Archive for October, 2011


Big Swings

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Big swings in playgrounds can be scary for the kids who ride them.

As we get older and start investing in different playgrounds, it’s the big swings in markets that can cause similar emotions.

Recently ‘fear’ gripped markets and we saw a big swing downwards with the ASX 200 trading from 4354 on the 1st of September to 3840 on the 4th of October.

A steep drop of around 11.8% in a little over a month.

Many investors wanted to get off and stand on solid ground.

More recently, ‘relief’ has gripped markets and we’ve seen a big swing upwards in the ASX 200 from 3840 on the 4th of October to 4265 on the 24th of October.

A steep rise of around 11.1% in less than a month.

These days smart phones and modern media can spread ‘noise’ quicker than ever before, and around 60% of market trades are driven by automated (emotionless) computer trading.

Therefore big swings in the market are more likely than ever.

As a long term investor you should expect these swings, understand that no-one can accurately predict when they will occur or in what direction, and hang on tight whilst you focus on the longer term.


Man Vs Wild

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I met Bear Grylls yesterday and had the opportunity to have a chat to him about adventurers and climbers we both know.

A financial institution had secured Bear to launch their latest financial platform innovations.  To be truthful I was more interested in Bear’s description of his climb to the summit of Everest.

A masterful performer, I wasn’t surprised to see the audience enthralled in his stories.

I also couldn’t help draw parallels with him and with new investors, when both are dropped into hostile and unknown conditions where they must learn to conquer fears and the unknown.

Bear survives with the help of a team of experts including advisers with local knowledge.

In times like these, markets can also be very wild, but investors can increase their chances of survival with the help of a team of experienced advisers.

If you (or others you know) need to bolster their team, you can seek help via this website.


The World Cup

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Did you get to watch the beginning of the rugby world cup quarter-finals in New Zealand?

Wow … if you did you would have witnessed the amazing passion displayed by each team as they belted out their national anthems before the games began.

Each team looked determined and confident that their game plan … coupled with their passion … would bring victory.

But passion and a belief doesn’t let them all win.

It’s the same with active fund managers who say they can pick the best stocks.

They are passionate about their processes, skills and knowledge and fervently sing their company anthems.

But the latest Standard and Poor’s SPIVA report to June 30 stated that 77% of active fund managers failed to beat the ASX 200 benchmark.

A horrible scoreboard indeed; and one which means investors using their services were the main losers.

Maybe a ‘wallaby’ throwing darts to choose stocks would have been better?



Unforeseen Events

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Bad news is often delivered to investors with the descriptive cause being ‘unforeseen events’.

Economists revise their forecasts due to ‘unforeseen events’.

Analysts alter their ‘buy, hold and sell’ call due to ‘unforeseen events’.

Researchers provide a different rating and alter their recommended list due to ‘unforeseen events’.

Ironically, many in these professions justify their keep on the premise that they can predict the future by either choosing the best asset class, the best stocks or the best fund managers to invest in.

But ‘unforeseen events’ will always mean that no-one can accurately predict the future with any consistency.  (Well we haven’t found anyone).

Before following someone’s predictions, analyse their value proposition and motivation.  Try to identify if their promises are realistic, or if ‘unforeseen events’ are more likely.

If you don’t know how to do this, there are people who can help guide you.