Archive for the ‘Finance Lessons’ Category



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The world is more global than ever.

We are told that our economy is in good shape, government debt is low, we are in the right place on the map (Asia); and have an excellent outlook because we will be direct beneficiaries of a longer than predicted commodities boom.

Yet our market doesn’t seem to care.

It is more global than ever. If bad things happen overnight in Europe or the US …. then our market reacts as if we are sitting on their doorstep.  If they go up …. then often we follow.

Frustrating, but we need to get used to it because that’s the way markets are now intertwined.

On another note, Georgie’s Blog has also gone global in that I’ve taken extended leave until mid January.

You may get an occasional blog during this time, however regular weekly blogs will most likely continue in February 2012.

For those who wish to follow my global travels, I have just launched a new website today which will include a regular update, and provide an insight into another passion of mine …. the world of adventure.

You can get to that website via this link .

 (For those needing expert advice; Simon, Russell, Gary, Sandra and Maria are available for immediate contact, and I will be keeping in touch via satellite phone for any urgent requirements)

 Safe travels

 Mark ‘Georgie’ George


Zombie Funds

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Zombie funds are a major problem for unsuspecting investors.

Essentially they are a dead (or ‘closed’) fund given a semblance of life by its fund manager, but they are soul-less.

Typically zombie funds can have:

  • High fees
  • Under performance;
  • Low funds under management so they get neglected; and
  • Limited flexibility.

And there are literally thousands of them.

When I last checked the Morningstar’s database of 11,000 funds, it uncovered about 3,000 closed funds.

What’s more alarming, was that close to two thirds (62.71%) of these funds were $10 million or less; with 52.12% being smaller than $5 million.  Not zombie funds yet – but how cost effective and well managed are they?

Unsure if you (or your family members) have a zombie fund?  Well ask an expert or visit for a free appraisal.


The Melbourne Cup

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Well it stopped the nation; and it also stopped the delivery of your Tuesday blog for 24 hours.

With around $100 million bet on the race, that means there were lots of people trying to pick the winner by doing ‘the form’.

But can we relate picking a winner at the horses to trying to pick who the best fund manager will be for the next 12 months?

  • The trainers would be the economists
  • The jockeys would be the fund managers
  • The horses would be ‘the market’
  • The tipping experts would be the researchers
  • And the form guide would be the historical returns

The horses with the best form are often the favourites.  The fund managers with the best historical returns are often the most popular and also gather the most inflows.

But as with Americain, the favourites don’t always win.

Portfolio Planners have reviewed the performance of some past fund manager ‘favourites’, and also found similar outcomes, eg.

  Top Performing Funds 1 Year Rank 1 Year Rank Following Year
1995 Colonial Managed Growth Fund 1 of 63 58 of 68
1996 Mullens – Investment Fund 1 of 68 79 of 81
1997 Tyndall – Equity Performance No. 3 1 of 81 57 of 85
1998 Challenger Aust Share Income 2 of 85 89 of 91


We could go on but hopefully you get the point.

Trying to pick the best fund manager based on past performance can be as difficult as trying to pick the horse with the best form as the winner of the Melbourne Cup.

Using an ‘enhanced asset class’ approach provides an excellent alternative.


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.


Superannuation is not an investment – it is a structure.  It is simply a trust.  If you follow the rules, the trust structure gets amazing tax concessions.

People who rattle off that they ‘don’t like super’, will generally pay lots more tax throughout life, and live off less in retirement.  That’s silly – don’t listen to them.

The same people usually complain that Governments change the rules too much, and will do so again.  That’s true.  But have you ever stopped to think how often they change rules outside of super?  Heaps more.  So what’s the big deal?

I have heard lots of people complain when they don’t have enough super – but I’ve never heard a complaint from someone telling me they have too much.

I have heard people complain about ‘preservation’; how they can’t get their hands on super until they’re old; and how that’s a horrible thing.

In reality it’s the only reason why super is ranked the largest asset in retirement outside the family home. Preservation is most people’s saving grace, and ensures there’s plenty of cookies left in the cookie jar when it’s time to eat.

Your family home isn’t going to give you an income to live off.  So although super may rank as the largest asset in retirement behind the family home, it’s the most important one to help you maintain your desired lifestyle when you stop working.

Get smart on the super-sized benefits of super.


Does it really make sense to spend everything today in case you die tomorrow?

Because you probably won’t.

So don’t try and justify stupidity with this quote.

In fact the stats are stacked in your favour that you will be alive tomorrow.  They say that you will live a lot longer.

That’s why the average life expectancy for males and females is increasing.

By all means ‘live in the now’, and enjoy every day to its fullest.

But before you do, make sure you first invest 10% of what you earn (in addition to the 9% your employer contributes to super).

You can still have heaps of fun spending the rest, and feel a lot smarter in the knowledge you have a plan for the future.

Build a portfolio that is designed to create a growing income for life.


It’s not what you don’t know that gets you into trouble – it’s what you do know that then turns out to be wrong.

High conviction bets are made when you think you’re on an absolute winner – a financial certainty.

Sure the rewards can be spectacular if what ‘you know’ turns out to be right.

But life can be very uncertain.

Fortunes are only lost when diversification is thrown out the window.