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While the change in the US Federal Reserve inflation policy late last week failed to translate to any meaningful gains for the S&P/ASX 200 Index (Index:^AXJO), make no mistake that this will impact on your ASX portfolio.

The move by the Fed to use the average inflation to control price increases excited US investors. This is because it clears the way for the US central bank to ramp up stimulus as it isn’t constrained by fears of a short-term surge in inflation.

The Reserve Bank of Australia isn’t as aggressive as their US counterparts, but the Fed’s policy change will have implications for ASX investors.

ASX stocks facing more uncertainty in FY21

The irony is that equities aren’t necessarily the biggest beneficiaries of this, and in fact, may be a loser from the move to Average Inflation Targeting (AIT).

By introducing greater flexibility in the inflation target, the Fed is likely to increase inflation volatility, warned Credit Suisse.

And we know from the COVID-19 fallout (and all other crises for that matter) is that volatility is investors’ worst enemy.

“The worry for equity investors is that higher inflation volatility transmits directly to market valuations, independently of rates and yields,” said Credit Suisse in a note on Friday.

“This is because inflation has ambiguous effects on corporate profit margins, depending on whether it is ‘cost-push’ or ‘demand-pull’ in nature.”

Rising risk premium a threat to ASX bull market

Greater uncertainty in the outlook for inflation will push risk premiums higher. A risk premium is the extra protection investors demand if they are to buy shares. The bigger the premium, the lower share prices need to be to entice them.

The ASX looks vulnerable to any increase in the risk premium given its big surge since bouncing from the depth of the bear market in March.

This may be bad news for our share market on the whole, but there’s a silver lining for our embattled ASX banks.

ASX banks catching a rare break

I noticed that the yield curve is steepening after the Fed’s signal it will move to AIT. The willingness for the US central bank to accept more upward pricing pressure is driving longer-dated bond yields higher.

The 10-year Australian Commonwealth Government Bond (ACGB) jumped 13 basis points to 1.04% on Friday, which is a big move for such securities.

Meanwhile, the 3-year ACGB remained largely where it as the RBA committed to keeping the yield on this duration at 0.25%.

As the graph below shows, the spread between short-term to longer-term ACGB is getting wider, thus steepening the yield curve.

Steepening Yield Curve (now vs. 1 year ago)

Source: MarketWatch

This is welcomed news for the likes of the Commonwealth Bank of Australia (ASX: CBA) share price, Westpac Banking Corp (ASX: WBC) share price, National Australia Bank Ltd. (ASX: NAB) share price and Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price.

Small victory

Banks generally benefit from a steeper yield curve as they can borrow short-term funds at a lower rate and lend long.

Of course, there are a lot of moving parts impacting on bank profits at the moment, so a steeper yield curve on its own isn’t enough to turn sentiment, but we need to celebrate every small victory in this volatile environment.

Another group of ASX winners

Another group that will benefit from inflation volatility is commodities. This is particularly so for the safe-haven gold price, in my view.

The Newcrest Mining Limited (ASX: NCM) share price and Evolution Mining Ltd (ASX: EVN) share price have underperformed in August as the price of the precious metal retreated from record highs.

Any material pull-back in gold mining shares is a buying opportunity, in my view. This is particularly so because the US dollar is in for a sustained period of weakness as the Fed injects more stimulus to support the American economy.

More reading

• Will the RBA keep the cash rate on hold for 3 more years?
• ASX reporting season heroes to buy for FY21
• Attention all value investors – here’s one key ratio to help you value a company
• My top 5 ASX shares to buy in 2020
• ASX 200 drops 0.9%, Costa reveals healthy result

Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, Evolution Mining Limited, National Australia Bank Limited, Newcrest Mining Limited, and Westpac Banking. Connect with me on Twitter @brenlau.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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With a new month upon us, now could be a good time to see if there are any additions you could make to your portfolio to take it to the next level.

I think the tech sector would be a good place to look for options, given the quality on offer at this side of the market.

But which ASX tech shares should you buy? Here are a few I would buy:

Appen Ltd (ASX: APX)

Appen is one of my favourite tech shares on the ASX. Its global team of over a million crowd-sourced experts prepare the data that goes into artificial intelligence (AI) and machine learning models. This is a very important part of the process, as high quality data is vital for successful models. Pleasingly, given how important AI is becoming to businesses, I expect demand for Appen’s services to continue to grow over the next decade. This should underpin strong earnings growth for a long time to come.

BetaShares Asia Technology Tigers ETF (ASX: ASIA)

If you would like to invest in a number of tech shares in a single investment, then you might want to look at the BetaShares Asia Technology Tigers ETF. This fund is invested in some of the fastest growing tech companies in the Asia market. These companies are revolutionising the lives of billions of people in the region and look very well-positioned for growth. Included in the fund are the likes of ecommerce giant Alibaba, search engine company Baidu, and Afterpay Ltd (ASX: APT) shareholder and WeChat owner, Tencent.

Xero Limited (ASX: XRO)

A final ASX tech share to consider buying in September is Xero. It has been growing at a strong rate for years and looks well-positioned to continue this trend in the future. Especially given its evolution from a cloud-based accounting service into a full service business solution. It’s offering was given a boost recently by the acquisition of Waddle. It is a cloud-based lending platform that helps small businesses access capital through invoice financing. Management believes the acquisition aligns with its strategy to grow the small business platform and to address critical small business financial needs.

More reading

• Top brokers name 3 ASX shares to buy next week
• Why investing more in super can turbo charge your retirement plans
• These were the worst performing ASX 200 shares last week
• Why I’d buy Afterpay and other ASX tech shares at record highs
• Bulls versus bears – two experts face off on where share prices are going

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. The Motley Fool Australia owns shares of AFTERPAY T FPO and Appen Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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I think there are always ASX share opportunities on the ASX to buy. You just need to buy the right ones at the right price.

It’s a good idea to decide which shares you may want to buy in the form of a watchlist. Then you could jump on opportunities whenever they pop up.

I think the below four ASX shares are long-term opportunities and I’d be very happy to buy for my portfolio right now:

Citadel Group Ltd (ASX: CGL) – $3,000

Citadel is a leading ASX tech share that provides software to help organisations manage data in sectors like defence, education and healthcare.

The company recently reported its FY20 result which had a lot going on, partly due to the acquisition of Wellbeing. I really like the transformational acquisition. It’s a UK software provider for the healthcare industry.

Compared to the core Citadel business, Wellbeing has higher recurring revenue and it also has a higher earnings before interest, tax, depreciation and amortisation (EBITDA) margin. It improved quality of the overall Citadel business.

In FY20 Citadel’s underlying EBITDA grew by 25.3%. I think FY21 and beyond looks very promising for Citadel.

At the current Citadel share price, it’s trading at around 13x FY22’s estimated earnings.

Pushpay Holdings Ltd (ASX: PPH) – $3,500

Pushpay is another exciting ASX share in my opinion.

It’s an electronic donation business which helps its clients facilitate digital giving. Its largest customer base is the US large and medium church sector. There is a huge amount of money donated to US churches each year. Pushpay is aiming for US$1 billion of revenue over the long-term.

The company could become a lot larger partly as a result of its growing profit margins. In FY20 alone Pushpay’s gross margin improved from 60% to 65%. That’s a big increase in one year. It indicates that the business can become more profitable again in FY21, FY22 and beyond.

At the current Pushpay share price it’s trading at 35x FY22’s estimated earnings.

Magellan High Conviction Trust (ASX: MHH) – $1,500

This is a listed investment trust (LIT) which invests in other businesses on your behalf.

The ASX share is managed by Magellan Financial Group Ltd (ASX: MFG), the portfolio is full of Magellan’s best (growth) ideas.

What names make it into a portfolio of (approximately) just 10 names? Some of its biggest holdings include Alibaba, Alphabet, Microsoft, Tencent and Facebook. These are quality global businesses with resilient operating models for the current COVID-19 environment.

At the current Magellan High Conviction Trust it’s trading a 5% discount to the current indicative net asset value (NAV).

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) – $2,000

Soul Patts is a great investment conglomerate in my opinion. It has been around for over a century and I think the current uncertain environment is a good one for the business to excel in.

It owns a number of defensive businesses like telecommunications, property, swimming schools and agriculture. These industries should be able to perform well even during a recession.

The ASX share is regularly adding to its portfolio of investments. There are plans to invest in regional data centres, which is a good growth industry at the moment with the shift to cloud infrastructure.

Not only is Soul Patts a solid growing business, but it also has a great dividend history. It has increased its dividend every year for 20 years in a row.

At the current Soul Patts share price it offers a grossed-up dividend yield of 4.2%.

Foolish takeaway

I really like each of these ASX shares. I think that Citadel and Pushpay have very exciting futures which is why I’d be willing to invest more in both of them. However, I like the long-term returns and diversification offered by Soul Patts and Magellan High Conviction Trust.

More reading

• 3 stellar ASX growth shares to buy right now
• 5 top ASX dividend shares you should never sell
• 2 great ASX shares I’d buy for income and growth
• Volatile day for the Citadel share price following FY 2020 results
• 3 small cap ASX growth shares to buy right now

Motley Fool contributor Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Citadel Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Where I’d invest $10,000 right now in ASX shares appeared first on Motley Fool Australia.

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While some shares have fully recovered from the 2020 market crash, many others continue to trade at relatively low levels. As such, there are still likely to be buying opportunities for long-term investors who are seeking to grow the size of their portfolio.

Through purchasing undervalued shares now, you could benefit from their long-term recovery potential as the prospects for the world economy improve. This may lead to market-beating returns that improve your chances of making a million.

Low valuations after the market crash

Numerous stocks continue to trade at low prices after the market crash. In fact, vast swathes of the stock market are currently trading significantly lower year-to-date, with their uncertain financial prospects causing investor sentiment to remain weak. For example, commodity-related stocks, banks and many support services companies currently trade on valuations that have not been seen since the last major global recession in 2008/09.

Buying stocks at low prices has historically been a sound means to generate high returns in the long run. As with any asset, a lower price provides greater scope for capital growth. It also means there may be a wider margin of safety on offer. In some cases, such as where a company has a solid financial position and long-term growth potential, a low valuation may not be merited. This could reduce overall risks for investors when such companies are purchased as part of a diverse portfolio of shares.

Recovery potential

While some sectors may currently seem unlikely to recover from the 2020 market crash, history suggests that they will encounter improving operating conditions in the coming years. For example, at times it felt as though the world economy would never recover from the global financial crisis. However, through the use of an accommodative monetary policy, global GDP growth gradually recovered. This allowed companies trading in a wide range of sectors to produce rising profitability, which catalysed their share prices.

With policymakers having already sought to stimulate economic growth through fiscal and monetary policy stimulus in many of the world’s major economies, the long-term prospects for global growth could be relatively sound. As such, buying a range of cheap stocks now while other investors are bearish on their prospects may enable you to benefit from a likely recovery in their prospects in the coming years.

Making a million

While the market crash may have temporarily derailed the performance of the stock market, its track record suggests that it offers high return potential in the long run. For example, indexes such as the FTSE 100 and S&P 500 have produced high single-digit annual returns over recent decades.

Assuming an 8% return on a $500 monthly investment, you could obtain a seven-figure portfolio within 35 years. However, through buying undervalued shares now ahead of a likely global economic recovery, you may be able to generate even higher returns than those of the stock market. This could improve your chances of making a million in the coming years.

More reading

• Where I’d invest $10,000 right now in ASX shares
• Top brokers name 3 ASX shares to buy next week
• Will the RBA keep the cash rate on hold for 3 more years?
• Top brokers name 3 ASX shares to sell next week
• ASX reporting season heroes to buy for FY21

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why the 2020 market crash could be your chance to make a million appeared first on Motley Fool Australia.

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Last week saw a large number of broker notes hitting the wires once again. Three buy ratings that caught my eye are summarised below.

Here’s why brokers think investors ought to buy them next week:

Appen Ltd (ASX: APX)

According to a note out of the Macquarie equities desk, its analysts have retained their outperform rating and lifted the price target on this artificial intelligence services company’s shares to $43.00. Although Macquarie acknowledges that Appen’s first half performance was softer than the market expected, it still believes it will achieve its guidance in FY 2020. It also remains very positive on the future thanks to the increasing spending on artificial intelligence. I agree with Macquarie on Appen and feel it would be a great buy and hold option.

Aventus Group (ASX: AVN)

Analysts at UBS have upgraded this property company’s shares to a buy rating and lifted the price target on them to $2.50. According to the note, the broker was impressed with Aventus’ FY 2020 results and believes it demonstrates the strength of its large format retail assets. And while it acknowledges that no guidance was given for the year ahead, it remains positive on its outlook and expects its assets to benefit from changing consumer habits. I think UBS is spot on and would be a buyer of Aventus’ shares.

Bravura Solutions Ltd (ASX: BVS)

Another note out of Macquarie reveals that its analysts have retained their outperform rating but trimmed the price target on this financial technology company’s shares to $5.50. Although Bravura’s performance in FY 2021 looks set to be disrupted by the pandemic, the broker appears confident this is temporary and its long term prospects remain positive. In light of this, it feels it is worth sticking with the company. I agree with Macquarie and would buy and hold Bravura shares.

More reading

• These were the worst performing ASX 200 shares last week
• Brokers name 3 ASX shares to buy right now
• The Appen share price is down 9% today. Here’s why
• ASX shares are on track for new record highs. Here’s why…
• ASX 200 down 0.9%: Costa impresses, Harvey Norman profits grow, Appen downgraded

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bravura Solutions Ltd. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended AVENTUS RE UNIT. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It’s that time again. On Tuesday the Reserve Bank of Australia will be meeting to discuss the cash rate.

According to the latest cash rate futures, the market is reasonably undecided and is pricing in a 56% probability of a rate cut to zero.

One leading economics team that isn’t expecting a cut is the one at Westpac Banking Corp (ASX: WBC). Its latest report reveals that it is expecting the cash rate to stay on hold at 0.25% once again.

The bank stated: “The RBA is expected to keep policy settings unchanged at its September meeting. The Bank is providing support to the economy through a range of stimulus policies and will continue to do so for the foreseeable future.”

“The key elements have been: 1) lowering the cash rate to 0.25%; 2) targeting the 3 year government bond rate at 0.25%; 3) market operations, as needed, to provide ample liquidity to the banking system; 4) a Term Funding Facility for the banking system providing 3 year funding at 0.25%; and 5) Setting the rate paid on Exchange Settlement balances at the RBA at 10bps,” it added.

However, Westpac doesn’t appear overly convinced that this is enough and suspects the central bank may be forced to do more in the future.

It explained: “Persistently poor economic outcomes – growth well below trend, high unemployment, and inflation below the bank’s 2–3% target – mean the RBA will need to maintain these policies for an extended period and may come under pressure to do more in the future. For now though the bank is of the view that monetary policy is doing “what it can”.”

When will rates go higher?

Unfortunately for savers and income investors, don’t hold your breath for a rate increase any time soon. In fact, it could be years before we see a hike, according to Westpac.

It notes that “the [Reserve] Bank is prepared to purchase three year bonds at 0.25%, indicating that the cash rate is expected to stay at 0.25% at least out to August 2023.”

In light of this, I would sooner be putting my money into Westpac shares rather than its bank accounts, or buying dividend stars such as Dicker Data Ltd (ASX: DDR) and Rural Funds Group (ASX: RFF) ahead of term deposits.

More reading

• 3 quality ASX shares to add to your retirement portfolio
• Attention all value investors – here’s one key ratio to help you value a company
• 5 top ASX dividend shares you should never sell
• Dicker Data share price surges following interim results
• Reinvest your Coles dividends in these top ASX shares

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited and RURALFUNDS STAPLED. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Will the RBA keep the cash rate on hold for 3 more years? appeared first on Motley Fool Australia.

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Once again, a large number of broker notes hit the wires last week. Some of these notes were positive and some were bearish.

Three sell ratings that caught my eye are summarised below. Here’s why top brokers think investors ought to sell these shares next week:

Fortescue Metals Group Limited (ASX: FMG)

According to a note out of Credit Suisse, its analysts have downgraded this iron ore producer’s shares to an underperform rating with an increased price target of $15.00. Although the broker was pleased with Fortescue’s performance in FY 2020 and its dividend was greater than expected, it isn’t enough to stop it from downgrading its shares. The broker believes its shares are expensive, especially given its belief that the iron ore price could be close to reaching a top. This could ultimately mean that its earnings will soon peak. The Fortescue share price was changing hands for $18.87 on Friday.

Galaxy Resources Limited (ASX: GXY)

A note out of the Macquarie equities desk reveals that its analysts have retained their underperform rating and 40 cents price target on this lithium miner’s shares. According to the note, the broker believes that an oversupply of lithium will keep prices lower for some time to come. This is likely to weigh heavily on its performance until there is a recovery in prices, potentially in FY 2023. The Galaxy share price closed the week at $1.20.

Zip Co Ltd (ASX: Z1P)

Analysts at UBS have retained their sell rating and $5.70 price target on this buy now pay later provider’s shares. This follows the release of an update on the performance of its soon to be acquired QuadPay business. While the broker appears pleased to have seen a return to growth in July for QuadPay, it isn’t enough for a change of rating. UBS has previously suggested that the risk/reward on offer with its shares was unfavourable following a rally in its share price. The Zip Co share price last traded at $8.88.

More reading

• 5 things to watch on the ASX 200 next week
• Brokers name 3 ASX shares to buy right now
• Why Appen, Link, LiveTiles, & Zip shares are dropping lower
• Zip share price plummets 8% despite strong FY 2020 result
• ASX 200 drops 0.7%, Zip rises 27.5%

James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Don’t let the August reporting season go to waste, fellow Fools. This bi-annual event is an opportunity to evaluate and adjust your ASX portfolio, and the nearly completed profit season has taught us plenty.

The 2.5% rise in the S&P/ASX 200 Index (Index:^AXJO) is hint enough that the results have been better than expected.

ASX stocks that have bested expectations during this period tend to continue to outperform over the next few months. There’s no reason to think this time will be any different and there’s two stocks that I believe have a bright outlook for FY21.

Big Wow from reporting season

The first is the Woolworths Group Ltd (ASX: WOW) share price, which is lagging behind its rival Coles Group Ltd (ASX: COL) share price.

Coles may have produced a slightly better profit figures for its supermarket business, but I think Woolies stole the show.

It’s not the performance of Woolworths supermarkets that caught my attention, but its embattled Big W department store.

Faster than expected turnaround

I had low expectations for the department store chain, which suffered from falling comps (sales growth from stores opened at least a year).

But Big W hit it out of the ball park with a 32% increase in comps for the June quarter. The store benefited from stuck at home consumers snapping up IT, education and entertainment products during COVID-19.

The big jump in sales may not be sustained but the result is boosting confidence in the turnaround of the group’s Achilles’ heel.

No one will call the Woolworth share price cheap. But with a much brighter FY21 outlook for Big W and ongoing tailwinds from the pandemic, I believe there’s more room for the stock to climb.

Low hanging fruit

Another stock well placed to outperform in the current financial year is the Costa Group Holdings Ltd (ASX: CGC) share price.

Shares in the fruit grower surged 11.8% to $3.31 on Friday after it posted its half year results. To be honest, the numbers weren’t that great for its local operations, which accounts for over 70% of group sales.

But investing in shares is all about the future and not the past, and the outlook for the rest of 2020 is looking sweet.

Bright outlook to support Costa’s share price

The group’s international business is going gangbusters as sales surged 43% to just under $120 million compared to the first six months of 2019.

Some analysts thought the international business could be the weak link for the group and this explains the re-rating on Friday.

The outlook for the local division is also improving thanks to more favourable weather. The drought lobbed around $15 million from group earnings in the Tomato and Berry categories. But crops have fully recovered in May.

This is one stock that is unlikely to be impacted by the COVID-19 uncertainty. And assuming the weather remains favourable, the stock is likely to remain well supported over next six months, if not longer.

More reading

• 5 things to watch on the ASX 200 next week
• 5 top ASX dividend shares you should never sell
• ASX 200 drops 0.9%, Costa reveals healthy result
• Is the Woolworths share price in the buy zone following its FY 2020 results?
• Why Coles is a top ASX dividend share for a post-COVID world

Motley Fool contributor Brendon Lau owns shares of Woolworths Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Many investors don’t think about investing more in super. It’s easy to just consider buying ASX shares within your taxable brokerage accounts. However, buying your favourite companies directly or indirectly through your retirement accounts can have some powerful benefits.

Investing more in super to lower your tax bill

The most obvious benefit about investing more in super is paying less tax. Using a simple tax calculator, an individual with $100,000 of taxable income would pay an estimated $24,497 in tax.

Let’s assume that this investor receives the 9.5% p.a. Superannuation Guarantee, or $9,500, from their employer. By maxing out their concessional contributions at $25,000 per annum, that investor would lower their taxable income by $15,500 to $84,500.

That means the FY20 tax bill would be lowered to $19,172, representing a 21.7% reduction. Those additional contributions to super will be taxed at 15%, but that could be much lower than the marginal tax rate paid on your income. Clearly, investing more in super can have some powerful advantages when it comes to tax time.

Generate stronger after-tax returns

The favourable tax treatment also happens within the portfolio. If you buy ASX shares like Afterpay Ltd (ASX: APT) within your super, any capital gains are taxed at the marginal level. For the super fund, that’s likely to be 15% compared to 19% to 45% if it was in your brokerage.

Here’s a quick example. Let’s say you want to buy a broad market index like Vanguard Australian Shares Index ETF (ASX: VAS). If you purchased 5 years ago, you’d be sitting on a tidy 16.0% gain before including dividends. However, you then need to realise that gain at some point by selling your units in that fund.

If you’re a high-income earner on $200,000 per annum, that means 50% of those capital gains will be taxed at 45%. However, by investing more in super, those gains will be taxed at just 15% for the super fund which represents more money in your pocket come retirement.

On top of that, accessing super after 60 as either a super income stream or lump sum could be tax-free. Of course, there are strict eligibility criteria around this sort of stuff and its best to check with a qualified professional beforehand.

Nevertheless, there are some tasty tax breaks on offer for those willing to invest more in super.

Foolish takeaway

Investing more in super is not for everyone. It’s important to make all investment decisions in the context of personal financial circumstances, goals, age and many more factors.

Super does have its drawbacks like regulatory risk and significant lock-up period. However, if it fits your strategy, super could be a useful tool for a good retirement.

More reading

• Why I’d buy Afterpay and other ASX tech shares at record highs
• Bulls versus bears – two experts face off on where share prices are going
• Brokers name 3 ASX shares to buy right now
• ASX 200 rises 0.2%, Afterpay reports FY20 result
• Afterpay reckons this 1 number shows its ‘moat’

Motley Fool contributor Ken Hall owns shares of Vanguard Australian Shares Index. The Motley Fool Australia owns shares of AFTERPAY T FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Last week the S&P/ASX 200 Index (ASX: XJO) was out of form and tumbled lower. The benchmark index lost 0.6% over the five days to end it at 6,073.8 points.

Earnings season may draw to a close on Monday, but that doesn’t mean there won’t be another busy week ahead.

Here are five things that I think investors should be watching next week:

ASX futures pointing lower.

The ASX 200 looks set to start the week as it finished it. According to the latest SPI futures, the benchmark index is poised to open the week a disappointing 40 points lower. This is despite Wall Street finishing the week strongly on Friday. The Dow Jones climbed 0.6%, the S&P 500 rose 0.8%, and the Nasdaq pushed 0.6% higher.

IOOF results and potential major acquisition.

The IOOF Holdings Limited (ASX: IFL) share price will be in focus on Monday when the financial services company announces its full year results. According to CommSec, the market is expecting a net profit after tax of $132.6 million. The company is also planning to announce a potential significant transaction. There is speculation the company could be interested in acquiring AMP Limited (ASX: AMP).

Reserve Bank meeting.

The Reserve Bank of Australia will be meeting on Tuesday to discuss the cash rate. According to the latest cash rate futures, the market is pricing in a 56% probability of a rate cut to zero. While this means a cut is possible, it appears unlikely. The Westpac Banking Corp (ASX: WBC) economic team expects the cash rate to stay on hold at 0.25%.

Fortescue to trade ex-dividend.

The Fortescue Metals Group Limited (ASX: FMG) share price is likely to tumble lower on Monday when its shares trade ex-dividend. The iron ore producer is paying shareholders a final fully franked $1.00 per share dividend. This equates to a 5.3% dividend yield, which could mean its shares fall by a similar margin.

Other shares trading ex-dividend.

Fortescue isn’t the only share trading ex-dividend next week. On Monday there’s Ansell Limited (ASX: ANN), on Tuesday there are Super Retail Group Ltd (ASX: SUN) and Woolworths Group Ltd (ASX: WOW), on Wednesday there is Medibank Private Ltd (ASX: MPL), on Thursday there is BHP Group Ltd (ASX: BHP), and on Friday there is Bravura Solutions Ltd (ASX: BVS).

More reading

• Is the Woolworths share price in the buy zone following its FY 2020 results?
• Why Coles is a top ASX dividend share for a post-COVID world
• ‘Ethical’ share investors sell too quickly after bad news
• ASX 200 jumps 0.7%: Afterpay reaches 9.9 million customers, Woolworths strong sales growth
• Why the IGO share price is outperforming the ASX 200 today

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of and has recommended Super Retail Group Limited. The Motley Fool Australia owns shares of Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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