Investment Trends – Local / Overseas

Failing to achieve goals? Try this out

Lifestyle Focus on identifying cues that will trigger the desired action, writes Amantha Imber.

Can you recall the last time you set a goal?

Maybe it was a New Year’s resolution, a plan to shed some kilos or to escape the hypnotic grip of social media.

If you’re a member of the mere mortal club like I am, it’s quite likely that you never achieved all those goals, despite the best of intentions.

A meta-analysis conducted by Thomas Webb and Paschal Sheeran from the University of Manchester analysed 47 studies on the relationship between goal intention and goal achievement.

They found a significant gap between intending to do something and actually achieving it.

A big reason for this gap is it can be hard to start or find the right opportunity to act.

When hitting a goal involves giving up something you love, such as the daily block of chocolate during your 3pm work slump, and replacing it with something less desirable – and let’s face it, most food is less desirable than chocolate – motivation can be hard to find.

The best of intentions often ends up with us failing to change our behaviour.

Implementation intentions

Psychologists have found that one of the most effective ways to bridge the gap between intentions and behaviour is by having a plan, or an ‘‘implementation intention’’.

Implementation intentions connect opportunities to act with a particular behavioural or cognitive response. In other words, an action is linked to a situation, so the desired behaviour becomes natural or automatic.

A goal is simply ‘I will achieve X’, whereas an implementation intention identifies the context or situation that will trigger the desired behaviour.

Implementation intentions are typically expressed as ‘‘if-then’’ statements. Some examples:

If I am feeling tempted to skip my workout, I will remind myself of my fitness goals and do the workout.

If I am struggling to finish a report and want to procrastinate by checking social media, I will set a timer for 10 minutes and push through on the report until the timer goes off.

If I come home from work and feel tempted to snack on junk food, I will eat a piece of fruit instead.

If I find myself sitting for more than an hour, I will stand up and take a short walk.

Identifying cues to act

When thinking about the first part of the statement, you need to specify an internal or an external cue.

An internal cue is a sensation or thought, such as feeling stressed. An external cue refers to something happening in your environment, such as opening the pantry and spying chips to snack on, or opening Instagram on your phone.

Cues can be related to good opportunities to act, such as when you are in an environment where it becomes easy to perform the desired behaviour. Alternatively, cues can focus on specific obstacles, such as a couch and a television.

To optimise the effectiveness of your implementation intention, research has found it will be more likely to work if you are as specific as possible with your cue and behaviour. Specify ‘‘eating an apple’’ as opposed to ‘‘eating something healthy’’.

Make sure you will actually encounter the cue. While this may sound obvious, don’t use the cue ‘‘when I get home from work’’ if you work from home most of the week.

And ensure the plan is viable. If your cue is ‘‘arriving home’’ and the behaviour is ‘‘eating fruit’’, make sure you have fruit in the house. Again, this may sound obvious, but ‘‘obvious’’ does not always equal ‘‘applied’’.

Making implementation

intentions work

Write down the behaviour you want to change. For example, you might want to stop sleeping in on the weekend so you can wake up at the same time every morning.

Think about a cue that would present a good opportunity to engage in the behaviour.

Your alarm going off is an ideal cue to change behaviour by getting up immediately rather than reaching for the phone.

Craft your implementation intention as an if-then statement: If my alarm goes off in the morning, I will remind myself of my goal to improve my sleep and get out of bed immediately and go for a walk in the morning sunlight.

Pin your implementation plan somewhere prominent in your home – so you are constantly reminded of it. Even better, pin up the plan where your cue occurs, such as the kitchen, the office, the bedroom.AFR

This article is an edited extract from the book The Health Habit.

Failing to achieve goals? Try this out2024-04-16T16:52:13+10:00

Nobel winner’s tips for investors

Behavioural economics Daniel Kahneman transformed our thinking, writes Tim Mackay.

Despite winning a Nobel Prize in economics, Daniel Kahneman was an unlikely economist. For one, he never undertook a single course in economics. For another, he was a psychologist. His body of research is vast and multifaceted, but at its core it challenged conventional wisdom on how we make investing decisions.

With Amos Tversky, Kahneman was the pioneer of behavioural economics and is well known for debunking the idea that people always make rational decisions in their own self-interest.

Kahneman died on March 27 at the age of 90 after transforming our understanding of investing. His research shows the intersection of personal finance and psychology is far more ‘‘personal’’ than it is financial. Here are some of his critical discoveries for investors.

Kahneman’s greatest insight was that investors make mistakes, which sounds obvious. But his groundbreaking realisation was that our mistakes are the norm, not the exception.

We rush to judgment using mental shortcuts (or heuristics), leading to persistent biases in our decisions. Even when evidence suggests we ought to rethink, we often cling to our initial judgments.

None of us like being wrong. But once you accept mistakes are inevitable, you can seek to understand them and become a better investor.

Kahneman found we hate losing money far more than we enjoy gaining it. Losing $100 hurts twice as much as the pleasure from gaining $100. It has been shown golfers play better when putting for par (fearing the ‘‘loss’’ of a bogie) than when putting for the ‘‘gain’’ of a birdie.

As humans evolved, threats were always far more consequential than opportunities. If you spotted a deer, it could feed you for a few days. But if you spotted a lion, it could end everything.

Our objective as investors is to gain returns, but our behaviour is driven more by fear of loss. We tend to prematurely sell assets that are gaining value and retain assets that are losing money. We desperately want our losers to win. One solution is to accept you will win a few and lose a few, but it’s the overall portfolio performance that really matters.

Avoid looking at your portfolio too often. A ‘‘loss’’ each day for a week could still be a ‘‘gain’’ over a month. When you look more often, you trade more, and you lose more money.

A study revealed 74 per cent of professional fund managers think they are above average. The other 26 per cent thought they were average. Mathematically, this is impossible – half must be below average.

Kahneman believed this was our key bias. ‘‘What would I eliminate if I had a magic wand? Overconfidence,’’ he said.

The vast array of financial information available online creates the illusion of understanding. This leads to excessive trading, timing the market, under-diversification and risky investments.

When we research investments, we typically seek out and value more highly any information that supports our existing view. And we downplay information that calls it into doubt. .

Seek objective feedback, diverse and contrary opinions and stick to an objective re-balancing plan.

Kahneman and Tversky provided important insights into ‘‘anchoring bias’’ and the ‘‘endowment effect’’.

Anchoring bias describes the fact that investors rely too heavily on the initial opinion or piece of information they are given on any topic. Imagine you were told a widget sells for between $85 and $100 but is available for $75. You might view this as a good deal.

However, if you were simply told a widget costs $75, you’d be far more likely to ask: what is a widget? And you’d question its true value. The deliberate ‘‘anchor’’ placed first in the information you are given distorts your analysis and is a common pitfall in financial decision-making.

The endowment effect is a term coined by Richard Thaler, and in a 1991 study, Kahneman and colleagues proposed that it occurs, in part, due to loss aversion. When we own something – such as a BHP share – we give it more value than it might objectively hold. This leads to a paradox where we are more likely to keep a BHP share we own rather than acquiring one we don’t, despite the result being the same in both scenarios – ownership of the share.

This cognitive bias skews our perception, often preventing us from selling assets when it might be prudent to do so, as we overestimate their worth due to personal ownership. SI

Tim Mackay is an independent financial adviser at Quantum Financial.

Nobel winner’s tips for investors2024-04-16T16:50:42+10:00

RBA change is coming, like it or not

More people, more input, more cooks in the kitchen. That’s ultimately the price the Reserve Bank of Australia will pay for a couple of years of bad or miscalculated calls, made in response to the pandemic.

Ironically, the review was conceived in the pre-COVID days when the RBA was criticised because inflation was running below its 2 to 3 per cent target range. All the attention is on what has happened since.

When money was flooding into the financial system and the economy, it is now clear the RBA board was too slow to apply the handbrake. The result is the highest level of inflation since the 1990s and an unprecedented 10 straight rate rises that were never going to be popular with ordinary Australians or politicians. No one seems to care that the unemployment rate is around its lowest level in nearly 50 years.

Right or wrong RBA governor Philip Lowe wears the blame. He will be all over the newspapers and nightly television news bulletins, even though markets (equities, bonds, currency) barely blinked. Mr Market saw the review coming, and now says the changes are some way off.

From the market’s perspective, next month’s budget is more material. Treasurer Jim Chalmers needs to set up the books for the next few years, which means finding more money. The economy is finely poised: it would be tempting to throw money around to ease cost of living pressures, although money’s tight and the inflation doesn’t need stoking.

In the meantime, old-head RBA watchers said it was a significant day. The fact that the central bank, which has such a great impact on Australians’ daily life, was subject to such scrutiny made it a historic day.

Lowe and the RBA will be hauled over the coals for what happened a few years ago, even though it was just as much the government stoking the fire that continues to burn today. The critics argue he should be accountable for the combination of low rates, forward guidance, yield curve control, quantitative easing and the term funding facility, which combined to whipsaw the economy and may yet cause a recession.

Of course, Lowe’s monetary policy is just one tool.

Once the commotion passes, we should all still be worried about the rising cost of rent and energy and how both can be addressed. The review doesn’t change that.

The review prompted plenty of thinking about the RBA, its corporate governance, board composition and decision-making. It recognised that in more normal times, the RBA had done well to keep inflation around the midpoint of its 2 to 3 per cent range for the past 30 years.

However, it is the past few years, a wartime for central bankers when no one escaped with a goldilocks path out the other side, that will now shape the direction of Australia’s monetary policy system.

What’s the answer to it all? Get more people involved in the decision-making. A specialist monetary policy board, fewer board meetings and more outsiders sitting around the table.

Reading between the lines, there seemed to be concern about how insular the RBA either is, or has become. Lowe is a perfect example; he’s got a great temperament for the governor’s job, is clearly smart and well regarded by colleagues and peers globally, but he is an RBA lifer and ingrained in current-day practice.

The creation of a new nine-person Monetary Policy Board, widely tipped by pundits, is about getting more rigorous thinking into rates decisions.

The nine people would include the RBA governor, deputy governor, Treasury secretary and six outsiders. The review recommends that ‘‘external members should be able to make a significant contribution to monetary policy setting through expertise in areas such as open economy macroeconomics, the financial system, labour markets, or the supply side of the economy, and in the context of decision-making under uncertainty’’.

So, this specific rate-setting board should mean more challenge and debate to the house view, which appears to have become more entrenched. At the same time the review calls for RBA’s operatives to spend more time with board members, making it a bit of an each-way bet but a good use of what is a big and expensive research team. (The need to spare a day a week or so in the RBA’s offices surely tilts the external board positions towards academics.)

The undertones were that the board wasn’t functioning properly, either because it didn’t have the right people or the right information. Lowe defended his board at a press conference yesterday, saying discussion around the boardroom table was robust and not dominated by himself.

It’s all well and good to have more people in the room on rates decision day, but it does not mean the board will function more efficiently or come to better decisions.

But big boards do not necessarily mean better outcomes. Corporate Australia is littered with poor boards and ‘‘jobs for the directors club’’ type attitudes that ruin what can be otherwise good businesses.

Often the bigger the board, the more constipated the decision-making process. The other scourge is chairmen roping in old mates and colleagues from other boards.

Ultimately, whether a separate and bigger Monetary Policy Board works will depend on who is on it. It was a logical and welcomed decision to create the separate board, and clear rate-setters of the governance-type matters that tend to dominate board meetings.

The review recommended a transparent appointment process, starting with advertised expressions of interest. External members would be appointed for five years, and up to another year depending on the circumstances.

There would also be fewer board meetings; eight not 11. And the governor would have to front the press following each meeting to explain the board’s decision, with more emphasis on the expected path of inflation and the labour market. That shouldn’t prove too onerous. External board members would also be required to make one public address each year.

The idea of more communication is conceptually good, although post-meeting press conferences can be a double-edged sword. We’ve seen Federal Reserve chairman Jay Powell mix his messages in a live setting, which can leave the market with more questions than answers.

Fewer meetings mean more time between rates decisions and arguably more punting and reading the crystal ball for fixed income investors. There could be more focus on monthly/quarterly economic data, to fill the information void between meetings.

Market economists liked that there could be more briefings, as it should (in theory) help them with their forecasts. They also probably like that there would be an unattributed published vote after each policy decision.

Other parts of the review said RBA should work more closely with the government/ Treasury, although it remains to be seen how. The review said fiscal and monetary policy should be set separately, however the RBA and Treasury needed to ‘‘have a good understanding of the intentions of the other and informs better policy choices’’. The two institutions are already close, but the review said their co-operation should include increased information sharing on risks, scenarios and policy constraints, and some joint scenario analysis.

Lowe was gracious at his press conference, although it was clear he did not love all the recommendations. For example, he bristled at any notion rates decisions were his alone and thinks it’s important to be careful with the number of public messages out of the RBA to ensure consistency and stability.

Lowe said he would leave his reappointment to the RBA top job in the Treasurer’s hands. He said he would be happy to go around for another term if asked. If not, he said he would find another way to contribute to society.

The fact that the RBA was subject to a 294-page review and there were 51 recommendations suggests change is on the cards.

Next week’s CPI reading could be material to the situation. Economists are tipping a number just shy of 7 per cent.

For all the focus on Lowe, in the near term the real attention should be on Chalmers and the budget. That’s the real showstopper for the economy. 

RBA change is coming, like it or not2023-04-24T16:53:10+10:00

Financial Planning Message – December 2022

As 2022 draws to a close we are reminded of the recent period of intense volatility in capital markets and the reality that a global recession is likely next year.


Markets are pricing in a lower probability of a recession in Australia.


This in turn will depress corporate earnings and valuations across all asset classes and significantly increase default rates among high-risk borrowers.


The correction to valuations is likely to be more severe during this economic cycle due to valuations starting from elevated levels compared to previous corrections.


We are also yet to experience a high number of fixed loans move from fixed interest rates of sub 2% to levels of 5%+ prevailing rates, something in the order of $500bn are due to mature in mid to late 2023.


This will no doubt impact the already depressed property market in Australia.


All the major banks and APRA are keeping a close eye on this development as we progress into 2023.


As inflationary pressures persist ( highest in 40 years ), geopolitical tensions and tight labour supply, the  central banks are forced to aggressively press on with higher interest rates and keep for much longer.


The RBA has so far moved the cash rate from .1% in March 2022 to now 3.1%, markets are now pricing in another two .25% increases in early 2023 before a potential pause to evaluate the impact on inflation.


The Federal Reserve was pricing in a rate increase of just 1% in December 2021, it is remarkable that their view now is that it is likely to peak at approximately 5.25%.


Consequently, 2023 is poised to exert added stress to highly leveraged borrowers, specifically those that have acquired property / equities in 2021 / 2022, are now in nil or negative equity positions.


It is worth noting that during this business cycle, we have had an explosion of companies that have become addicted to cheap debt, on the other hand, these same companies are not generating sufficient cashflow to support increased interest payments.


Clearly, there will be consolidation particularly in property related businesses in 2023.


There are no doubt significant headwinds for Australian households and the economy in general as we enter 2023.


Accordingly, extreme caution and sound strategies need to be implemented for the year ahead, including but not limited to :-

  • Be clear on what and who matters given the many conflicting sources of information and ‘investment opportunities’ across the media.
  • Understand your portfolio and position appropriately taking into account your forward plans and risk / return / management costs.
  • Review cashflows and eliminate unnecessary lifestyle costs in light of higher interest rates in 2023.
  • Let’s not forget managing your tax position, this is always relevant be it during your working life, in retirement ( with respect to investments) or as part of your estate plan.
  • Focus on what can be controlled / influenced as opposed to factors over which we have no control or influence.
  • Make incremental ‘dollar cost savings’ as opposed to taking a significant position when investing.
  • Diversification and history are our best friends, reflect and actively rebalance asset allocations.
  • Consider Dividend Reinvestment Plan ( DRP) in light of the attractive valuations.
  • Confirm borrowing / refinancing options well before due dates and explore potential savings across relevant lenders – competition appears to be intensifying across the major lenders.
  • Insurance is always important, however potentially critical during extreme business cycles as are likely to unfold in 2023. It is not desirable to execute forced sales at depressed values.


In closing, we would like to take this opportunity and thank you for placing trust in AMCO since inception 26 years ago and making our Integrated Wealth Management practice what it is today.


We are aware of the challenges you are facing during these uncertain times and are there to advise and navigate all matters with professional care and promptness.


It is vital that fundamental mistakes are prevented during these critical periods, hence the need for sound advice.


From the team at AMCO, we wish you and your loved ones good health, peace of mind and prosperity in the year ahead.


Merry Christmas.



Danny D. Mazevski 

Chartered Tax & Financial Adviser


Financial Planning Message – December 20222022-12-22T08:01:23+11:00

Taxing homes would fill gap: OECD

Australia’s public purse missed out on $64 billion last year in tax revenue foregone due to the capital gains tax exemption on the principal place of residence, a tax break that entrenched intergenerational and geographic inequality, a new OECD report on housing and taxation says.

Capital gains tax exemptions, which give more benefit to people who have held them for a long time and to owners of properties in sought-after locations, should be capped or at least balanced in part by ‘‘recurrent’’ taxes such as a broad-based land tax, says the

Housing Taxation in OECD Countries


Australia is one of 20 advanced economies in the OECD grouping that allow full and unconditional exemption from capital gains tax on the family home. Even in OECD countries that tax capital gains on primary residences, nine allow full exemptions and another five allow favourable tax treatment.

In the face of a popular tax incentive, the notion to drop it is bold. It goes further than the now-dropped policy of the Labor Party when it was in opposition to end the 50 per cent capital gains tax exemption for investors in property and other assets.

But while most leaders would not go that far, it could also have far-reaching consequences for housing by raising prices further, warned independent economist Saul Eslake.

‘‘It would be a form of political suicide subject to one point,’’ said Mr Eslake, a critic of Australia’s tax incentives that encourage investment in residential property and drive up the price of housing.

‘‘You would then need to allow mortgage interest as a deduction, an expense of earning that income.’’

This would give people even more cash to put into housing purchases, Mr Eslake said.

‘‘It’s an incentive to borrow more,’’ he said. ‘‘That’s why people do negative gearing – imagine being able to do it on your own house.’’

When it comes to residential property, Australia is just above the OECD average of 68 per cent, with 68.5 per cent of household wealth tied up in the owner-occupied and ‘‘secondary real estate’’ investment property, holiday homes and farmland.

However, it is second only to Luxembourg for average housing wealth in both types.

The OECD argues in favour of removing or capping mortgage interest relief for owner-occupied housing and says capital gains on secondary residential property – or investment properties – should be taxed.

But the Paris-based organisation says capping CGT exemptions for primary residences has the potential to reduce distortions and improve equality while also raising revenue, especially at a time of falling home ownership among younger people.

‘‘Capital gains tax exemptions for the main residence reinforce intergenerational and geographical inequality, given that gains have been concentrated among older generations and specific geographical areas,’’ the report says.

‘‘Older households are characterised by high homeownership rates and housing wealth and have enjoyed significant growth in property prices.’’

The unprecedented gains in residential property values – which have outstripped inflation and wage growth – over the past three decades were due to historically low levels of interest rates and unlikely to be repeated, meaning future home owners will not reap the same benefit, it says.

‘‘Homeownership rates are falling among younger generations, in part due to property value increases that have made it increasingly difficult to access the housing market,’’ the report says.

‘‘Even if younger households are able to access the housing market, they may not experience the large gains of previous generations. Many countries have also witnessed stark differences in the regional distribution of capital gains, with households in large metropolitan areas benefiting from the most significant property price growth on already highly valued property.’’

The report argues in favour of broad-based land taxes on real estate and the elimination of transaction-based taxes, such as stamp duty, saying it would increase efficiency in the housing market.

Tax incentives for energy-efficient housing renovations could also be better targeted to ensure that they reach low-income households, the report also says.

‘‘This could contribute to greater emissions reductions and enhance the equity of tax incentive schemes,’’ it says.

Taxing homes would fill gap: OECD2022-07-25T13:03:17+10:00