Her analysis includes:

• the advantages of debt over shares
• the impact of interest rates on debt, and
• debt strategy in uncertain times.

View the Natalie Comino video here.

Have you any idea when the bounce may come?

The short answer is that no-one knows. What we can say is that share market recoveries tend to happen before economic recoveries. In other words, waiting for better economic news as a sign of better times for the share market could mean you miss the bounce when it happens.

What will recover quicker the Australian share market or the international share market?

In this kind of environment, the local market is likely to take its lead from offshore movements. That’s not to say we cannot recover without a lead from offshore, it’s just that you would not want to bank on it.

How do we know when Australia enters a recession?

A recession is popularly defined as two consecutive quarters of falling Gross Domestic Product or GDP. However in my opinion, that definition is too simplistic. A better definition of a recession is a sustained decline in output and employment across a majority of industries in the economy. To make that call, we need to look at a range of indicators, including employment, retail sales and manufacturing output.

The Melbourne Institute of Applied Economic and Social Research (within the University of Melbourne) identify the start and end of Australia’s recessions using a broad range of indicators, as detailed on their website.

What impetus or catalyst do you foresee that will start the move out of recession?

If an Australian recession occurs this year, which is a real possibility, then the best ways to summarise the catalysts for recovery would be in terms of policy and confidence. Over time, expansionary policy settings (lower interest rates, higher government spending and/or lower taxes) do tend to work. They don’t work immediately, but they do work. Confidence is another key ingredient. While lower levels of confidence do not necessarily signal a recession, and higher confidence does not necessarily mean a recovery, if consumers and businesses become confident that the future will be brighter, this can and does have an impact on their spending decisions.

In the case of a US recession, the answer is largely the same, except for one important factor. Lower interest rates only work effectively if banks and other financial institutions are willing and able to extend credit. For now, that is not happening in the US. But eventually it will.

General Advice Warning: These comments contain general information and may constitute general advice. They do not take into account any person’s particular investment objectives, financial situation or individual needs. They should not be relied upon as a substitute for financial or other specialist advice.

Before making any decisions on the basis of these comments, you should firstly, consider the appropriateness of its content having regard to your particular investment objectives, financial situation or individual needs and secondly consider the relevant Product Disclosure Document.

Opinions expressed constitute our judgement at the time of issue and are subject to change.

A number of commentators suggest people previously considering retiring shortly should remain working now for a number of years – does this make sense when taking into account how long most people will be retired for, and how share markets should perform over the long term?

If the sharemarket performs exceptionally well, then any reduction in your account balance could be restored without needing to stay in the workforce and save more. However, no one can predict when the sharemarket will rebound and how strong its performance will be. If, therefore, you have the opportunity to continue working and save more from your income, this could be a prudent strategy. This could be reviewed depending on future market performance.

At age 55 is there any tax payable on the non-preserved amount of your super?

Prior to age 60, benefits received from a taxed super fund are potentially taxable. The actual tax payable will depend on a number of factors:

• the form in which the benefits are received (eg: lump sum or pension);
• the age the benefits are received;
• the components for tax purposes that you withdraw, and
• the amount withdrawn.

As a general rule, if you withdraw an amount as a lump sum between age 55 and 59, the taxable component above the first $145,000 will be taxed at 16.5%.

To find out whether you should withdraw some of your super and the amount of tax you’ll pay, you should speak to a financial adviser.

My next birthday is 66 and I am presently working overseas. Am I eligible to withdraw tax free the full balance of super kept with MLC? I have been with MLC for 12 years. Do you think it is a wise move to take now?

Given your age, you are eligible to withdraw the full balance of your super tax-free. However, we recommend you seek financial advice before doing so. This is because investment earnings in super are concessionally taxed, whereas if you cash out your super and invest elsewhere, your earnings are potentially taxable at a higher rate.

Furthermore, it may not be possible to get the money back into the concessionally-taxed super environment if you decide you want to do this at a later date. To be eligible to make super contributions at age 65 or over (up to age 75), you need to have worked at least 40 hours over a consecutive 30-day period during the financial year. You could also be constrained by certain contribution caps when getting money back into super.

I am 57 years old and still working full time, can I get my money from my superannuation now? If not the full amount (I have around $10 000.00) maybe part of that money? Could this be available at the moment?

You’ll generally not be able to withdraw your super as a lump sum payment until you permanently retire, reach age 60 and leave your employer, or reach age 65. You could however use your super to start what is called a transition to retirement pension. From this you could draw a maximum of 10% of your account balance each year. You should speak to a financial adviser to find out what’s the best strategy for you.

You keep saying to remain in the market, but you or nobody knows when it will start to return. I am receiving 4% income from my allocated. If I take my money out and invest in a bank and get about 5.5%, after tax I would get a return of the same amount and my investment would not go down as it is at the moment. Would this be good strategy to preserve my balance while the market is still falling?

You are right; nobody knows exactly when the sharemarket will recover. But it is worth remembering that investment earnings in an account-based pension are tax-free, as are income payments received from a pension investment at age 60 or over. Conversely, if you cash out your pension and invest the money elsewhere, your earnings are potentially taxable at a higher rate. If you want to retain the tax concessions and protect your savings from further losses, one option is to select a cash option within your pension. But before you move to cash within or outside of your pension, you need to keep in mind that you run the risk of missing out on the sharemarket recovery when it happens. You should speak to a financial adviser to talk through your options and work out what’s best for you.

I am a 23 year old and just starting out my super, what should I do?

Given your age and time until retirement, it would be a good idea to speak to a financial adviser to find out whether you should be making additional super contributions. If so, they will be able to advise you on whether you should be making these pre or post tax. Even if you decide not to make additional super contributions, they will also be able to advise you on which investments you should choose for your existing super based on your personal circumstances.

General Advice Warning: These comments contain general information and may constitute general advice. They do not take into account any person’s particular investment objectives, financial situation or individual needs. They should not be relied upon as a substitute for financial or other specialist advice.

Before making any decisions on the basis of these comments, you should firstly consider the appropriateness of its content having regard to your particular investment objectives, financial situation or individual needs, and secondly consider the relevant Product Disclosure Document.

Opinions expressed constitute our judgement at the time of issue and are subject to change.

How do you find a trustworthy adviser? I know people who have lost everything by trusting people.

Developing a plan for your finances is one of the most important things you can do in your life, so it pays to find an adviser you can trust to understand your needs and act in your best interests.

Most financial institutions are able to refer you to a qualified financial adviser, so you can ask for recommendations from an institution you trust. You can also search on the Financial Planning Association website.

At your first meeting, a professional financial adviser will give you a Financial Services Guide that details their qualifications and authority to give advice, the type of advice they provide, how and how much you will pay and the procedures they have in place if you ever have a complaint. You should review this document carefully to see your adviser’s credentials and backing.

A professional financial adviser will take the time to get to know you, your circumstances and the role you want your money to play in your life. Once they understand what your needs are, they will develop a tailored Financial Plan with their recommendations for your financial affairs.
Your adviser should always make sure you understand the type of investments they recommend to you.

By understanding your adviser’s accreditations and recommendations, how they are paid and their focus on your needs and what you are trying to achieve, your trust in them can be based on principles that are important to your financial plans.

Why should I go to a planner recommended by MLC compared to other planners?

Financial advisers recommended by MLC have been hand-picked and must meet strict criteria, including experience, educational standards (that exceed professional requirements) and an additional quality advice accreditation.

The plans they develop are focused on your financial needs, and the advisers are reviewed regularly to ensure they maintain the standards supporting MLC’s recommendation.

Read more:

• It pays to get expert advice
• How financial advice can benefit you
• Find an adviser

Is salary sacrifice a good idea in these times as I want to retire in a year?

Regardless of market conditions, salary sacrifice is a tax effective way to save for retirement. This is because your super contribution is taxed at a maximum rate of 15%, instead of your marginal income tax rate which could be up to 46.5%*.

There could also be advantages to investing in super when markets are down. This is because share values are cheaper, so you can buy more with your contribution and capitalise on this when the market recovers.

You should see a financial adviser to work out whether salary sacrifice is the best way for you to boost your retirement savings. If it is, they will also be able to advise on what investments you choose to generate sufficient income for your retirement.

Having just retired, should I reduce my monthly payments in the short term?

If you draw less money from your pension, you’ll be leaving more money in your account to benefit from any upturn in the market. However it will, of course, mean you have a reduced monthly income, so you need to be comfortable that you have enough to live off. Speak to a financial adviser, as there may be other things you can do with your investments to help you through this period of market turbulence.

When you speak about long term do you mean 10-20 years? If so, then surely you should not be selling investments to a 50 year-old, as there is little point in being rich at 70 years old.

It’s important to remember that you are not just investing until you retire, but for the additional 20 or more years you could spend in retirement – a long-term time horizon by anyone’s standard. It’s therefore important to hold growth assets (like shares) in your portfolio as these investments have the potential to deliver higher long-term returns and so help you ensure your money lasts as long as you do. If you would like to review your investments, speak to a financial adviser.

I am 30. Should I ante-up and switch my balanced super into a geared growth fund if much of the recovery comes in the first 12 months?

Switching your super to a more aggressive fund would benefit you when the market recovers. However the trouble is we don’t know if we have reached the bottom of the market yet. The best strategy is not to make investment decisions based on short-term market cycles ― as this could make any losses worse. It is generally best to have a long-term investment strategy and stick to it regardless of what the market’s doing. To find out which investment strategies suit your goals, time horizon and risk profile, speak to a financial adviser.

General Advice Warning: These comments contain general information and may constitute general advice. They do not take into account any person’s particular investment objectives, financial situation or individual needs. They should not be relied upon as a substitute for financial or other specialist advice.

Before making any decisions on the basis of these comments, you should firstly, consider the appropriateness of its content having regard to your particular investment objectives, financial situation or individual needs and secondly consider the relevant Product Disclosure Document. Opinions expressed constitute our judgement at the time of issue and are subject to change.

* Includes a Medicare levy of 1.5%

Watch this space for more Q&A from our panellists.

What in the market crisis today is different from the crash of 87?

The fall in share prices then happened much faster, and the recovery began sooner, although the recovery hit a snag quite soon in the form of the early 1990s recession.

The rise in share prices that preceded the 1987 crash was also much less soundly based. Prices had risen pretty much on ‘thin air’ – corporate earnings hadn’t risen anywhere near as fast as company share prices. This time round, the rise in prices was much more closely related to gains in company profits. However, the problem now is that the level of company profits doesn’t look sustainable – profits always tend to fall in even a mild recession, and markets seem to be factoring in just such a fall.

What is the technical definition of a depression?

My definition of a depression is a large and prolonged fall in output, employment, and prices. It tends to last some years rather than a few quarters. It also tends to have an element of self-reinforcement about it. Falling demand/spending leads to falling output and prices; falling prices encourage people to delay spending, which means further falls in output and prices, and so on.

The panel are assuming that the markets will continue upwards in the long run. How sure can you be of this given the rules of money management are likely to be substantially tightened following this crisis?

I think the environment we are going into will be one where investors are much more cautious, much more conservative than they have been over the last five to 10 years. In this kind of environment, investment returns are likely to be more modest than we saw from 2003 to mid-2007. However, this does not mean that markets won’t recover.

At the end of the day, the sharemarket is a snapshot of a collection of businesses. These businesses make profits by meeting customer needs, pay dividends out of that profit, and re-invest the rest back into the business to drive future growth. What this means, is the true value of businesses tends to grow over time. The price of those businesses on the sharemarket will inevitably be much more volatile in the shorter term, but over time, the sharemarket reflects the underlying growth in the value of those businesses.

Which market is dropping faster ― property or shares? Which one is more vulnerable?

It depends on what kind of property you’re referring to. Strictly speaking, shares are falling faster than physical property, but that’s not surprising. The price of shares and other liquid assets are priced every minute of every trading day, and shares have fallen very sharply in price. With direct, physical property however, prices can only be tracked infrequently. You only know how much your house is really worth when you sell it. There are a number of indices of house prices and other direct property values, but because of the nature of the assets those prices do not move quickly. For non-residential assets, investors have to rely on periodic valuations. In contrast, listed property assets are priced every minute of every trading day, and these have fallen very steeply in the past year.

Australian house prices have, in aggregate, been falling ― some areas worse than others. My own view is that house prices have much further to fall, and consequently, I would view them as being more vulnerable at present. In order to determine whether house prices are over or undervalued at any point in time, ask yourself this question. Can the average person, living in the average city, earning the average income, afford to buy the average house in that city? If the answer is ‘no’, then the market is probably overvalued.

97% of my portfolio is invested in an Australian Share Fund. Do you think I should diversify more to foreign markets?

As with any of these things, you need to get personal financial advice. That said, more diversification is almost always better than less, and having all your eggs in just the Australian equity basket isn’t ideal. The local sharemarket makes up only around 3% of the world market, which implies that 97% of the opportunities are somewhere else!

General Advice Warning:These comments contain general information and may constitute general advice. They do not take into account any person’s particular investment objectives, financial situation or individual needs. They should not be relied upon as a substitute for financial or other specialist advice.

Before making any decisions on the basis of these comments, you should firstly consider the appropriateness of its content having regard to your particular investment objectives, financial situation or individual needs and secondly consider the relevant Product Disclosure Document.

Opinions expressed constitute our judgement at the time of issue and are subject to change.