Monthly Archives: March 2015

Asset allocation and Self-Managed Super Funds

Asset allocation is something that most investors seem to avoid or even ignore. It is really important to periodically review portfolio diversification and asset allocation. How often should it be done? It probably depends on how much change there has been in the investing environment but it is worth looking at every six months.

The factors which makes reassessment of asset allocation particularly important include changing interest rates, significant change in the value of the Australian dollar (AUD) and a changing investment environment. During 2014 the Australian dollar was near its long term high against the USD. A fall in the value of the AUD was a high probability so allocation of investments to overseas securities was an obvious move. Investors who took that approach have had more than a 20% capital gain in addition to exposure to a strong United States stock market. From the table below it is… Continue reading

Stock market value and volatility

There is a high probability that the bull market in equities will continue, given the very low returns from alternative investments in an environment of very low interest rates and high liquidity. But investors in equities while searching for stocks with value need to be tolerant of increasing volatility.

Market valuation.

In the United States there is increasing concern that a very strong USD is placing increasing pressure on the profitably of large corporations whose markets are mainly overseas. By historical standards the USD is far from its highest levels and could be expected to rise further. The result may be a slowing of the bull market in the United States. There is also concern that the equity market will be affected if the Fed raises interest rates. So while the United States bull market will in all probability continue, one must question the valuations of many stocks.

In Australia… Continue reading

Has the bull market ended?

With a stock market correction now underway the question arises: is this the end of the bull market? The question is examined in brief using fundamental and technical approaches.

The fundamentals

The world economy shows some very real concerns with very high sovereign debt, falling GDP and very high unemployment in many countries. The American economy is one of the few bright spots. In Europe the equity market is now quite positive with the start of quantitative easing. China continues to slow and this will impact on world growth while Japan whose economy is in desperate straits has embarked on a massive quantitative easing program.

The Australian economy is weakening, exacerbated by poor leadership from governments over a number of years and this comes at a time when commodity prices are falling and the economies of our export partners are weakening. Business confidence is falling and unemployment is rising.… Continue reading

The risk of investing in this bull market

With the real interest rate getting closer to zero, investors particularly the baby boomers are now in a desperate search for a higher return on their savings. This means that most are investing in shares and although equities in the long term outperform cash and property, the share market is higher risk and offers significant risk of capital loss.

While there is a need to have exposure to the equity market, investors need to be alert to the risks and have a plan to exit the market as the danger signs become evident. This is imperative because with more and more investors coming into the market we have a developing bubble which can only end with a market collapse. From history we know that this has always happened and the current bull market is no different.   While the Australian bull market could continue for at least another few… Continue reading

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