. He has 3 kids too, one still at school, one finished her degree but can't get a job and another working in the snowfields but not making enough to support herself.

His degree was in economics and they base everything on cash flow. A perfect case of how investing can go wrong and ruin your life.

A perfect example of how greed can ruin your life. UK home went for $1.5m equivalent and Aussie home only cost $650K - why didn't he just buy it outright?!

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18 hours ago, Wanderer Returns said:

A perfect example of how greed can ruin your life. UK home went for $1.5m equivalent and Aussie home only cost $650K - why didn't he just buy it outright?!

He did buy it outright and could have got a couple of investment properties and retired early. Instead he bought loads, got loans galore. When things went wrong they had to get a mortgage to free up cash as he couldn't sell his investment properties he had mortgages on and he had gone into a deal on some land that some "advisor" told him to get into for development. That cost them the most to get out of.

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4 hours ago, Paul1Perth said:

He did buy it outright and could have got a couple of investment properties and retired early. Instead he bought loads, got loans galore. When things went wrong they had to get a mortgage to free up cash as he couldn't sell his investment properties he had mortgages on and he had gone into a deal on some land that some "advisor" told him to get into for development. That cost them the most to get out of.

There are times I am thankful that I have no ambition! ūüėĄ¬†¬†

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