Majella Newsletter

Merry Christmas

From the team at Majella Wealth, we would like to wish you a very Merry Christmas and Happy New Year!

We hope that you enjoy the Christmas period with family and those you love as we will be doing. For the 5 children across the McCreery and Faddy households, Santa’s arrival is eagerly anticipated!

We would also like to extend a warm welcome to all the clients who have recently joined us. It has been a period of intense scrutiny for financial advisers this year and we are very grateful to our clients for their ongoing support and the faith they show in us by referring clients to us.

Our office will be closed from Christmas Eve until 4 January, but as always, Lisa and Jo are available to talk to you about any urgent matters. Feel free to call us on our mobile phones.

Market update

2009 has been quite an exciting year and for many investors, a much happier one than 2008. It’s not every year that you can earn 28% from the Australian Share market or 39% from your Asian share manager. Unfortunately it usually takes a return like last year’s -43% on the ASX All Ordinaries to make it happen.

While we hope to bid farewell to this roller coaster ride-like period and welcome in a period of growth as economies around the world continue to recover, it is important to remember that another share market crash will one day happen again. While the size of 2008/9 crash was abnormally large, the share market does typically have regular short periods of negative returns. However, for those who stay invested, history shows that the longer term return is usually worth the wait.

In much more moderate moves, we recently had a correction in most share markets, with the ASX All Ords falling 7% from mid October to early November. It has since risen again and is now only 3%off its mid October level.

An indicator that the RBA believes that the worst is behind us, it began tightening interest rates in early October, when it raised the official cash rate from a 49-year low of 3% to 3.25%. The cash rate now stands at 3.75% and is expected to rise next year, potentially by another 1%.

The outlook

We believe the long term outlook for the Australian and select global share markets are positive. We remain cautious about the companies dependent on the US economy - while economic growth and growth in corporate profits has turned positive in the US, unemployment is above 10% and the budget deficit is unsustainably high.

As we have quoted to many of you before, the Australian market still has to increase by 46% to get back to its November 2007 high. If the market takes a full 5 years to recover, a broad investment in the Australian share market will deliver a 9%pa return plus dividends over the next four and a half years.

In the short term, markets are driven more by investor sentiment and are therefore a lot less predictable. However, market commentators are always prepared to make a prediction and many are currently predicting the ASX All Ords at 5600 by December next year. That’s a 19% rise. See Olivers Insights.

Superannuation changes

Tax deductible contributions to superannuation (such as SGC, salary sacrifice and personal tax deductible (“concessional”) contributions for the self employed) have been reduced to $25,000 pa for those under 50 and $50,000 for those over 50 (until June 2012 at which point the limit reverts to $25,000 for all).

For many, this reduces a significant tax deduction and will increase your tax liability this year. We will work with each of you prior to June to assess your tax position and whether it can be improved.

Contributions that are not tax deductible (“non concessional”) are still $150,000 pa (or $450,000 over 3 years).

The Henry Tax Review is due in January and is likely to have implications for many. We will keep you abreast of the changes and how they affect you.

Our Services

Our services to clients may include just one or all of the following areas:

In offering a complete financial service, we also provide strategic advice on taxation planning, loans (property and investment) and estate planning. While we do not directly provide accounting, mortgage broking or legal services, we can refer you to professional providers in each of these groups.

Investment Returns Update

Sector returns to 30 November 2009
	3 mths	1 year	3 Yrs, pa	5 Yrs,pa
Australian shares	6%	33%	-1%	8%
Global shares ($A hedged)	4%	23%	-7%	6%
Emerging markets (local currency)	5%	32%	0%	12%
Australian listed property	1%	-5%	-22%	-7%
Global listed property ($A hedged)	6%	36%	-17%	-
Australian Government bonds	2%	3%	7%	6%
Cash (Bank Bill Index)	1%	4%	6%	6%

This newsletter and previous issues can be read on our web site.

Note: The information provided in this document is general advice and may not be appropriate for your specific needs. Please speak to an adviser before acting on any of this information.

Lisa Faddy 0402 042 962
Joanna McCreery 0414 234 932
Office 02 8086 2462

Or via our web site: www.majellawealth.com.au