Average Australian Bull Market

Average Bull Market Duration: 38 months
Average Annual Bull Market Return: 30.8%

Average Australian Bear Market

Average Bear Market Duration: 15 months
Average Annual Bear Market Loss: -31.1%

Interesting, but don’t put too much weight (if any at all) on these sort of statistics when making your investment decisions.

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If so you may be interested in this perspective published by AXA Australia today called “Reading the Signs. A guide to investment markets in 2010.”

The guide is easy enough to read without much jargon and covers some of the key aspects that I hear are on many people’s mind.

In conjunction with reading this guide I recommend you review my video article on “How to decide when to start investing again.”

If you decide you want to participate in the recovery by investing but are nervous about picking specific stocks or even managed funds then remember to always start simple. The easiest, simplest and also lowest cost way to invest is by using a index managed fund. Your return will be the market return – so if the market goes up you should also make money. (To learn more call me.)

What do you think of the AXA guide?

Please let me know your reaction to the AXA guide in the comments section below.

Was it informative or too full of jargon? Did it take you closer to making an investment decision? What else would you want to know? Share your thoughts below.

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For do-it-yourself investors it is handy to know about ETFs and how they work. It is also important to understand how they are different to Listed Investment Companies (LICs).  To learn a little more about how ETFs work I recommend this brief article from Vanguard Investments Australia called “ETFs: Market Making, Spreads and Liquidity“.

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Following the recent drop in real estate prices I have noticed many spruikers coming out again in force promoting their services and properties. If you perceive property to be “cheap” and are tempted into buying now please read Jenman’s article.

One of the valuable insights in Jenman’s article is when he busts the myth that property prices double every seven to ten years:

“In 1890, the average Sydney home price was $1,446 (£723). If property really does double every seven years then, in 2009, the average Sydney home will be worth $189,530,112.”

Neil Jenman has been in the real estate industry for decades and is now also a consumer advocate. Here’s his view on investing through property investment clubs and the like:

“In my opinion, investing in property via a Selling Machine company, which is rapidly becoming the most common way to invest in property, is the worst way to invest in property.”

“…all [investors] have been ripped off because they have paid far too much at the start – and they often pay far too much in holding costs.”

When direct investment in real estate becomes the right strategy to achieve your life goals find the right mentor to help you and ensure they are biased and/or incentivised to achieving your best outcome rather than theirs.

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Would you like ideas to manage your money in a way that doesn’t take much time and doesn’t require you to read the business news every day?

Do you like the idea of outsourcing to a professional but are not sure how?

If so, you should download and read my latest free e-book here.

This version includes a targeted introduction for information entrepreneurs, but the recommendations are equally applicable to most people. Download the e-book for free now.

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Or maybe have you been holding out on your regular investment plan because you haven’t felt comfortable?

If you made that decision based on an emotional trigger such as “feeling tired of losing money” then you face the real predicament of getting back in too late and missing out on big gains which often come in the early days of an economic recovery.

Watch the video below for some insights into how to decide when to start investing again.

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In his own personal account he says that he has been buying American stocks. He also says that people who currently have their wealth in cash should not feel comfortable at the moment. Read the full article to understand his reasoning, including some historical context.

Following the historical context Buffet writes:

You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

Slow, steady and committed wins the race. Chopping and changing in line with your emotions will cost you dearly.

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It’s time to continuously remind ourselves to take a strategic view and keep a long term perspective that matches the period we will be alive and investing. Finally some articles to that affect are appearing among the mass media doom and gloom.

You may think you have heard it before but keeping reading the good news – you need at least two pieces of bright news to outweigh the psychological impact of each piece of gloomy news.

Following is an excerpt of a long article by James Dunn in The Australian today. Rational analysis that enables you to learn from history.

Andex Charts has calculated the returns made by investments in the main accumulation index (share price growth plus dividends) of the Australian share market, made at every month-end since January 1, 1950, and held for 10 years. In the period to August 31, 2008, there have been 585 10-year investment periods — and not one had made a loss.

The lowest 10-year return was 2.9 per cent a year (for the 10 years ended September 30, 1974), while the best return was 28.7 per cent a year (for the 10 years ended September 30, 1987. The median 10-year return comes in at 13.3 per cent a year.

The most recent completed 10-year return — for the decade to August 31, 2008 — is 12 per cent a year. This is despite a 13.1 per cent fall in the last 12 months of that period. Reid says the index would need to have fallen by 66 per cent in September to produce a negative 10-year return.

The lesson in these numbers is that if you are certain that you can give a share market investment (that is, in the accumulation index) time, you can be confident that it will make money for you.

A financial planner would get into trouble for describing the share market as capital guaranteed but, statistically, the accumulation index is, if you hold it for 10 years.

Wealth creation is a long term project. Investing in growth assets like shares must always be considered with at least a 10 year horizon before you need to spend the money. Any time frame less than that is gambling with odds that are turning against you.

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So was the opening sentence of the front page article of The West Australian newspaper yesterday (9th October 2008).

It should have read:

“Anxious, emotionally fragile, short sighted sellers wiped…”

Movement in the share market index is based on actual trades completed. For every seller there is a buyer.

Buyers are always out for a bargain – it’s human nature. So would-be-buyers submit a bid below what they think the item is worth just hoping for an anxious seller to come along.

The “investors” at the moment are the buyers with long term vision and emotional control. They are not the ones wiping 5 per cent off the share market.

Revered investor, Warren Buffet, is often quoted as saying “the markets are a very efficient mechanism for transferring wealth from the impatient to the patient.”

Wealth creation is a long term game. Whatever you do, do not push the panic button!

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