If you’re saving for your retirement, you may want to consider a new investment option.
The Federal Government has announced it will introduce an indexing scheme for retirement funds.
But it’s not a new idea, with the Government already making the decision to index the Commonwealth Retirement Savings Plan (CRSP).
What is an index?
An index is a financial plan that is indexed every five years and includes all of the major investment categories including stocks, bonds, real estate and commodities.
It has been around since the 1930s and is used to measure a company’s profitability and returns.
How it worksWith an index, investors are able to compare a stock’s price to the index.
For example, if a company had a $100 billion market cap, it would be a high-yield index.
But if the company only had a 1 per cent market cap and had only a $20 billion market capitalisation, it’s a low-yielding index.
It is based on a company with a market cap of $100bn and a market value of $20bn.
What to look forAn index isn’t a comprehensive list of investment opportunities.
Instead, it focuses on the major investments and provides an overview of each asset class.
That’s important to understand because the index is often used to determine the level of risk for each asset.
“The CRSP has an index of a range of securities, so that if a stock falls in value the fund would be able to take a riskier position on that stock,” explains Matt Taylor, chief executive of the CRSp.
And if you’re an investor, you can get a financial break with an index.
If you’re a small investor, or are just starting out, the CSA can provide a lump sum of up to $1 million per year to start out.
In addition, a lump-sum grant of up, $1,000 per year, is available to those investors who meet the CSP eligibility criteria.
To qualify, you have to have at least $100,000 in a qualified retirement account.
Investors can also get a higher index to invest in if they have a $25,000 or $50,000 CRSS (a combined CRSSP and CRS fund) in a qualifying account.
This can give you an extra investment boost, as the CSPA provides a guaranteed return.
More informationFor more information, you’ll want to check out the CFS website, and if you need help, contact the CFA’s financial services team on 1300 856 744.
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