In the news we hear about federal budget cuts and now even the proposal of a 1% deficit levy for people making over $80,000. It makes you wonder if it is worth trying to make a better living if about half of it is going to the government anyway.
Despite the news, we do have a couple of positives in our favour. The government doesn’t want to derail the economy’s growth just as it is picking up some steam, so interest rates should stay low for a while. Some estimates are that there may not be any rate hikes well into 2015.
Also, international markets like the U.S. are improving, which will help keep finance and capital markets flowing. We are seeing more mergers and acquisitions activity even domestically from overseas institutional investors and funds.
The growth may not be at breath-taking pace, but the trend is upwards. Until that changes, there is money to be made.
I would look for more earnings growth from Macquarie Group Ltd (ASX: MQG). Both here and abroad, its capital market and corporate activity business is already seeing definite growth and its fund management division should benefit from advancing equities markets.
Its share price just went above $60 for the first time since May 2008. It has a PE of 16.3 and the dividend is 4.3%.
Magellan Financial Group Ltd (ASX: MFG), a fund management business that specialises in international equities and investments, raised its funds under management (FUM) by $506 million to $22.9 billion. Apart from the investment gains revenue, it also attracts management fees, so as FUM increases, the fees rise as well.
The stock hit a $14.38 all-time high in early April, but has pulled back to $12.42 now. It does have a high 31 PE, so its previous high growth rate would have to continue to justify the premium now required.
The best way to prepare for your future is to earn as much as you can, which also includes earnings from investing. If it costs a little more, then that is the price of financial freedom.
The same politicians who are trying to balance the budget with our extra income, are also overseeing your retirement superannuation as well, so take the responsibility of how you invest your savings now as much as possible.