You and I are in the stock market game for one reason. To make money.
Sure, it’s great to enjoy the journey. An education in the markets is its own reward.
But you can’t lose sight of the destination…your investment objective.
You want to finish the ‘game’ with as much money in your pocket as possible to fund your retirement and provide for your family.
That’s why it’s frustrating when a third party disadvantages you by ‘moving the goalposts’.
Well, it looks like that’s about to happen.
In less than two weeks, Australia’s Federal Government will hand down its annual budget.
Unless you spent the past three weeks sailing in the Bahamas without access to the news — in which case, well done! — you’ll know that the government has plans for a bit of budget belt-tightening.
One proposed measure is hogging the headlines. That’s the cleverly-titled ‘deficit levy’.
That’s the new tax that the government plans to impose on everybody with an annual taxable income of more than $80,000.
This tax might not affect you directly. You might be in a phase of your life that lets you escape unscathed.
But if and when this new tax gets the all-clear, it will punish many income earners and investors in their prime investing years.
It means you’ll potentially have to work harder for a comfortable retirement.
Now, there are a few ways you can do that. You could defer retirement for a few extra years. You could cut down on your expenses and moderate your quality of life. Or you can move further out on the risk spectrum and take a closer look at more speculative stocks for higher returns.
Personally, I like the third option best, although it is risky and won’t be suitable for all investors.
The fact is, with the government throttling investors’ take-home pay, a lot of people are going to find it increasingly hard to make ends meet.
That (for better or worse) will drive more demand for the services offered by short term money lenders. You may think that it’s a bit insensitive to talk about turning someone’s higher tax bill and financial hardship into an investment opportunity. But as an investor it’s important to consider the impact of various government policies on specific companies.
Investors do that all the time.
After all, what’s the alternative? That I don’t tell you about these opportunities? If I did that you should rightly be angry at me for failing to do so.
It’s for that reason I’ve recently increased the buy-up-to price on one of the stocks on the Australian Small-Cap Investigator buy list. It’s a company heavily involved in the short-term lending market.
Now, you might not think that these companies will be affected by a new tax on those who earn more than $80,000.
But here’s the reality: more than 30% of the borrowers who use this lender’s service earn more than $50,000 a year.
A percentage of those customers are likely to earn more than $80,000 a year. That means like it or not, the ‘deficit tax’ is likely to drive more business towards short-term lenders.
Add to that, recently this company also announced some exciting results. That makes now an ideal time to think about adding a company like this to your portfolio. You can find out how to get the full story here.
The simple fact is that there are always investing opportunities in the market. It’s just a case of spotting the opportunities and then taking advantage of them – even if sometimes it makes you slightly uncomfortable.
Cheers,
Tim Dohrmann+
Analyst, Australian Small-Cap Investigator
