It is a constant debate: what is the best investment? Is it shares or property? Should you buy gold bullion or tip extra money into your superannuation?

Lets have a look back at the past decade to see how these investments have performed.

Gold is the winner for pure gains but a rising Aussie dollar rubbed off some of the shine. Still, in $US per ounce it’s up a massive 284 per cent.

Houses

The median Australian house price has climbed 127 per cent in the past decade but there are big differences between the best and worst.

The big winners are Darwin (up 223 per cent), Hobart and Perth (both 208 per cent), data from the Real Estate Institute of Australia has found.

Adelaide’s median house price has climbed 176 per cent during the decade.

As a rule of thumb, residential property doubles every 10 years.

Sydney was the only city to underperform, with a 93 per cent increase.

However, this does not tell the whole story. The median Sydney price, currently at $569,000 is still below its $571,000 high in 2004.

Shares

It has been a rocky road for shares during the past decade, with two bear markets and a long boom. The All Ordinaries index of 500 companies is up 49 per cent over the past 10 years.

Australian Stock Report head of research Steven Dooley says the energy sector had a great decade as the oil price rose from about $US10 a barrel to highs near $US150 in mid-2008.

Consumer staples companies showed that slow and steady wins the race.

Superannuation

Super is technically not an asset it’s a structure to hold your investments and it has been hit for six during the past 18 months.

However, it’s on the way back up again, and for the decade the average balanced fund has still climbed 72 per cent.

The global financial crisis wiped 20 per cent off the average balanced fund in 2008, while the year before super was down 6.4 per cent.

But the GFC was not the only glitch during the decade. The 2002 Asian financial crisis caused losses of almost 5 per cent.

“The funds soon shook that off, however, and we had five strong years of predominantly double-digit growth,” SuperRatings chief operating officer Nathan McPhee says.

“People soon just expected that those extraordinary levels of growth were normal.”

Wine

Australians’ love of wine can be justified by investors to a point. Average prices of premium reds have climbed 78 per cent, although most wine is still traded on the secondary market for pleasure.

“The fine wine market is today’s modern spice trade,” Langton’s auctioneer Andrew Caillard says.

During the past 10 years, however, the wine market has developed a bit of a “cult phenomenon” where unheard-of wines can fetch more than $1000 a bottle.

“Don’t borrow money to buy wine. There are no guarantees of making returns,” Mr Caillard says.

Very rare wines, however, are a market to themselves with some Australian rare wine up 300 per cent this year.

Cash

It has been an uneventful start and finish for cash investments for the decade.

In December 1999 the average one-year, fixed-term deposit rate was 5.22 per cent.

Today it is 5.09 per cent, according to RateCity. The average during the decade was 5.3 per cent.

Unlike shares and property, cash does not deliver capital growth only income but is seen as a safe investment.

HSBC has some great offers currently. You can find them here.

Commercial Property

Listed property trusts offer the easiest access for investors to commercial property but what a shocker of a decade for this sector. The Listed Property Trust index fell 31 per cent.

During the decade, many trusts started at just 50 per unit, rode the back of the global property bubble up to $8 or $9 then tumbled back again, Australian Stock Report’s Steven Dooley says. Other trusts were wiped out.

Thoroughbreds

The average yearling sale price has jumped 88 per cent during the decade.

“The globalisation of the industry has been a boon to Australian horses because it has brought international investment and recognition during the past 10 years,” Inglis commercial manager Matt Rudolph says.

“In Australia, anyone can be an investor but in the UK or Europe, for example, it is often only for the elite. Here you can dream of winning a Golden Slipper or a Melbourne Cup. You only have to have a look at the past winners to see it can happen.”

Gold

If you put your money in gold 10 years ago, you’d be on a winner, with 284 per cent growth.

Although currency fluctuations have boosted the price recently, the sector is still seen as a haven and a growth asset.

There is a real bull market in gold, says Daily Reckoning gold analyst Bill Bonner.

“It’s what you buy when you think government is making a mess of the monetary situation. You put your trust in gold as an antidote, as protection, as wealth insurance.”

Diamonds

Diamonds have not been a girl’s best friend this decade, with virtually no growth a mere 0.5 per cent.

According to the international benchmark index of South Africa’s PolishedPrices.com, diamond prices roughly ended the past 10 years at the same place they started. However there were a few ups and downs.

PolishedPrices spokesman Richard Platt says diamonds reached a peak in August last year, but even that high translated to a mere 18 per cent increase since 1999.

So, the next time you are told in the jewellery store that it’s a ‘great investment’, refer them to this article.

Where have you found some great value from investments?

PD

With an ageing population, more people are starting to look seriously at the prospect of how much they will actually need once they ‘retire’. There are many areas to take into account when considering retirement. Like, which fluffy shoes to buy for your mid morning stroll to the front lawn to pick up your newspaper, looking for the next holiday destination in your new motor home.

My guest writer for this topic is Sean Prosser , from Lighthouse Financial Advisers based in Sydney. Sean is an experienced financial planner and specialises in retirement planning and wealth creation.

The question about how much you need to live on in retirement is an old chestnut, where “old” is probably the operative word. Studies in the US show that life expectancy could reach 100 years of age by 2030. If that is the case  if someone were to retire at age 65, that means 35 years in retirement.
So it’s not just a question of having enough income each year in retirement, but also one of whether you will outlive your retirement savings.
The Association of Superannuation Funds of Australia, together with Westpac, found that to have a comfortable lifestyle, retired singles who live in their own home need to spend $36,607 a year and couples $48,648.

Recent life expectancy figures issued by the Australian Government Actuary estimate that a 55-year-old woman has a 35 per cent change of reaching 95 years and a man of the same age has a 19 per cent chance. But 71 per cent of 55 year old women will live till they are 85 and 58 per cent of men.

On average a 55 year old woman has a life expectancy of 89.7 years and a 55 year old man 86.2 years. So that’s quite a number of years that people will be spending in retirement.

Compulsory superannuation at nine percent a year will not get you that sort of money, so you will need to make additional contributions along the way.

So while it makes sense to get as much of your retirement savings into super so you can enjoy the tax-free environment, you will need to adopt a steady-as-she-goes strategy to achieve this end.
What that means is you should be looking at making additional super contributions from your 30s onwards rather than leaving it until the last moment.

Aside from the tax-free status of money drawn down from super after you are 60, there are plenty of other incentives to encourage you to make additional contributions, such as the tax concessions available during the accumulation phase of super.

The most accurate way of assessing your retirement needs is to work out a realistic budget. However, if that’s a daunting prospect, a good rule of thumb is approximately 60%-70% of your pre-retirement income.

So how much do you need in dollar terms per annum?

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Once you have determined your required annual income, you then need to establish exactly how big your retirement nest egg needs to be to provide that level of income for life.
The table below shows the savings you will need at retirement for some income levels, assuming retirement at age 65 years and that the income will be paid for an average life expectancy.
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This is general information and everyone’s needs and requirements are very different.
So if you are at all concerned with your retirement plans, talking with a qualified financial planner may be a good idea, it’s never too late to start planning.

To ensure you are on the right track to retirement, and having enough funds to get you there, Sean has offered an hour of his service at no cost to readers of this blog. This offer is only available to 50 readers, so you need to be quick. Sean can be contacted by EMAIL or visit his website at www.lighthouseonline.com.au

So, you need to get rid of your house and you need to do it as fast as possible. Whatever the reason, be methodical, reasonable, and most importantly of all, don’t panic. This may not seem like the best time to try and sell your house your house, but if you follow this sound advice, it is very possible.

I am about to disclose to you the five biggest mistakes homeowners make when selling their home. I’m also going to address some proven home-selling tactics that will assist you in selling your home fast.
The Top (5) crucial mistakes impatient homeowners make
1)    Making small price reductions over and over
Nothing indicates desperation more than multiple incremental price drops. The longer a property continues to remain on the market, the more enabled the buyers become. Instead, research the market value yourself. Find out what your house is worth by looking at similar properties in the neighborhood and price it well below them. The most looked at houses on the market are the newest and the cheapest. If there is a way that you can come in first in both categories, you will more than likely have yours under contract in a very short amount of time.

2)    Hiring the cheapest but not the best Real Estate Agent or Broker
There are many ways of finding a good Real Estate Agent. Personal recommendations from friends and colleagues are often one of your best sources. Top notch Real Estate Agents charge a premium for their services, and rightfully so. So don’t sign up with cheapest Real Estate Agent and get stuck with a lemon. You want someone with experience, personality, enthusiasm and drive, and most importantly, someone who will give you the attention you need and ultimately guide you and your potential buyers through the entire process with courtesy and professionalism.

3)    Waiting for a better market
Good luck. If you decide to wait, you are joining the ranks of the other million homeowners who have also decided to wait. Trust me, when everyone decides to sail at the same time, you are probably too late, and have already missed the boat. If you need or want to sell now, then by all means, sell now. There will never be a better time than the present.

4)    Showing your house before you get rid of your stuff
You would not try to sell your car without first washing it and vacuuming it out, would you? Let me make it perfectly clear. When it comes to all of your stuff that you have collected over the last thousand years, trust me, it may be your prized stuff, but everyone else sees it as junk. Trying to sell your house when it is full of junk is definitely a bad idea. Potential buyers will not see charming family memories; they will see an overcrowded house that appears smaller than it actually is. Your potential buyer does not want to see your house; they want to see their house.

5)    Do not be over confident
The seller gets a few showings early on and they are suddenly filled with courage and confidence. The first offer does not seem so great, so you naturally assume there are bigger and better offers to be had. So with a great amount of confidence, you talk yourself into rejecting the first offer. This is a big mistake. Treat every offer you receive, as if it is your last. If you do not take this advice, trust me, your competition will.
For more information on selling your home, visit Americas Housing Educators at www.americashousing101.org

One of the reasons shares are bought is to receive an income. Each time the listed company has profits at the end of each year, they pay a share of the profits to their shareholders, which is called a dividend.

I know this is not rocket science for many people, but you would be surprised how many people don’t understand different parts of shares. Wikipedia’s definition of a dividend sums it up quite well:

Dividends are payments made by a corporation to its shareholders. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be paid to the shareholders as a dividend. Many corporations retain a portion of their earnings and pay the remainder as a dividend.

These dividends can be paid franked or unfranked. Franked means that the shares have had the tax paid on the earnings already, and unfranked means the tax hasn’t.

So many people invest in shares, in fact nearly every Australian worker has some form of shares at the moment, through superannuation. If you haven’t gone to the extent of actually purchasing shares yourself, then there are a few things you will need to understand before taking ‘the plunge’.

To help you with the basics of understanding shares, I’ll run a short post series. If you have any feedback or suggestions on what you would like to hear more about, please post a comment below and I’ll post the information for you.If you go to the ASX website, and click on shares to search for a company, you will find the following facts: This first post is about Price Earnings Ratios (P/E ratio).

What Does Price-Earnings Ratio - P/E Ratio Mean?
A valuation ratio of a company’s current share price compared to its per-share earnings.
Calculated as: Price-Earnings Ratio (P/E Ratio)

For example, if a company is currently trading at $43 a share and earnings over the last 12 months were $1.95 per share, the P/E ratio for the stock would be 22.05 ($43/$1.95).

The Eearnings Per Share is usually from the last four quarters (also called trailing P/E), but sometimes it can be taken from the estimates of earnings expected in the next four.

In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. However, the P/E ratio doesn’t tell us the whole story by itself. It’s usually more useful to compare the P/E ratios of one company to other companies in the same industry, to the market in general or against the company’s own historical P/E. It would not be useful for investors using the P/E ratio as a basis for their investment to compare the P/E of a technology company (high P/E) to a utility company (low P/E) as each industry has much different growth prospects.

The P/E is sometimes referred to as the “multiple”, because it shows how much investors are willing to pay per dollar of earnings. If a company were currently trading at a multiple (P/E) of 20, that would mean that an investor is willing to pay $20 for $1 of  current earnings.

It is important that investors note an important problem that arises with the P/E measure, and to avoid basing a decision on this measure alone. The denominator (earnings) is based on an accounting measure of earnings that is susceptible to forms of manipulation, making the quality of the P/E only as good as the quality of the underlying earnings number.

I hope this post helped you understand the P/E Ratio, and be sure to keep an eye on the next post.

PD