Following significant share market falls around the world in 2008, 2009 also started on a bleak note with global share markets falling around 10% in the first quarter. However, as a result of concerted efforts by governments across the globe, most markets bottomed in March. Since that time global credit markets have started to improve, while share markets have posted gains of around 50%, with the median balanced fund option returning a 10.07% one-year return as at the end of November 2009*.
*SuperRatings Fund Crediting Rate Survey, 30 November 2009.

What are diversified investors likely to have seen?
The following table shows the median returns for diversified investment funds compared with the same period for the Australian share market (the S&P/ASX 200 Accumulation Index).

Please note the below investment returns are not specific to your account. Your investment returns may differ from these median returns and in addition these median returns do not reflect withdrawals.

The period ended 31 December 2009 was the most recent data available at the time this table was prepared.

* Source: InTech Super Survey. Returns quoted are net of tax and ongoing fees.
# Source: Factset.

Past performance is not a reliable indicator of future performance.  The above median returns should be used as a guide only.

Why haven’t diversified funds shown the same recovery as share markets?
Diversified funds have a diversified mix of assets, so just as they did not fall as much as share markets in 2008, they have not risen as much as share markets in 2009.
For example, Aggressive funds include assets such as property, while Conservative funds include a greater allocation to defensive assets such as bonds.

Despite the recovery in share markets, some other asset classes have experienced significant setbacks over the past 12 months. For example  direct property returned around -8% and similarly, private equity and infrastructure returned around -10%.

Also, the appreciation of the Australian dollar has held back returns from international investments where the associated foreign currency exposure has been unhedged.

Markets continue to move and different assets may move in different directions over the same period, impacting the overall return of diversified funds.

What’s expected looking forward?
Shane Oliver, AMP Capital Chief Economist, says: 
“Looking forward, our view is that unlisted assets such as direct property, private equity and infrastructure - which are a component of many diversified funds - are close to their low point and some recovery is likely in 2010. Despite the experience of the past year, we believe that these assets substantially enhance the risk and return characteristics of diversified funds over long periods as they tend to outperform at different stages of the market cycle to listed assets such as shares and listed property.

We expect further gains in share markets in 2010 due to the combination of improving economic and profit growth, low inflation and relatively low interest rates. Australian shares are likely to continue to outperform global shares, reflecting their higher dividend yields and stronger growth prospects. Asian and emerging markets are also likely to perform strongly, though with some volatility in returns.”

For the latest market updates, including a monthly market update video featuring Shane Oliver, go to www.amp.com.au/volatility.

What you need to know
Investors should consider the relevant Product Disclosure Statement available from either AMP Capital Investors Limited (ABN 59 001 777 591) (AFSL 232497) or AMP Life (ABN 84 079 300 379) (AFSL 233671) for the relevant Fund before making any decision regarding a product. No company in the AMP Group guarantees the repayment of capital or the performance of a product or any particular rate of return. Past performance is not a reliable indicator of future performance. AMP Financial Planning Pty Limited, ABN 89 051 208 327, telephone 02 9968 2722, makes no representation or warranty as to the accuracy or completeness of any statement in this article. This article has been prepared for the purpose of providing general information, without taking account of any particular investor's objectives or financial situation. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor's objectives and financial situation.

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With a firm grip on her travel budget, Melanie Ball explores Australia for dollar-friendly holiday options.

A change is as good as a holiday, proverbial wisdom tells us - in one of those sayings that is as inaccurate as it is irritating. But escaping the everyday usually costs money, alas, and the global economic crisis is eating into that. So how lucky are we to live in a country flush with inexpensive holiday options.

Although petrol costing under a dollar a litre has almost certainly joined the ranks of the extinct, the great road trip, or at least a shortened version, lives on with campervan relocations. Rental companies frequently need vehicles moved between major cities, and a relocation deal from Alice Springs to Darwin might allow a week for the trip at a charge to you of just $5 a day.

These trips generally involve you paying for the petrol en route, but you'll often receive a refund up to an agreed amount when you deliver the vehicle to its destination. Further, the time and kilometres allowed you to complete the journey generally include a provision for side trips. The Alice to Darwin relocation I investigated allowed for 150 km more than the direct road route, ample for sizing up the Devils Marbles, downing a beer at Daly Waters pub and paddling Katherine Gorge on your way north.

Hefty excess kilometre charges aside, campervan relocation is cheaper than every form of outback transport except camels!

Prefer salty air and seaspray? Savour them on South Australia's Eyre Peninsula, a patchwork of farms, parks and towns bounded by the Great Australian Bight, Spencer Gulf and vast salt lakes.

A west coast drive takes you from Ceduna, and the Nullarbor Plain, to Point Labatt to see (take binoculars) and smell (no additional equipment necessary) Australia's largest breeding sea-lion colony. Dolphins surf the waves that roll through Venus Bay's narrow entrance, and closer wildlife encounters await in Baird Bay, where snorkellers go mask-to-whiskered-nose with playful juvenile sea-lions.

And then there are King George whiting to catch, Coffin Bay oysters to shuck, and bluefin tuna to hand feed.

For a complete break from driving, train from Sydney to the Blue Mountains and explore beyond the Three Sisters. Step off the often crowded sandstone escarpment onto some of Australia's best walks. Follow in coal and shale miners' footsteps to Ruined Castle for breath-taking views of Kings Tableland. Wander through the Valley of the Waters, where cascades tumble from mossy ledges on which fairies must surely dance in private.

Accommodation (all budgets) is often just a stroll from trail heads - as are art galleries, gift shops and boutiques, in case your passion for exercise wanes. Don't miss the Norman Lindsay Gallery in Faulconbridge (free for National Trust members) and afternoon tea in Katoomba's Art Deco Paragon Café (and chocolatier).

Chocolate makers call Tasmania home, too, but there are other reasons to cross Bass Strait and check into Hobart. Ludicrously cheap flights from Melbourne leave cash in hand for enjoying the island state's oysters, Atlantic salmon and ales.

With its spectacular harbour and 1270 m scenic lookout (Mount Wellington), Hobart is an ideal base for day trips to Port Arthur and Bruny Island, the city's adventure playground. Try to stretch your budget to a flight over the jagged Arthur Range and into the Tasmanian Wilderness World Heritage Area, otherwise accessible only on foot. You'll land at Melaleuca, where a hide allows you to spy on endangered orange-bellied parrots before you head to the local jetty to cruise beautiful Bathurst Harbour.

Back in Hobart, the ghosts of convict ships crowd Constitution Dock (free).

Convicts built the intimidating limestone prison overlooking Fremantle, Western Australia, and penal history flavours a holiday in this famous port town. So, too, do great maritime characters and stories, such as the Batavia. Wrecked off Western Australia in 1629, she is showcased in the excellent Maritime Museum along with exhibits ranging from other early wrecks to America's Cup-winning Australia II and the Ovens, a retired Oberon Class submarine.

It is a short train ride from Fremantle's café precinct and marina to Perth. There is a bike route up the Swan River, as well, and river cruises to the city. Catching a ferry in the opposite direction puts you among Sandgropers revelling in Rottnest Island's pristine beaches and turquoise waters - and fighting greedy seagulls for chips!

Pelicans are more frequent visitors to the Murray, and this once mighty river is still a route to a great Victorian escape, despite ongoing water problems.

Visit historic river towns, stopping to chat with a winemaker, publican, motel owner or farmer. Stand under waterfalls in an Upper Murray national park. Relive the steam era in Echuca or watch hot air balloons rise over a houseboat in Mildura. Or simply pitch a tent among riverside gums and spend a week reading or fishing or just kicking back in the company of rowdy corellas.

Another fabulous destination for kicking back is the Sunshine State, and relaxing doesn't come easier than on Fraser Island.

The world's largest sand island is the place to dip your toes in tea-coloured lakes and teeter on sandblows fringing deeper water; to look up at towering trees in shadow-filled forests and walk kilometres of ribbon-like beach; to watch brahminy kites wheel on wings of burnished copper.

With vehicular ferry passage from $80, resorts, cabins, private camp grounds and kilometres of beach camping (beware march flies in summer), Fraser is a treasure chest brimming with treats that cost next to nothing!

Money-saving tips

• Be flexible about when and where. Destinations are cheaper and less crowded outside holiday seasons - and off-peak weather is rarely as bad as you fear!
  Midweek flights generally cost less than weekend departures.
• Compare the cost of petrol and time at the wheel with flying and hiring a car.
• When buying airline tickets, look out for sales and promotions, such as Virgin Blue's Happy Hour and Jetstar's Friday Fare Frenzy. Compare domestic flights across airlines (except Tiger) at www.webjet.com.au. I recently booked Melbourne-Darwin tickets on Jetstar for the Monopoly-money price of $224 return!
• Choose budget accommodation for most of your holiday and splurge on the final nights. You will remember the adventure of the former and the comfort of the latter.
• Last-minute accommodation sites (e.g. www.wotif.com) offer great deals, but also check individual properties. Discounts for multi-night bookings are common.
• Cook as many meals yourself as you can; make dining out a treat.
• Contrast guided tours with do-it-yourself; the latter often give more freedom, the former can be better value and less hassle.
• National Trust membership can soon pay for itself if you visit a few properties.

As previously published in YOURLifeChoices magazine

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Before you know it the end of financial year will be upon us, so now is a great time to focus on some tips and strategies which may be valuable in assisting with your short-term tax, and long-term retirement plans. 

Salary sacrifice
Salary sacrifice into super offers an easy way to save on tax while boosting your super balance
                                              
What is salary sacrifice?
Simply put, salary sacrificing involves nominating a certain amount of your future pre-tax salary to go straight into your super.  Your reduced salary (that is, your salary minus the amount you salary sacrifice to super) becomes your assessable income for personal income tax purposes. However, since 1 July 2009 salary sacrifice may be used to work out entitlements for certain tax offset and government benefits.

What you need to consider
There are a number of factors you need to consider before you salary sacrifice.  Firstly, speak to your employer and find out if they allow salary sacrifice arrangements (and if there are any effects on other employment or superannuation benefits or your Super Guarantee contributions). If they do, then you’ll need to consider:

• How much you want to contribute from your salary. Usually you can nominate the amount as either a percentage or fixed dollar amount.
• Whether you want to sacrifice any of your future bonus, if you receive one, to super.
• Whether or not you would like to salary sacrifice any leave entitlements. Generally speaking, you can only salary sacrifice leave payments that you have note yet accrued or become entitled to.

As salary sacrifice contributions are taken to be concessional contributions, you also need to consider the concessional contributions cap.  For the 2009/10 financial year, the cap on concessional contributions is $25,000 for those under 50.  The transitional cap for those aged 50 and over is $50,000.

For more information about salary sacrifice, visit www.amp.com.au/salarysacrifice.

Government Co-contributions
Make a difference to your super by taking advantage of Government incentives

Will you earn under $61,920 pa in 2009/2010?
If you answered yes to the above, and you make personal after-tax contributions to your super, then you may be eligible to receive ‘co-contributions’ from the Government to help grow your super.

How does this work?
The government will contribute up to $1 for each $1 you contribute to your super (up to an annual maximum of $1,000).   If you meet the eligibility criteria, all you have to do is lodge your tax return for 2009/2010 and the ATO will arrange payment of your co-contribution.

Am I eligible for co-contributions and if so, how much can I receive?
To find out if you are eligible for co-contributions and how much you can receive, visit www.amp.com.au/cocontribution.

Spouse contributions
Build your super and save for retirement with your spouse using this tax-effective strategy

What are spouse contributions?
Basically, a spouse super contribution is where you invest money into your spouse’s superannuation account, rather than your own. 

When would I use spouse contributions as a super strategy?
This strategy is helpful if your partner has a low income or is not working.   If your partner’s income plus reportable employer superannuation contributions (generally speaking any salary sacrifice amounts) and reportable fringe benefits is $13,800 or less, you could receive up to a $540 tax offset on the first $3000 you contribute to their super account (from your after-tax income).

For more information on spouse contributions, including your eligibility for the tax offset and to see who qualifies as your spouse, visit www.amp.com.au/spouse.

'Bring forward' your super contributions
By boosting your super now, you could have extra tax-free money when you retire.

What is the ‘bring-forward’ option?
No tax is paid on non-concessional (after-tax) contributions in a financial year when the amount of these contributions are within that year (1 July through to 30 June) and fall below the non-concessional contributions cap. The non-concessional for 2009/2010 is $150,000 pa.  However under the Governments ‘bring forward’ rules, people aged under 65 can bring forward two years worth of non-concessional contributions - up to $450,000. 

Earnings on these contributions will be taxed at the favourable rate for superannuation funds of up to 15%.  Further, when taken as a super benefit, they are tax-free if you retire after age 60.

How does this grow my super?
The size of your final super benefit will depend on the performance of the super fund, but also on how much you invest into super.  This means you have the opportunity to build your wealth by investing into your super and benefiting from a favourable tax environment.

What happens when I retire?
When you retire, you have the choice of taking your super payout as an income stream, or lump sum.  Either way, if you take your super benefit on or after age 60, the money you receive will be completely tax-free!

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Teaser:
There's nothing like a Pav. Our classic Pavlova recipe is a winner!

• 1 tablespoon cornflour
• 6 eggwhites
• 1 teaspoon cream of tartar
• 1 1/3 cups caster sugar
• 1 teaspoon vanilla extract
• 1 teaspoon white vinegar
• 200ml pure cream
• 250g frozen raspberries, slightly mashed

• Preheat oven to 200°C. Draw a 24cm (diameter) circle on a sheet of baking paper. Place, pencil-side down, on a baking tray. Dust lightly with 1 teaspoon cornflour.
• Using an electric mixer, beat eggwhites and cream of tartar in a large bowl until soft peaks form. Add sugar, 1 tablespoon at a time, beating constantly until thick and glossy. Add remaining 3 teaspoons cornflour with the last tablespoon of sugar. Fold through vanilla and vinegar.
• Spoon meringue onto baking paper. Shape into a circle, using the pencil mark as a guide, with a slightly higher edge and a low centre. Reduce oven to 100°C. Bake for 1 1/4 to 1 1/2 hours or until dry and crisp. Turn off oven and open oven door. Cool completely in oven (pavlova may sink during cooling).
• Slide pavlova onto a serving plate. Spread with cream and top with raspberries. Serve.

Source: www.taste.com

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