Wealth for Women from ANZ Financial Planning

Investment Pearls of Wisdom

*ANZ Financial Planning “What Women Want” research project conducted by TNS, 2007

Women’s wealth

Women are extraordinary.

For the past few decades women have been able to earn increasingly higher salaries, start and run more companies as well as influence more buying decisions than ever before.

But while nearly 100% of women are confident about managing their day to day finances, many don’t feel confident in investing or protecting their income or assets.*

At ANZ we are committed to educating and helping women of all ages achieve their financial goals. We understand when you’re busy it can be difficult to find the time to learn how to grow your wealth. We also understand many women wish there was someone they could speak to who could help share the load, someone who can explain things in a way that is interesting and relevant.

This is where an ANZ Financial Planner can add value. They can help make sense of wealth management and investing because they understand more than finance.

To help you along, ANZ Financial Planning has developed this ‘Pearls of Wisdom’ brochure information series just for you called Wealth for Women. This brochure on investing is just one in the series – take a look at the others on insurance, superannuation, retirement and estate planning too.

You can also check out our Wealth for Women site on anz.com to see and hear from others who have seen an ANZ Financial Planner. Take the time now to be better off.

All our dreams can come true, if we have the courage to pursue them. Walt Disney

Pearls Of Wisdom

2

Investing at any stage in your life can grow your wealth and provide an additional income stream. Before you start investing, it is important to identify your long, medium and short term financial goals. For example, you may want to save up for a holiday or ensure you have enough for retirement. Once you have defined your financial goals, you can then choose the right investment to suit your budget and lifestyle.

Time frame Investment goals

Short term

(1 to 3 years)

Car

Holiday

Starting a family

Medium term

(3 to 5 years)

House deposit

Boat

Regular income

Extended work leave

Long term

(7 years or more)

Children’s education fund

Retirement

Before you start investing, you should devise a budget to work out how much you can afford to invest without having to compromise your lifestyle too much. Draw up a monthly personal budget and note down the income you receive after tax, all your fixed expenses such as regular bills, rent and car/transport expenses, as well as the variable expenses such as entertainment, lunch and grocery expenses. For each category, work out an annual total.

Whatever amount you have left over can be put towards your investment, but it is a good idea not to invest all your spare cash in case of emergencies or extra expenditures that may arise throughout the year.

Risk and return

It is important to recognise the level of risk you feel comfortable with for different investment types. Some investors are more risk averse and prefer to invest in safe, low-interest cash and bank deposits where the value of their money is highly unlikely to fall. Other investors could accept that the value of their money may go down over short periods of time but have the potential to earn a higher return over a longer period of time if they invest in shares or property. It is important to remember losses are a possibility, depending on the fluctuations in the sharemarket.

Pearls of Wisdom

Investment

Use ANZ’s budget planner to start calculating your budget. Simply go to www.bemoneyconfident.com, select ‘Career & Work’, then ‘Making more of your salary’ and finally ‘Budgeting’.

3

4

The magic of compound interest

The sooner you start investing, the better. This is because of the powerful effects of compound interest. For example, if you decide today to invest an initial amount of $1,000, then contribute $100 per month into a managed fund that earns 8% p.a., in 10 years time, you would have $20,071. If you started investing the same amount three years later, you would only have $12,708. This is where the magic of compound interest takes effect.

The longer you invest for, the greater the difference in the compound interest, which is why starting to invest now and not waiting until later is important.

Asset classes

There are four main asset classes you can put your money into. The return you achieve and the level of risk associated is different for each asset class. You can invest in cash, fixed interest (such as bonds), property and shares. To build a balanced portfolio, you can invest in a combination of these asset classes, this method is called diversification.

Diversification

Diversification involves spreading your investment over a number of different asset classes (cash, fixed interest, property and shares) to provide more consistent overall returns. It is a good way to reduce the risks associated with investing over short periods of time.

By not having all your money in one type of investment, the high returns you receive from one investment can sometimes offset any poor performance in another asset class.

Cash and fixed interest asset classes are considered ‘defensive’ assets, which means they are designed to defend your investment from losses. These tend to be more popular for short-term or risk averse investors, who prefer safe, more secure investments with some consistency in returns.

Property and shares asset classes are considered ‘growth or aggressive assets’ because they tend to provide overall higher returns in a long-term investment and allow you to build wealth over time, but they are considered more volatile (higher risk).

Pearls Of Wisdom

Cash

Fixed interest

Property

Shares

Low

High

High4

Cash

Cash funds include bank deposits and investments in securities such as treasury notes, with a term of less than one year. Investing in cash via a cash management trust is good for short-term financial goals such as saving for a holiday or a car, as there is little risk of losing money over short periods of time.

Fixed interest

A fixed interest investment or ‘bond’ is a debt security issued by a corporation or Government in return for cash from an investor.

Bonds are the most common form of fixed interest securities. They are agreements to repay a fixed amount of money at a predetermined date in the future (maturity date).

Fixed interest investments are commonly referred to as ‘income-producing’ investments.

Interest rates can impact on the value of a bond, therefore they can be riskier than cash, but bonds can potentially offer better returns.

Property

Property investments can include investments in direct property, listed property trusts (LPTs) and other property securities. LPTs invest in a range of residential and commercial property, office buildings, hotels and industrial properties. They are pooled property investments which are broken into units and listed on the stock exchange like shares in a company.

Funds which invest in property securities allow you to take advantage of the benefits of diversification from investing across a range of different property sectors.

Property investments generally have a higher risk than fixed interest investments, but less than shares.

55

Pearls of Wisdom

Good advice adds up

The importance of obtaining good financial advice can’t be overlooked. From helping you formulate realistic goals and objectives to effective tax planning, it is a valuable part of creating wealth. A financial planner is one of the key sources of financial advice. They offer personal advice based on what you want out of life and help you implement strategies to make it happen.

Shares

Shares or stocks are securities representing ownership of a company. When you buy a share in a company, you become a joint owner of the business. When companies distribute profits via dividends, the investor receives part of it.

Shares are generally known to provide the potential for the highest return of all the asset classes over the long term. A company’s value can rise or fall due to changes in economic and industry conditions and the company’s profitability. This means they generally carry the highest risk of loss on your investment.

Managed funds

A managed fund (or managed investment) is made up of a pool of money which allows people with similar investment goals to individually invest an amount of money into the fund. The money is invested indirectly in asset classes such as shares, listed property trusts, cash and bonds, or a combination of these.

Diversifying your investment across several asset classes helps to minimise risk, or alternatively select more volatile investments such as shares to maximise their potential growth over the long term.

The benefits of investing in managed funds are they provide choice and there is less work for you because they are managed by an expert. They will also be tailored to suit your risk profile and investment objectives.

Managed funds are easy to get started, with many funds only requiring $1000 as an initial investment to begin investing. They cater for all types of investors from people with as little as $100 to invest per month to those with larger sums to invest.

Gearing

Gearing, or borrowing to invest, can be useful in allowing you to borrow and invest more in order to achieve greater investment returns. It makes sense if the investment returns you achieve will exceed the cost of borrowing, but sometimes it can also generate greater losses.

This long-term strategy would suit investors who can cope with higher risks and have income from other sources to service the loan. One of the benefits of gearing is the tax effectiveness, where you may be able to deduct interest expenses and ongoing borrowing fees for tax purposes.

Pearls Of Wisdom

6

Pearls of Wisdom

77

8

Setting up investment accounts for your children’s education and future

School fees are expensive and if you plan to send your children to an independent or private school, it is a good idea to start saving for their education as early as possible.

Average independent and private school fees can cost between $14,201 to $20,000 per year.1 That’s not including school books, uniform, extracurricular activities and other necessary items which cost an extra $1600 to $2300 per year.2

This means some parents are spending between 50% and 75% of their household income on school fees,3 and some even have to work two jobs to make ends meet.

Consider starting up a Cash Management Trust (CMT) or a managed fund just for this purpose and watch your money grow with the magic of compound interest. By the time your children have reached school age, you should have a nice little nest egg to cater for all the educational costs.

Don’t just save

Saving and investing aren’t the same thing. With saving, you hold your money to use in the future, instead of spending it now. Investing involves putting the money you have saved to work. The ultimate aim of investing is to accumulate wealth, however you may also choose to generate income from investing. It’s essential to invest your savings if you want to make the most of them.

Pearls Of Wisdom

A goal without a plan is just a wish.Larry Elder

1School fees bite as new term starts, Sunday Telegraph, 28 January 2008. 2Bank West ‘Back to School’ survey 3NSW Department of Education and Training

8

9

Pearls of Wisdom

Investing internationally

When you invest overseas, it gives you access to growing economies, geographic and sector diversification, a better spread of risk and the potential for higher returns over the longer term.

The main advantage to investing overseas is access to investments not available in Australia. Some of the world’s largest and most successful companies such as Microsoft, Coca-Cola and General Motors are only listed on international stock exchanges.

Buying direct shares in overseas companies can be complex, as well as having currency exchange risks. Some alternatives are to invest internationally through your superannuation fund or a managed fund which invests in international shares and may manage the currency risks.

Would you like more information?

Speak to an ANZ Financial Planner about your goals and they will be able to put together an investment plan most suitable for your personal and financial circumstances.

9

Why you should see an ANZ Financial Planner

We have financial planners to suit you

At ANZ we have over 400 professionally qualified male and female financial planners ranging from 28 to 55 years.

So we can find the right planner for you. Someone you can relate to and build a long term, trusting relationship with.

It’s easy to get started

It’s never too early to start planning your financial future. Your first appointment with an ANZ Financial Planner is no obligation.

In your first meeting, your planner will talk to you about YOU. Your current lifestyle, your goals and the life you want to live. From here your planner can arrange a step by step plan to get you there – and you decide how quickly or not you want to start implementing.

You know you can trust an ANZ Financial Planner

There are many benefits of seeing a professional financial planner from one of Australia’s most established banks.

All ANZ Financial Planners are strictly regulated by the Australian Securities Investment Commission (ASIC), and what’s more ANZ Financial Planning are principal members of the Australian Financial Planning Association (FPA).

For more information on the comprehensive code of ethics and legislation which our planners have to abide by, see the Head of the FPA Joanne Bloch’s presentation on www.anzdigitaltv.com

At ANZ all our planners are salaried employees of the bank

At ANZ you can choose the way ANZ Financial Planning is remunerated. It can either be a fee for advice or a commission based structure. The choice is yours.

ING Joint Venture

The partnership between ANZ and ING brings together the complementary strengths of both companies for the benefit of ANZ customers.

ING Australia Limited is a joint venture between the ING Group, which owns 51% and ANZ, which owns 49%:

• INGAustraliaisoneofAustralia’slargestfund managers and life insurers.

• INGAustraliamanagesassetsexceeding$48 billion.

• INGGroupmanagesmorethan¤635billion.

Through ANZ Financial Planners, you can access a range of products provided by a world-class wealth manager.

ANZ Financial Planners are representatives of Australia and New Zealand Banking Group Limited ABN 11 005 357 522, the holder of an Australian Financial Services Licence.

Pearls Of Wisdom

10

11

Be better offTo see how ANZ Financial Planning changed the lives of ANZ customers, go to www.anzdigitaltv.com and watch some real life stories.

To find out how an ANZ Financial Planner can help you be better off, come into your local ANZ branch, call 1800 641 593 or visit www.anz.com/wealth-for-women to make an appointment today.

Aust

ralia

and

New

Zea

land

Ban

king

Gro

up L

imit

ed (A

NZ)

AB

N 1

1 00

5 35

7 52

2. A

NZ’

s co

lour

blu

e is

a tr

ade

mar

k of

AN

Z. I

tem

No.

703

35 1

1.20

08 W

1471

63

www.anz.com

This material does not take into account your personal needs and financial circumstances and you should consider whether it is appropriate for you. ANZ recommends you read the Product Disclosure Statement before deciding to acquire or hold the product. ANZ Financial Planners are representatives of Australia and New Zealand Banking Group Limited ABN 11 005 357 522, the holder of an Australian Financial Services Licence.