Sharesight Blog

I’m considering starting an SMSF. How can I make share investing most cost-efficient?

Posted by Andrew Bird on October 7, 2011

While some investors may be feeling concerned about current stockmarket uncertainty, the volatile markets appear to have done little to dampen our collective enthusiasm for self-managed superannuation funds. The sector is booming and recent numbers from the government regulator APRA show that self-directed investors poured an extra $44 billion into their super accounts in the past year to June 2010. The total amount of funds under management in SMSF at June 30 this year was estimated at $420 billion, and rising.

So how can investors maximise the benefits of running – even growing – their SMSF against the backdrop of volatile markets?

The state of the Greek debt default and its impact on global markets might be out of our control. But what if we take charge of those things we can control? Like the many variable costs that erode the overall performance result of your fund?

This is a key point, as many do-it-yourself investors often don’t consider the underlying costs associated with managing a portfolio, and the impact of these on overall returns.

It makes sense for investors to focus on minimising cost and freeing up funds for reinvestment. The good news for DIY investors is that that by exploring online services to help manage their portfolios they are in a good position to maximise cost effectiveness.

The costs of share investing generally fall into three areas: the cost of research and advice on what shares to buy; the cost of buying and selling shares (brokerage) and the cost of administering your portfolio.

Traditionally, these services would be bundled together by a full service broker or platform provider. This provides convenience, but the cost can be a significant drain on portfolio performance for many investors.

Online services now provide investors with the option to disaggregate these three areas and choose the individual providers that best suit them.

Online trading through an internet broker can save you money on your brokerage fees, while more and more of us are finding cost-effective advice, traditionally provided by a broker or financial adviser, through online advisory services.

Then there is the cost of portfolio administration. Using a broker, accountant or financial adviser to handle the significant tax and reporting obligations of DIY share trading can be prohibitively expensive for many investors. A good online share portfolio management system, which automatically records the data you need, can significantly reduce the time your accountant or adviser will have to spend on administration and record keeping – and therefore your bills – leaving you with more money to reinvest in your portfolio.

In short, while the complexities of investing in shares through your SMSF should not be underestimated, a growing number of services are being brought to market to make life easier for the self-directed investor. Nonetheless, before you jump head first into becoming the trustee of your own managed super fund, make sure you spend the time working out if this is the best option for you. And while you’re at it, spend some time looking into the cost of research and advice on the shares you wish to buy; the cost of buying and selling shares (brokerage) and the cost of administering your portfolio.

Big Brother is watching… and acting

Posted by Andrew Bird on August 11, 2011

The Australian Tax Office (ATO) warned this week that more than 40,000 suspect tax returns for FY11 have already been flagged by its computer system. Cases have included overstated or fraudulent claims for spousal offset or education tax refunds, but the ATO has also declared that declaration of franking credits by share market investors is also on its radar.

While some of these returns concern suspected fraudulent behaviour, no doubt quite a number relate to mistaken claims entered in good faith. We are human after all!

The news from the ATO provides a timely reminder for those of us looking to complete our tax returns over the next few weeks that not only is it important to complete your tax return accurately, but it is also essential to ensure careful record keeping throughout the financial year. If you don’t have up-to-date information at your fingertips, chasing the data you need gets very time-consuming – often leading to errors or corner cutting.

Many DIY investors are finding that using a service such as Sharesight can help them stay on the right side of the ATO at tax time. Sharesight automatically tracks data relating to your shares throughout the year, enabling instant access to taxable income reports that contain a summary of gross dividends, franking credits and withholding tax information for all dividends. You can also access CGT reports in a couple of clicks of the mouse.

But for DIY sharemarket investors who haven’t already signed up to the service, here are some tips to make your EOFY life a little easier….

• You need to keep a record of all shares bought, the date you bought them and the price paid. When you choose to sell, you will need those records to work out the potential capital gains tax due.
• To calculate the capital gain or capital loss when disposing of only part of an investment in shares or units, you need to be able to identify which ones you have disposed of. This can be very important because shares or units bought at different times may have different amounts included in their cost and can alter the amount of tax you may need to pay.
• Keep track of all dividends received for tax purposes. You will need the date the dividend is paid, the net amount and the franked amount (whether you must pay tax on the whole sum received or whether you have received franking credits from the issuer if they have already paid part or all of the tax due).
• Remember that the potential tax due can change as the price of your stocks goes up or down and this may influence the time you choose to sell.
• Storing your records online through a service such as Sharesight allows you to view your records at any time wherever you are in the world, and also gives instant access to your accountant or financial adviser.

With the ATO bringing on-board ever more sophisticated techniques (click here for The Australian’s report on how their computer modelling is tracking down false claims), the disorganised investors among us have no excuse but to get our houses in order! See www.ato.gov.au for more information on the tax requirements that come with investing in shares.

Upcoming events

Posted by Scott Ryburn on October 22, 2010

We are excited about attending some great events in Sydney and Melbourne next week – please see below for details!

Trading and Investing Expo

Sharesight will be exhibiting at the Trading and Investing Expo at the Sydney Convention and Exhibition Centre on Friday 29th and Saturday 30th of October. Now in it’s 10th year, this is the leading event in New South Wales dedicated to educating traders and investors, and well worth attending.

We have secured a special $5 ticket offer for Sharesight customers, saving you $10 per ticket! Please click here and enter promo code SHARESIGHT to take advantage of this offer. We will be at stand 76. Please head along and say hello!

Xero Online Solutions Roadshow

As a Xero partner, we will be participating in Xero’s Online Solutions presentations in Melbourne on the 28th October and Sydney on the 29th October. These free 90-minute presentations are aimed at showcasing ‘best of breed’ online solutions for accountants in practice.

Click here to find out more and register for the event.

RewardSuper and Sharesight

Posted by Scott Ryburn on March 16, 2010

RewardSuper is an Australian company that provides great web based tools to accountants to automate the labour intensive task of preparing transaction data for their clients’ accounts. We have been working with RewardSuper on our upcoming broker contract note processing feature where the backend PDF processing is handled by RewardSuper’s RSTradeweb product. This will enable Sharesight clients to have their share portfolios automatically updated when they buy and sell shares.

We are also working towards a closer integration with RewardSuper to enable a secure mechanism for customers to have their detailed Sharesight portfolio data flow through to their accountant’s professional accounting systems via RewardSuper’s RSDataweb platform.

RewardSuper will be at the Institute of Chartered Accountants Self Managed Superannuation Funds Conference in Sydney this Friday 19 March. If you’re attending this event and are interested in finding out more about RewardSuper and Sharesight, please head over to the RewardSuper sponsor table.

When Will the Share Market Bounce Back and How high Will it Bounce?

Posted by Tony Ryburn on November 3, 2008

For those of us with an interest in the share market this is an issue of some importance.  We all know that when the markets take a tumble they will rise again, but it would be great to get a handle on how long it will be before we see an upturn and how strong that upturn will be.

Here’s my take on the situation. Caveat: I might change my mind next week!

There is no doubt that there is going to be a major reorganisation of credit globally.  The consequences of such a massive change that will embroil the Government (and quasi-government organisations) so extensively in the financial markets, are impossible to predict.  However history suggests that anomalies, distortions, loopholes, exploitation and ever increasing complexity and cost will rule.

Despite this gloomy prediction, I also think that while the process of restructuring the world’s financial markets is occurring, the productive sector will quickly get back to something approaching normalcy.  In other words the players will soon stop obsessing over the score and start concentrating on the game.

Clearly Australia will not escape the impact of the credit crisis or the effects of the recession that is likely to hit most of our trading partners. In view of this it is slightly surprising to me that PM Kevin Rudd has predicted 2% annual GDP growth and that this is supported by similar predictions by the big 4 banks.  In fact Westpac is predicting GDP growth of 2.8% over 2008 and 2.2% in 2009.

Whether these predictions prove to be unduly optimistic remains to be seen but there are good reasons to believe we will be less severely affected than most.  Unlike many countries we have not had major bank collapses, our financial system has not been hijacked by out-of-control derivatives trading and the Reserve bank has more latitude than most its overseas counterparts to provide further stimulus via interest rate cuts if necessary.

And there is further reason for optimism as well.  According to Westpac CEO Gail Kelly http://www.theaustralian.news.com.au/business/story/0,28124,24578232-30538,00.html

who should know if anyone does, Australian banks, in contrast to their counterparts in the US and Britain, have been more conservative in their lending over the past decade. She claims that there has been little or no sub-prime lending by the major banks, and that average loan-to-value ratios are remarkably low.

So back to our share market. What might all this mean? I believe it will be good news. Our economy will be less severely affected than most and this will enhance Australia’s reputation as a sound place to invest. This in turn will re-stimulate investment in our share market from both local, and more importantly, offshore investors.

This is not to say it will not be much tougher than it has been over the past 10 years or so.  For a start, lack of international demand is likely to depress oil, iron ore and coking coal prices. However this is already fully reflected and more in the share prices of the likes of Rio Tinto and BHP.

For those of us interested in the share market this is surely the key point. The collapse in our share market prices (the S&P/ASX has fallen from 6828 points a year ago to 4018 today) seems out of all proportion given an economy with a sound banking system and forecast growth in GDP that most countries could not contemplate in their wildest dreams.

So how long will it be before common sense prevails and how strong will the bounce back be?  I don’t know, but I have certainly persuaded myself not to give up on the Australian share market.

What are your thoughts?

Australia’s Secret Economic Weapon

Posted by Tony Ryburn on August 13, 2008

Since 1990 Australia’s real economy has expanded by around 3.3% per annum. Few countries have been able to match this impressive performance.

Innumerable studies have examined the reasons for this remarkable growth. This is not surprising because other countries are eager to learn from Australia’s experience. And from Australia’s point of view it would be great to understand the reasons for this success to help ensure that it continues unabated.

Most of the studies talk about things like economic reform, increasing productivity, innovation and the increasing world demand for Australia’s extensive reserves of metals, minerals and fossil fuels. But all this stuff is pretty old-hat and you could be forgiven for wondering if there isn’t a bit more to it than that. Could it be that Australia has an economic weapon that is so secret that it is not mentioned in any of the economic studies? Either the answer is “yes” or else these studies have failed to uncover a key contributor to Australia’s economic success story.

You’ll think my coolabah tree has failed to keep the sun off my head if I say that Australia’s secret economic weapon is a romance. But it is true. It’s Australian’s love affair with their share market.

According to the ASX’s 2006 share ownership study, 46% of Australians own shares. Although international data is scarce, you can bet your last dividend that few countries, if any, can come close to matching this remarkable performance. When it comes to investing in their share market Australians leave the rest of the world in the shade.

History shows that in the long run shares provide the best return so this romance with the share market creates a win/win/win. The 7.3 million Aussies and their families who own shares win. Australian companies also win because the high level of share investment provides the equity that helps fund the rapid growth that many of them achieve. And through this growth the Australian economy wins as well.

An equally remarkable fact from the ASX study is the DIY attitude Australians take to share investment. An amazing 6.0 million invest directly in shares and of those, 38% invest through an online discount broker and further 15% through a discount phone broker. This is where Sharesight comes into the picture.

Direct, DIY share market investors who invest online deserve a decent, online, portfolio management system. And that is exactly what Sharesight provides. Sharesight is comprehensive, easy to use, and requires minimal data entry. It automatically produces the true, annualised share returns and tax reports that ensure you pay the minimum amount of tax.

But don’t take my word for it; take a free trial. It could be the start of a beautiful new relationship.

Calling all Investorweb Customers

Posted by Tony Ryburn on August 7, 2008

One of the adverse consequences arising from the closure of the Investorweb website following its sale to Commsec has been the loss of its excellent share portfolio manager.

An Investorweb customer drew this to our attention recently after discovering and logging onto Sharesight. He wrote to us saying “I was really surprised at the difficulty in finding a replacement, which was is why I was so pleased when I found you site”.

If you are an Investorweb client who is looking for a top-quality portfolio management service we suggest you check out Sharesight by taking advantage of our 30 day free trial offer. We are sure you will be impressed.

Sharesight focuses exclusively on providing a straightforward, affordable and independent online share portfolio manager for DIY investors.