Paul's Insights: Four key findings for November

Inflation nudges 7%

New monthly inflation figures from the Australian Bureau of Statistics (ABS) suggest we could be in for more rate hikes.

The ABS says inflation dipped to 6.9% in October down from 7.3% in September. A fall in inflation is welcome new. But 6.9% is still a lot higher than the 2-3% target the Reserve Bank of Australia (RBA) is aiming for.

The RBA has signalled that we can expect further rate rises in the months ahead, but for many borrowers (and savers), the question is how high will rates go?

Without a (reliable) crystal ball it’s hard to pinpoint where rates will settle. Even the experts can’t agree.

NAB is forecasting rates to rise by 0.75% by March 2023. Westpac predicts we could see a further 1% rise in interest rates next year, with rates potentially easing in 2024. And the Commonwealth Bank thinks rates could start to head south by late 2023.

The upshot is that anyone with a home loan needs to prepare for the possibility of further rate rises, and that makes it critical to compare what’s available in the market to be sure you are paying the best rate possible on a loan that’s right for your needs.

Global shares swing upwards

It’s been a rough few weeks for international share investments. But patience pays off.

The MSCI ACWI ex Australia Index^[1], which measures returns on global sharemarkets excluding Australia, reported monthly gains in October of 6.66%.

The year to date returns are down by 10%, but international shares have always been a long term investment. And on this score global equities haven’t failed to deliver.

Past returns are no guide for the future but global shares have notched up returns averaging 8.05% annually over the past three years – a figure that rises to 9.72% and 14.06% over the past five and 10 years respectively.

12 million Australians don’t have a will

Australians are ill-equipped for an untimely death, according to new research by Finder.

The study found 60% of Australians – equivalent to 12 million people – do not have a will.

The high number of people who could die intestate (without a will) is not unusual. Unfortunately, many of us tend to postpone making estate plans until prompted by a personal tragedy.

As a guide, the Finder research shows getting sick or terminally ill would motivate almost 1 in 2 people to take out a will.

On the plus side, the pandemic has seen a 33% uptick in the number of Australians taking out a will.  But be careful if you’re thinking of relying on a do-it-yourself will kit. Unless your affairs are very simple, these DIY kits may not stand up to scrutiny in court if your will is challenged.

It makes more sense for many Australians to have a will professionally drafted by a solicitor. Yes, it will cost more, but it can bring peace of mind to you and your family about who will inherit your assets when you pass away.

Aussie shares prove the value of a long term outlook

October was a challenging month for Aussie shares. But investors who sat tight have been rewarded.

As I write, the local sharemarket is up 6.1% for November. However, the big returns have gone to investors who never lost sight of their long term goals through all the uncertainty  of the past few years.

The ASX 200 index has notched up capital gains averaging 4.06% annually over the last five years. Add in dividends, and the total annualised returns come to 8.02%.

Australia may not make it to the winner’s podium at this year’s soccer World Cup, but sticking to a long term game plan can deliver winning results to sharemarket investors.   

Paul Clitheroe is Chairman of InvestSMART, Chair of the Ecstra Foundation and chief commentator for Money Magazine.