02 February 2012

Dear Investor,


As 2012 moves into full swing, the headlines continue to scream a story of global economic uncertainty. Dire predictions are everywhere; so what is an investor to do?

In unpredictable times, it always pays to return to basic principles. So for the next few months, Investment News will focus on the fundamentals of investment. In this month's edition, we focus on savings and investment.

Savings vs Investments

"Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery" Charles Dickens
(David Copperfield)

It is a safe bet that pretty much every reader of Investment News has been a 'saver' at some point in their life. Whether it is for a new home, retirement, a holiday or some other reason, we are all familiar with the notion of 'tightening our belt' so that we can earn more than we spend. In Australia, we also have compulsory retirement saving under the federal government's superannuation guarantee scheme.

Saving is an indispensible pillar of financial freedom. But, in itself, it is not enough. When you save money, you work hard and make sacrifices to accumulate the cash. However, the real strides are taken when you put the money that you have saved to work.

To see the dollar difference that this can make to you, consider the following scenarios. John was saving for his retirement. He put aside $10,000 in savings every year in a zero interest (after fees!) bank account. Unsurprisingly, after 10 years he had saved $100,000 and after 20 years he had saved a creditable $200,000.

On the other hand, Jane decided to invest for her retirement. She set aside the same $10,000 each year, but invested it and earned 7.54%* p.a (the five year average return of La Trobe Financial's Pooled Mortgages Option). After 10 years, she had saved $141,739 and after 20 years she had saved an amazing $434,937.

The difference between the two is starkly illustrated in the table below. Amazingly, by year twenty, Jane's annual contribution to her retirement is virtually four times that of John, despite that fact that she continues to set the same $10,000 aside out of her salary. The difference is made up of the 'interest on interest' that she is earning on her investments.

Amount saved
after 10 years
Amount saved
after 20 years
in year 20
John $100,000 $200,000 $10,000
Jane $141,739 $434,957 $39,795

It simply makes no sense to keep your savings in a no or low-interest bank account.

Rule of 72: doubling your money

If that example does not convince you of the importance of putting your money to work, there is probably not much point reading further. However, for those who have made the decision to become investors, there are a number of little tricks that can be used to help you understand your investing needs.

One simple tool is the rule of 72 - which gives a quick and easy assessment of how quickly you can grow your investment.

The rule of 72 calculates how many years it will take for an initial sum of money to double at a given rate of return. The calculation is straightforward. The number 72 is divided by the expected rate of return and the result is an approximation of how long it will take for your money to be doubled.

If, for example, you expect to receive a 6% return, you divide 72 by 6 and receive the result that it will take 12 years for your money to double. The table below expands this example.

Expected return (% pa) Years to double money (72 ÷ expected return)
2% 36
4% 18
6% 12
8% 9
10% 7.2
12% 6
14% 5.1

If you do one thing in 2012, take the time to ensure that you have your money hard at work for you. As you can see - it can really pay off.

New website launch for 2012

La Trobe Financial is pleased to announce the launch of its new look website at www.latrobefinancial.com.au. Like all of our business, the website is built on our four key values.

Our four values are a fundamental part of who we are: they reflect the principles by which we conduct ourselves, shaping what we do and how we do it and why you should consider dealing with us at La Trobe Financial. They are also real and reflect our ethos and our intended legacy.

  • SECURITY: Since 1952 we have successfully managed over A$10 billion of institutional and retail investor mandates, in residential and commercial mortgage assets, giving you peace of mind about our performance.

  • EXPERIENCE: Over many different business and economic cycles we have specialised in lending and investment asset management for borrower and investor clients alike. With over 60 years of unbroken experience we combine technical excellence with our specialist "know-how" to satisfy your investment or borrowing needs.

  • SOLUTION FOCUS: Our aim is to satisfy through our "clients come first" focus, with responsive and innovative services 8am - 6pm Monday to Friday across our entire business. You won't speak to a machine and you will always have access to our decision makers.

  • TRUST: We act as one integrated team ready to serve you. We operate with integrity, respect and honesty. We put intense effort into our work and actively look for ways to deliver you the best results, by investing in local people and jobs, and our community programs. We are committed to continuing our good name and maintaining your trust; we are recognised for our outstanding customer service.

These values guide us as we continue to build La Trobe Financial into a force in the marketplace. They are embedded into the operations of our business as well as our underlying culture, and are part of the people we hire and retain to serve you.

Best regards,
Chris Andrews

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Chris Andrews
Head of Funds Management

t  +61 3 8610 2811
e  candrews@latrobefinancial.com.au

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La Trobe is one of Australia's leading independent specialist mortgage Financiers. Its business includes residential mortgages, commercial mortgages, and investment services operating one of Australia's largest Mortgage Funds under AFSL 222213. It employs over 145 staff and has raised over AUD$10Billion to assist over 100,000 customers since inception in 1952.

Copyright 2010 La Trobe Financial. All rights reserved. No portion of this may be reproduced, copied, or in any way reused without written permission from La Trobe Financial. Disclaimer

La Trobe Financial Asset Management Limited ABN: 27 007 332 363 and AFSL No: 222213 is the issuer and manager of the La Trobe Australian Mortgage Fund. It is important for you to read the Product Disclosure Statement for the Fund before you make any investment decision. The PDS is available on our website www.latrobefinancial.com.au or by calling 1800 818 818. You should consider carefully whether or not investing in the Fund is appropriate for you.
* The rates of return from the Fund are not guaranteed and are determined by future revenue of the Fund, and may achieve lower than expected returns. Past performance is no guarantee of future performance. Investors risk losing some or all of their principal investment.
- Withdrawal rights are subject to liquidity and may be delayed or suspended.
- The award and ratings were given to the Pooled Mortgages Option within the La Trobe Australian Mortgage Fund.
The rating is only one factor to be taken into account in deciding to invest.
1. Zenith's "recommended" rating indicates that it has high confidence in the manager meeting its objectives. The Zenith. Investment Partners ("Zenith") ABN 60 332 047 314 rating referred to in this document is limited to "General Advice" (as defined by section 766B of Corporations Act 2001) and based solely on the assessment of the investment merits of the financial product on this basis. It is not a specific recommendation to purchase, sell or hold the relevant product (S), and Zenith advises that individual investors should seek their own independent financial advice before investing in this product. To view the relevant research information, please visit www.latrobefinancial.com.au The rating is subject to change without notice and Zenith has no obligation to update this document following publication. Zenith usually receives a fee for rating the fund manager and product against accepted criteria considered comprehensive and objective.
2. Standard and Poor's (4 Stars - Research Rating) "The S&P rating of 4 out of a possible 5 stars indicates that Standard & Poor's has high conviction that the manager will consistently generate risk-adjusted fund returns in excess of its relevant investment objectives and relative to its peers. Ratings are subject to change. To view the latest research information please visit www.standardandpoors.com.au. Ratings issued by Standard & Poor's Information Services (Australia) Pty Ltd AFS Licence No. 258896 are solely statements of opinion and not statements of fact or recommendations to purchase, hold or sell any securities or make any other investment decisions. Research houses receive a fee from La Trobe Financial for rating the product."
3. SQM Research - 4 stars to 4.25 stars - superior, suitable for inclusion on most Approved Product Lists. To view the relevant research information, please visit www.latrobefinancial.com.au This rating will not take into account your, or your clients' objectives, financial situation or needs. It is up to investors to consider whether specific financial products are suitable for your objectives, financial situation or needs. Research houses receive a fee from La Trobe Financial for rating the product.
4. Lipper Leaders Rating Total Return (Score – 5) Lipper Ratings for Total Return reflect funds’ historical return performance relative to peers. The ratings are subject to change every month. The highest 20% of funds in each peer group are named Lipper Leader or a score of 5 for Total Return. Lipper Leader ratings are not intended to predict future results and does not guarantee the accuracy of this information. More information is available at www.lipperweb.com. Thomson Reuters Copyright, All Rights Reserved.