In the Zone - March 2022
Welcome to our first newsletter for 2022!
It hasn’t been the smooth start to the year that we all hoped for, with January experiencing record COVID19 cases due to the Omicron strain taking hold, devastating flooding in widespread areas of QLD and NSW, and the invasion of Ukraine dominating the media landscape and with the repercussions being felt by many Australians.
From a financial planning perspective, it’s pleasing to meet so many new clients in Q1. As you know, our passion is helping Queenslanders reach their financial goals. To provide peace of mind in an uncertain landscape is very gratifying.
You’ll hear from us again shortly when we release our 2022 Federal Budget overview following the Budget release on Tuesday March 29th. Following that, we wish you all a very safe and happy Easter break in a few weeks’ time.
Why you need a Family 'ICE' document
If you passed away unexpectedly or an emergency separated you from your family, would they have the information required to keep the household running and life in motion? Or the knowledge to be able to identify and close accounts and services? Many of us have a great handle on our finances, but our record keeping systems might not be obvious to family members or friends who might need immediate access to them in times of emergency.
Until we’ve been through a true emergency, we don’t know what it takes to make everything run smoothly. We don’t know about all those things that your insurance policy or your Will doesn’t spell out. Like how to pay the Netflix account. Or what is your email password? Or how to cancel your cleaner. Even who your pet insurance is with…. These problems, unfortunately, happen all the time. We can hope and cross our fingers that it never happens to you. But if it did, what would it look like?
This ‘In Case of Emergency’ (ICE) document puts the information they need at their fingertips. The idea behind this document is to have a single location where you or a loved one can find important information about you and your household. This document, also known as a legacy or ‘in case of death’ document, will guide your family through all those things we hope never happen. You can store it either on an encrypted secure document/password manager website or investigate a 'Dead Man's Switch' service - which is a service that automatically contacts your friends and/or family in the event that something happens to you.
One of our missions is to prepare people for the unexpected.
Completing our ICE document will certainly give you peace of mind knowing that another family member could step in to manage your home if the unthinkable happened.
European conflict and local flooding impacting the Australian economy
With the full-scale invasion of Ukraine continuing, the Australian economy is feeling the ripple effect of this new geopolitical reality. The impact of this instability has been further compounded with the destructive flooding on the Eastern seaboard of Australia. Few industries have been spared, with transport, food supplies, petrol and other essentials being affected.
The cost-of-living pressures are catching up with most Australians, and certainly petrol prices will probably continue to inflict pain on us. At the time of writing, motorists are paying around $2.20 per litre and there is no indication that prices will normalise any time soon, especially given the second largest oil exporter – Russia – faces unprecedented sanctions for waging ware in Ukraine. And the cost-of-living pinch isn’t restricted to the bowser, with Australian companies warning that their prices of everyday goods will have to rise accordingly – which will affect our hip pocket even more on everyday items.
The Australian share market is trending down, with most sectors reporting losses; however, it’s not all bad news, with the Energy and Materials sectors experiencing surges.
Inflation is still expected to rise for the next couple of years with ratings agency S&P Global forecasting inflation to average 3.9 per cent this year. Growth this year is likely to be a little higher, at 3.6 per cent, but the agency downgraded its expectations for 2023 (to 2.6 per cent) and even lower in 2024 at 2.2 per cent.
The Federal Government faces a mammoth task of delivering the 2022 Budget against a backdrop of a European war, devastating floods, global economic turbulence and rising COVID cases from a new Omicron variant. It will be interesting to see how they strike the balance between offering relief on the cost of living without overstimulating the economy causing inflation to rise even more.
Fasten your seatbelts; we could be in for a bumpy road ahead!
Investment Zone will release a Budget analysis - here in this Blog - shortly after the Budget is released on Tuesday March 29th, so watch this space for updates.
What do I need to know about Cryptocurrency?
Not a day goes by where there isn’t a headline about cryptocurrency. Many Australians now have some form of cryptocurrency in their investment mix. In fact, there is an estimated 800,000 Australians dabbling with digital assets.
So, what is it and should you have it?
What is crypto?
Crypto-assets (crypto) also known as cryptocurrency, virtual or digital assets, is an emerging type of asset class. It does not exist physically as coins or notes, rather digitally or virtually and uses cryptography to secure transactions. Cryptocurrencies don't have a central issuing or regulating authority, instead using a decentralized system to record transactions and issue new units. Because they are generally not issued by any central authority, they are theoretically immune to government interference or manipulation.
Since there’s no established company or physical representation of the cryptocurrency’s value, the price of the tokens is highly volatile and can fluctuate significantly within a short time. The value of the cryptocurrency will mainly depend on its popularity, the underlying technology, the ease of trading it, and its perceived future performance.
What’s the purpose of cryptocurrency?
Cryptocurrencies are a new paradigm for money, with their hope being to streamline existing financial architecture to make it cheaper and faster. Their framework decentralises existing monetary systems which enables transacting parties to exchange value and money independently of financial intermediaries such as banks.
Each cryptocurrency has different capabilities. Most were not created to be investments.
What technology does it use?
Central to the appeal and functionality of Bitcoin and other cryptocurrencies is blockchain technology. As its name indicates, blockchain is essentially a set of connected blocks or an online ledger. Each block contains a set of transactions that have been independently verified by each member of the network. Crypto may or may not have an actual asset underlying it.
What are the most popular cryptocurrencies?
There are thousands of cryptocurrencies present in the market today and each cryptocurrency claims to have a different function and specification. Bitcoin – the first created in 2008 is by far the most popular and valuable cryptocurrency followed by other cryptocurrencies such as Ethereum, Binance Coin, Solana, and Cardano.
As of March 2022, the aggregate value of all the cryptocurrencies in existence had reached over $1.8 trillion—Bitcoin represented approximately 44% of that total value. Source: CoinMarketCap. "Global Cryptocurrency Charts."
Is it safe?
Crypto is a high-risk investment. It is extremely volatile, often fluctuating by huge amounts within a short period. In Australia, crypto-assets are not considered to be financial products, which means that Financial Advisers cannot recommend them in a Financial Plan (Statement of Advice) and they are not regulated by ASIC. Unlike the ASX where there’s a strict process for approving companies wanting to be listed, there’s no such body to monitor cryptocurrency trading platforms and ‘Initial Coin Offerings’.
The Australian government has sent out warnings on investing in any kind of cryptocurrency, no matter how established and popular these systems may be. Because they are not considered financial products, the platforms where you buy and sell crypto will also not be regulated, which means you won’t be protected if the platform fails or is hacked. When a cryptocurrency fails, investors will most likely lose all the money they put in.
Finally, as financial advisers, Investment Zone cannot provide advice on cryptocurrency as it is not a product regulated by ASIC. We will continue to monitor any change in legislation; as there are whispers the Australian government is poised to reform its current cryptocurrency rules in a bid to empower crypto consumers.
Have you ever used a Cleaner, Babysitter or Gardener at your home?
Imagine if your babysitter, pool maintenance specialist, cleaner or gardener were to fall and break his or her arm while on your home premises. You could be sued for wage compensation and medical costs which could amount to thousands of dollars.
You may understand the importance of insurance for income, life, your home and your car. You may even have health insurance too. But are you familiar with insurance that will cover you if a household worker is injured at your home?
What is QLD Household Workers’ Insurance?
Directly paying workers to help in or around your home means you could be considered an employer, even if the worker has an ABN. If someone you hire is injured while working for you, you may be liable for costs relating to their injury, like medical expenses or weekly wage payments if they can't work while recovering. A WorkCover Queensland Household Workers’ Insurance policy will cover you if this happens.
Why should you consider taking out the policy? More than 30,000 Queenslanders take out cover for their at-home workers. It's a smart choice because some household worker compensation claims can reach over $100,000 (the average claim cost is $10,000). It’s only $50 for up to a two year term, so it’s very affordable.
As a homeowner or tenant, you'll want to be sure the injured person will get the care they need, as well as making sure you're covered for the costs. While most home and contents policies include public liability insurance, this only covers visitors to your house and not people you employ to work on your property. In Queensland, the scheme is wholly operated by the state.
Information is power, so take a look at these other information sources:
Preparing for uncertainty
Some Australians are stockpiling supplies of household necessities in anticipation of future volatility from a variety of possible sources. In any situation, it is up to each of us to take care of our needs and those of our family.
Being prepared for any emergency can ensure that you and your family can manage if affected by an event such as:
Natural disasters such as bushfires, cyclone, flood, storms
Cyber attack on food, internet or energy supply
Disruption of food and transport
Please consider building an essential pantry and emergency kit for your household and always have a full tank of petrol. Here is a guide replete with helpful hints to create your emergency supply.
Want to speak to our Financial Planning team?
The information in this communication has been prepared on a general advice basis only. The advice has been prepared without taking account of your specific objectives, financial situation or needs. Accordingly, you should, before acting on the advice, consider the appropriateness of the advice having regard to your objectives, financial situation, and needs. In cases where the advice relates to the acquisition, or possible acquisition, of a particular financial product, you should obtain a Product Disclosure Statement (or other relevant information statements) and consider such document before you make any decision about whether or not to acquire the product. For these reasons, it is imperative that you seek advice from your financial adviser before making any investment decisions. Investment Zone Pty Ltd (ABN 18 104 622 611) provides financial services as a Corporate Authorised Representative no. 296974 of Financial Force Pty Ltd ABN 42 091 425 464, AFSL no. 238337