Do you realise that $10,000 invested in Bitcoin 5 years ago would be worth over $1.1 million today? Makes you think, right?
With lockdowns occurring almost everywhere around the world, no one is travelling and AirBNB’s business has been decimated. Yet, its share price has risen by more than 40% over the past year, and it is currently worth nearly $160 billion. That is $10 billion more than Australia’s most valuable company, CBA. Oh, by the way, AirBNB lost $5.8bn in the 2020 fiscal year. In fact, it’s never reported a profit after tax. By comparison, CBA makes nearly $10 billion profit per year.
The big question is; is this the new normal? Is cryptocurrency the next big thing? Is profit and cash flow no longer an important metric when valuing a business?
Cryptical cryptocurrencyI am no expert when it comes to cryptocurrency. In fact, I admit that I know very little about it. But, then again, I have never spent much time researching it because it fails a few basic fundamental tests.
When contemplating an investment, it is important to form a view about the future demand for the product or asset involved. It’s not enough that its currently popular. You must ensure it will continue to be popular. Therefore, we must ask ourselves; who’s using cryptocurrency today and why? As far as I can see, at the moment, cryptocurrency is held solely for speculative purposes. Very few people are actually using it as a substitute for traditional currencies. The one exception to this may be money launderers.
According to the theory of diffusion of innovation, for cryptocurrency to become a sustainable alternative currency, it must be widely adopted. Renowned author, Dr Geoff Moore argues that there is a large chasm between ‘early adopters’ and the ‘early majority’. A product must cross this chasm in order to become self-sustainable.
There are two major impediments stopping cryptocurrency from crossing the chasmFirstly, cryptocurrency is extremely volatile. The share market’s volatility rate is approximately 20% p.a. compared to Bitcoin at just shy of 50% p.a. On average, Bitcoin’s daily volatility rate is 3% i.e. the price changes on average by 3%. Therefore, if you agree to buy some goods, when it comes to paying for them in 7 days’ time those, goods could end up costing you nearly 20% more!
For cryptocurrency to achieve wide adoption, its volatility rate needs to be around 4-5% p.a. – one tenth of what it currently is!
Secondly, one of cryptocurrency’s selling points is its anonymity. You can hold cryptocurrency without revealing anything about your identity. That makes it a perfect exchange for criminals to use. Governments around the world would have a lot to lose if cryptocurrency was widely used. It would be difficult to operate their tax surveillance activities and it would make policing criminal activity more difficult. If this occurred, governments would start regulating cryptocurrencies in the same way they regulate traditional currencies.
A market dominated by speculatorsYou must invest in assets that have application other than wealth accumulation. For example, investing in property in a location that is dominated by owner-occupiers is a wise strategy. If the investment market dries up for any reason, demand for property in that location will remain largely intact.

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Choosing the right accountant can make a world of difference. A proactive accountant will share tax-saving and wealth-building ideas, be available to answer questions during the year and ensure you never end up in the ATO’s ‘bad-books’.
Common complaintsThere are two common complaints about accountants.
Firstly, that they don’t provide proactive advice, including wealth building ideas. They are so involved in their day-to-day work that they don’t stop to ask themselves; “if I was in this client’s position, what would I do?” This is an incredibly valuable question to ask. Most clients want to feel confident that if they are missing any opportunities, that their accountant will point them out.
The second most common complaint is that they are not quick to turn work around. This includes replying to emails/phone calls and completing compliance work such as tax returns. Such delays can cost clients a lot in terms of missed opportunities, delayed decision making and make it difficult to implement financial plans.
What's involved in switching accountants?Switching accountants is actually a very simple and easy task.
Once you have agreed to appoint a new accountant as your tax agent, they will immediately write to your incumbent accountant for two reasons:1. To confirm that there are no ethical considerations that may prevent them from accepting you as a new client – this is referred to as an ‘ethical clearance letter’ and is common in the accounting industry; and2. Request the transfer of your documentation including most recent year’s tax returns, any financial statements, accounting system access, depreciation and cost base schedules, entity documentation such as Corporate Constitutions for companies, Trust Deeds and so on.
As a matter of professional courtesy, virtually all accountants respond to such requests promptly and often without contacting their (past) client. If you owe any outstanding fees, it is commonplace for an accountant to withhold their clearance letter until all fees are paid in full.
Apart from signing an engagement letter with your new accountant, there is nothing you need to do.
Do you have to tell the accountant you're leaving?The short answer is no. There is no obligation to have any contact with your incumbent accountant.
If you are self-employed or operate a small business, you may have a close relationship with your accountant and are in more regular contact with them. In this situation, it may be courteous that you inform them of your plans to move to a new accountant, before any ethical clearance letters are set out.
But there is certainly no obligation to do so, and very much depends on your relationship with them and the circumstances surrounding your departure.
What will my new accountant do after they are appointed?I can’t speak for other accountants but typically there are a few steps we take when a new client appoints us, namely:§ Update the ATO’s records so that it knows that we are your new tax agent and where to send future correspondence. It may be necessary to update other registrations also, such as ASIC if you have a company.§ Review past tax returns and schedules to identify any mistakes, omissions or planning matters. This is even more important if you have a trading business, as there are more matters to consider.§ Once we have completed a review, we will be in a position to set out your key milestones, which could include the date when we will undertake tax planning, when we will require your information to start preparing your next return and so on.
Does ch

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Your business structure is critical because it will dictate how much tax you pay, whether you will be able to build personal wealth effectively, if your assets are protected and your overall financial success. We see lots of costly mistakes. We discuss how to avoid these mistakes and structure your business to achieve personal success.

If the recent property price growth predictions become reality over the next couple of years, more homeowners may become ‘priced out’ of their desired location. What might be affordable today, could quickly become unaffordable, as prices can rise quickly.
Sometimes it’s not possible to buy your dream home in one fell swoop. But do not despair. A steppingstone strategy could be the solution.
Buying a dream home has always been a struggle, embrace itProperty has always seemed expensive. I bought my first property 23 years ago for $150,000 and it was a big deal. It was a stretch, financially. It was a dump that needed renovating.
Getting onto the property ladder and buying your dream home will take work. Some sacrifices. A little bit of hustling. But that has always been the case. Focus on the solutions, not the problems.
Focus on building your deposit/equityIf you are income-rich but asset poor, you need to build equity to extend your purchasing power. That equity could come in the form of cash savings/deposit or equity in an existing property.
If your income earning capacity is limited, then accumulating more equity reduces the amount you need to borrow and as such, you are closer to being able to buy your dream home.
Either way, your sole goal should be to build equity.
How to implement a steppingstone strategyA steppingstone strategy involves buying an owner-occupier property with the sole aim of accumulating as much equity as possible, as fast as possible. Then, selling that property and using the equity to upgrade to a superior property. And continuing to do that until you have attained your dream home.
There are three key steps to this strategy.
Step 1: Pick a location that has attractive short term growth prospectsBuying a property in a location that is popular and is enjoying rising property price momentum can do a lot of the heavy lifting for you.
The goal is to create equity as soon as possible. Therefore, it’s not as important to form a view about a given location’s long term growth prospects, unlike when buying a pure investment property. You just want to form a view about whether the price momentum will continue in the short term.
Typically, locations that are gentrifying will exhibit above average growth rates. Gentrifying suburbs tend to have similar themes such as a changing demographic, increased renovation activity, new infrastructure and/or amenities that enhance the community feel (liveability) of the location and so on.
Whilst it’s important to not buy at the peak of the market i.e. after prices have risen as much as they will, it is equally too risky to try to pick the next growth suburb, because you could be wrong. Essentially, you want recent evidence that the rising demand for the location is generating price growth. And that prices still have some future upside.
Step 2: Buy an older house with scope to manufacture equityOften, but not always, it is best to buy a house instead of a townhouse, villa unit or apartment. Firstly, houses tend to have proportionately more land value. Secondly, houses tend to offer more scope to improve their overall value e.g. renovation of bathrooms and kitchens, landscaping, adding a room/living area and so on. This is called manufacturing equity when the property’s value appreciates by more than the cost of the improvements made.
Older houses (e.g. built pre-1970’s) offer better opportunities than newer ones, because there tends to be greater scope to ma

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Exchange Traded Funds (or ETF’s) have become very popular, particularly over the past 5 years. In fact, the amounts invested in ETF’s has doubled over this time. Last year (2020), Australians invested over $20 billion in ETFs.
It is true that there are some advantages to investing in ETF’s. However, of course, not all ETF’s make good investments and there are some common pitfalls you must be aware of.
What is an ETF?An ETF is simply a managed fund that is owned in a company structure and that company is listed on the Australian Stock Exchange. The only assets the company holds are the underlying investments. For example, for an ASX200 ETF (such as A200 or IOZ), the company would own the top 200 listed stocks proportionally according to their market capitalisation (value).
You can invest in an ETF using an online share brokage account, such as Commsec.
What are the advantages of ETF’sPrior to ETF’s, the only way to invest in a managed (or index) fund was directly with the investment manager e.g. Vanguard.
This required you to fill out an application form each time you wanted to make a new investment. The managed fund would charge you a fee each time you invested and/or divested (this is called a buy/sell spread). And some of the lower cost ‘wholesale’ funds were only available to people if they invested a minimum of $500,000.
ETF’s provide a good solution as they allow you to invest in a wholesale managed fund for the cost of a share trade (which can be as low as $10) and no paperwork is required.
ETF’s and LIC’s are differentETF’s tend to utilise rules-based investment methodologies (commonly referred to as index funds). These products tend to have two common characteristics. Firstly, they are very low-cost. Investment management fees are typically below 0.40% p.a. (some as low as 0.04% p.a.) Secondly, they tend to be very well diversified. You can find a list of all ETF products here.
However, Listed Investment Companies (or LIC’s) are distinctly different as they tend to employ active funds management (remember that few active funds outperform their indexes in the long run). This means these funds can be more concentrated (less diversification) and tend to charge higher investment fees.
Beware that they are designed for retail investorsETF’s are mainly used by retail investors (DIY investors), but a growing number of financial advisors have started to use them. In the US, substantially more institutional investors (such as large super funds) use ETF’s, but this trend has now occurred in Australia. This creates a few notable consequences.
Firstly, ETF providers will promote products that align with ‘popular’ themes such as investing in technology. Popular investments attract more investors and the more money an ETF attracts, the more fees the ETF provider generates. However, we all know that what is popular doesn’t always make a sound investment. In fact, it is proven (empirical data) that investors that chase trends t

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It is generally an accepted investment principal that diversification can reduce your risk and improve investment returns. The common vernacular is, spread your eggs amongst various baskets. I would agree with this principle, so long as it doesn't result in deterioration of investment asset quality.
Sometimes property investors should not diversify. That's because the quality of your investments, will determine your future investment returns. You cannot expect to invest in average quality assets and expect to generate above average quality returns. If you're going to invest in property, you are much better off to buy one very high-quality property, than two average quality properties.
To be a successful investor, you must invest in the highest quality property that your budget allows.It is also imperative to recognise that the dollar value appreciation of your property is an important metric which indicates whether you will enjoy a comfortable retirement.
In retirement, we pay for living expenses in dollars, not percentagesThe value appreciation of property in dollar terms is an important metric. Whilst we can’t use capital growth to pay for living expenses, unless we sell the property, it still impacts our overall wealth. For example, if a retiree had $1,000,000 of super and wanted to spend $100,000 per year, they risk running out of super within 10 years (ignoring future investment earnings for simplicity). However, if at the same time, their property portfolio was appreciating by $200,000 per year, they are actually in a relatively strong financial position.
In 1991, 30 years ago, the median house price appreciated by around $10,000 per year – which is equivalent to $20,000 in today’s dollars (i.e., after adjusting for inflation). Since the average self-funded retiree spends circa $100,000 per year, this property appreciation ($20,000) is equivalent to 2.5 months of living expenses.
At the moment, the average median house price across Melbourne and Sydney is around $1,000,000. Assuming the median property appreciates by approximately 6% per annum (on average, over the long run), that equates to a dollar value rise of $60,000 (i.e., 6% of $1 million). That is equivalent to over 7 months of living expenses.
Annual property price appreciation in real dollar terms over the past 30 yearsThe chart below illustrates the historic change in median property price between 1991 and 2021, adjusted for inflation, that is, in today's dollars. The chart also includes a projection of how the median property price might appreciate over the next 30 years, assuming a growth rate of 6.50% p.a. and an inflation rate of 1.50% p.a.
This chart suggests that the median property value might be appreciating at a rate of over a $100,000 per year by around year 2030-2033 in today's dollars. And by 2045, the median property price may be appreciating by circa $200,000 in today's dollars – equivalent to two years of living expenses.
Putting aside liquidity considerations, this suggests that if you're at least 15 to 20 years away from retirement, that investing in one investment grade property could be sufficient to assist in funding your retirement.


What does this mean for investors?When it comes to investing in property, quality matters a lot more than quantity. The above chart suggests that owning one investment property (worth $1m or more) might be sufficient.
Some investors are obsessed with acquiring a multi-property portfolio. They express their investment goals in terms of the number of properties, rather than their financial performance. Having such a goal does not encourage you to focus

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One good financial decision will have positive consequences. But five good decisions in a row will be life changing. It will create a lot more than five times the positive outcomes than one good decision will. That’s because good decisions are a compounding asset.
Our lives are a sum total of the choices we have made - Wayne Dyer.When it comes to building wealth and fulfilling your lifestyles goals, true success comes when you master all six facets: (1) good cash flow management, (2) having a clear and efficient investment strategy, (3) invest in the right assets using the right methodologies, (4) optimising superannuation, (5) minimising tax and (6) protecting your assets for your family’s benefit.
We all know that to achieve a good level of health requires us to focus on optimising our diet, exercise regularly and get plenty of quality sleep. We also realise that we will not achieve our full potential (health wise) by just focusing on only one of these factors. Optimising your finances is the same – a holistic approach yields the best results, which takes several good decisions.
Here are some examples of some good financial decisions you can make.
(a) stop wasting your moneyMoney is wasted on things that don’t improve your standard of living. The key here is to make conscious financial decisions. If you aren’t conscious about your expenditure, your money will be wasted on things that you really don’t care about.
Holidays are a very good example of conscious expenditure. We tend to get a lot of happiness and satisfaction from holidays. They creates long-lasting memories. And if we stopped spending money on holidays, we’d really miss it.
However, buying takeaway coffee is a good example of unconscious expenditure. They are nice to have, but if you are able to make yourself a cup of coffee at work, you probably won’t miss it. These small expenses tend to add up to a surprising amount. Two takeaway coffees per day might end up costing you more than $10,000 per year! That is more than one investment property’s holding costs!
It is pretty simple to implement good cash flow practices, and it doesn’t have to be a painful process. The fact is that you won’t miss spending money in wasteful items. This blog last year walks you through a simple structure many of my clients use with great success.
(b) invest in the right assetsI believe investing is easy if you stick to sound fundamentals, only adopt evidence-based strategies and never watch the news or read newspapers. That is why I wrote Investopoly – to provide a set of rules, a framework, to guide people down the right path and avoid making financial mistakes.
What you invest in (the asset), and which methodology you chose to adopt, will determine your future returns. In a way, your destiny is determined when the initial decision is made . It only takes one decision to buy the right property or to seek advice. Once that decision is made, its merely a matter of waiting a decade or two for the results to materialise. These ‘decisions’ are incredibly important to get 100% right.
(c) ask for helpTwo points. Firstly, you don’t know what you don’t know. Secondly, experience is far more important than knowledge. You can fast track knowledge, but there are no shortcuts with experience. Experience tells you how and when to apply knowledge – you need both to avoid making mistakes.
Therefore, the question is, do you want to make your own mistakes or pay someone that

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A common question people ask is, “can property values continue to rise at the same rate which they have over the past 3 to 4 decades?” The short answer is no, they cannot. Mathematically, this is unlikely to occur as incomes are not rising at the same pace.
I came across the interesting graphic/visualisation (below) which sets out how property values have changed in real terms (excluding inflation) since 1970. The surprise for me was how much Canberra prices have risen (thanks, public servants and politicians!) and how attractive Brisbane prices appear.
https://public.flourish.studio/visualisation/4555913/
What has driven growth over the past 3 to 4 decades?In order to form a view with respect to future property growth, it is important to understand what has driven property values over the past few decades. There have been some events which are unlikely to be repeated. Below are some of the key factors, in no particular order.
Population growthAustralia’s population has been growing at a faster rate than other developed countries, mainly due to higher levels of overseas immigration. Population growth increases demand for housing, especially in capital cities as skilled migrants are attracted to job opportunities.
Increase in access to borrowingsAustralians are borrowing 2 to 3 times more than they were in the 1970s. Banking deregulation in the ’80s and ‘90s opened up more competition between lenders and reduced home loan margins i.e. mortgages became cheaper. The tables were turned, and suddenly potential borrowers were being approached (marketed to) by the banks, not the other way around.
Increase in household incomeIn a family unit, it is a lot more common for both spouses to work compared to fifty years ago. In fact, often it is necessary for both spouses to work in order to afford to live in their desired location. The transition from one to two household incomes has extended property purchasing power.
People are buying their first home later in lifeIn my experience, most first home buyers are in their late twenties to early thirties. This is partly because homes are relatively unaffordable for younger people in their early twenties.
But also, younger people tend to prefer to focus on their career thereby maximising their income earning capacity before they buy a home and/or have children. This puts them in a relatively stronger financial position compared to first home buyers 50 years ago.
Access to more informationThe internet has opened up a wealth of information. People are able to educate themselves about how to build wealth with property, including the advantages of borrowing to invest. This blog is an example of this. I write over 50,000 words a year, sharing almost 20 years of experience, which people can read for free. Such information was non-existent before the 2000s.
More, bigger, betterDrive around a newly developed residential suburb and you will notice that the homes are massive. More bedrooms, bigger living areas and smaller back yards. New home buyers are building larger homes with improved amenities and finishes compared to a few decades ago. These improvements contribute towards the increase in the value of property. The same is true when people renovate existing properties in established locations.
All of the above factors have contributed significantly to property price growth over the past 3 to 4 decades.
Which of these will reoccur over the next 20 plus years?Some of the above factors will persist, some won’

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Interest rates on savings accounts were over 5% p.a. in 2011… only 10 years ago. Today, you would be lucky to receive more than 0.5% p.a.! That means your savings won’t even keep pace with inflation, let alone provide you with any investment return.
As such, many investors are wondering what to do with their cash savings, other than depositing the money with a bank.
This blog discusses some alternatives to bank deposits. However, please do not make any financial decisions solely on the information contained here. It is general information only and does not consider your unique circumstances. It important that you receive personalised and independent financial advice before investing any monies.
I have listed each investment option in order of risk (the lowest risk options first).
Option 1: Deposit monies in an offset linked to a mortgageIf you have a variable rate mortgage, typically the best use of cash savings is to deposit the monies in a linked offset account. Given home loan interest rates range between 2% and 3.5% (depending on whether it’s a home or investment loan), this will save (or make) you a lot more interest compared to depositing your money in a savings account. Most importantly, it’s a risk-free return. That is, your return will always be equal to the mortgage’s interest rate – there is no risk.
Of course, you should offset non-tax-deductible (home loan) debt first. Once your home loan is fully offset/repaid, you should then offset investment debt.
Sometimes people worry that offsetting an investment loan will reduce their negative gearing tax benefits. However, firstly, negative gearing benefits are relatively small at current interest rates – investors aren’t saving huge amounts of tax anyway. Secondly, if you invest your cash savings elsewhere, you will have to pay tax on any returns (unless one spouse has a low/no income). Therefore, as both options have tax consequences, they net each-other out, and are therefore not relevant.
Option 2: Invest in government and treasury bondsA bond is a loan instrument where the investor is the lender, and the borrower is the issuer. The federal and state governments issue bonds to raise debt. You can invest in these bonds i.e. in essence you lend money to the government.
Most states have high credit ratings (AA or AAA), which means these bonds are extremely low risk. The federal government has maintained its AAA rating (the highest rating) despite significantly increasing its borrowings over the past year.
Australian government bond index funds are yielding (interest rate) in the range of 2.5% and 3% p.a., which is obviously a lot better than deposit rates.
International bonds typically provide lower income returns and you need to be mindful of foreign exchange rate fluctuations.
Option 3: Invest in Australian corporate bondsCorporate bonds are similar to government bonds. However, they are issued by companies, often large, listed companies. Corporate bond index funds only invest in investment-grade rated bonds, which means they are relatively low risk, albeit higher risk than government bonds.
Corporate bond index funds are currently yielding between 3% and 3.5% p.a. – sometimes more, depending on the type of fund and how it invests.
Option 4: Invest in hybrid securitiesHybrid securities are issued by the Australian banks. They are instruments that have both bond and share characteristics e.g. th

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The beginning of a new year is a great time to take stock and set personal and financial goals for the coming year. I wanted to share the process that I use personally. It has worked well for me and of course, I use the same approach when advising my clients too.
It’s particularly useful to undertake this exercise after you have had a break, which most of us do over the Christmas/New Year period. That way you should have enough emotional energy to think and reflect clearly. It’s not a good idea to review finances and set goals if you are tired and in need of rest.
This whole process shouldn’t take more than a couple of hours for most people. This small amount of time is perhaps the best investment you can make in any given year.
Step 1: Review what went well and not so well during 2020Mistakes tend to offer us the best learning opportunities – when everything goes exactly to plan, we typically learn very little. Therefore, the first step is to review everything that went wrong, or you could have done better last year. That could include not investing when you had the opportunity, not selling assets, wasteful spending and so on.
Procrastination or the inability to make a decision can be just as costly as making the wrong decision. The share market certainly taught us that last year. If you had invested in a world share market index fund in April or May 2020 (i.e. not the bottom of the market), the value of your investment would have increased by more than 20% to date (which equates to an annualised return of 34% p.a.).
Once you have identified any and all mistakes, ask yourself what you can do in the future to avoid repeating them. I like to ‘blame the system, not the person’. That is, don’t blame yourself. Instead, aim to systemise your financial decisions. Set rules that you must follow. As I have written about previously, it is challenging to remain unemotional when decisions involve your own money, so don’t be afraid to ask for help.
Step 2: Review existing investments and any unachieved goals from 2020The next step is to review all existing investments to ascertain whether any changes need to be made.
Have any investments under-performed, or do you need to take profit on investments that have done well? Do any investment properties require maintenance or are you unsatisfied with your property manager? Do you need to refinance or restructure your mortgages including fixing interest rates? Increase personal insurance? Update your wills? Consolidate superannuation accounts or review its investment performance? These are examples of some of the questions you must ask yourself.
Were there any tasks or goals that you set to achieve during 2020 that were not completed? If so, you’ll need to add these items onto your list for this year.
Step 3: Estimate your surplus investable cash flow for 2021The next step is to work out how much surplus cash flow you expect to have this year. Remember, the basic principle to successfully build wealth is always spend less than you earn and invest the difference. Or, put diffidently, invest a fixed amount as a priority and spend what’s left over.
I set out the most successful cash flow management banking structure in this blog last year. Almost all of my clients use this structure and have found it to be very successful and a painless way to eliminate any wasteful expenditure1. It also allows them to manage

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This podcast provides general information about finance, tax and credit. It doesn't take into account your specific objectives, financial situation or needs, so you need to assess whether it's relevant to your circumstances before acting on it. If you're not sure, speak to a licensed, trustworthy professional.