Monthly Archives: May 2016

Should investors chase yield or growth?

This is a difficult time for investors. Markets are uncertain and interest rates are at record lows. Most investors have little alternative but to invest in the equities market in an attempt to get a reasonable return. From the viewpoint of safety most investors tend to buy the higher yielding blue chip stocks. Certainly many investment advisors have been concentrating on yield and for the past 18 months have been advising investors to buy high yielding blue chip stocks. Their advice is presumably based on the fact that the dividends would be secure and that the blue chip stocks are safe. Let’s examine just how poor this advice has been.

Consider a strategy which compares the performance of a buy and hold blue chip portfolio with a managed portfolio of growth stocks. Both portfolios had a starting capital of $100,000 in January of 2015 and each held 10 stocks.… Continue reading

World equity markets are finely balanced.

World equity markets are now finely balanced. There could be a continued bull market perhaps in the United States but there are many uncertainties and it is now May, a time when markets often correct, so it is understandably a time when investors get rather nervous. But is there any reason for nervousness?

In recent times the strength of world equity markets has been due to very low interest rates and the activity of central banks as well as a reasonable performance from the United States economy. But world growth is slowing. Consider the status of the four largest world economies, the United States, the European Union, China and Japan.

The United States economy. After about three years of job gains the recent weak United States job figures are a cause for concern. GDP growth is very concerning with annual GDP now at 0.5% in the latest quarter. Retail… Continue reading

Elliot Wave and the ASX200 bear market

November 2007 was the start of a secular bear market in Australian equities. In Elliot Wave terms this was the start of a major A,B,C correction as shown in the chart of the ASX200 below. Elliot Wave analysis is useful in providing the investor with a longer term, broad perspective of the market. fib long term

The above chart shows the ASX200 over an 11-year period with the A, B, C waves of the bear market labelled in red. Wave A started in November 2007. Wave B started in March 2009 and wave C which started in March 2015 is expected to have some time and distance to run. The target for the C wave (the end of this bear market) is probably at least the 3150 level which was the low of the 2008 bear market.

The following chart of the ASX200 provides a more detailed analysis of wave C which… Continue reading

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