1. Diversify. 

It’s pretty clear from the share market’s recent performance that there are a lot of investors tipping money into the market, partly because there’s nothing else out there looking very exciting.

You can’t really buy or sell a bit of a property. And as for interest rates, the smart money seems to be on their being more likely to go down in the near future (from their existing record low level of 0.75%) than go up.

That’s all very well for big players in the bond market, since lower rates produce higher bond prices but not much use for the rest of us mere mortal savers, for whom lower rates basically mean lower returns.

The big push by local investors has understandably been towards the big payers of franked dividends, such as the banks. Look at the CBA share price, for instance: it’s back in the low to mid $80s. You wouldn’t think there had been a damning Royal Commission last year threatening to clamp down on all those extra ways for the banks to earn money. At the low point in late 2018, the stock was just over $65, since when it has paid out $6.62 in fully franked dividends.

The brave buyers have done well in terms of total return but CBA and its cohorts are becoming something of a crowded trade.

What are the alternatives? Within the equity space, there’s merit in creating a spread of second-tier stocks that should provide one or the other or both of capital growth and dividends, particularly over the longer term.

And there are always Exchange Traded Funds (ETFs) that offer access to a wide basket of stocks. In the spirit of diversification, it would be worth a look beyond Australia at one or other of the global ETFs that will allow you to include some of those world-dominating technology stocks you can’t get here. Tech stocks represent 2% of the Australian equity market.

A further positive from looking overseas is that a lot of people expect our dollar to be weak in 2020. Once you have bitten the bullet and invested, you WANT our dollar to be weaker so you get higher $A returns.

2. Don’t fall for a scam.

You’d think that would be pretty obvious but we are in a world now where many more people are making their own investment decisions and the scammers are out in force. The internet is their superhighway.

A few factors conspire: one is, people making their own decisions without taking advice. Paying an adviser is a much better plan than doing your dough. Another is FOMO, Fear Of Missing Out.

I keep getting emails suggesting that Andrew “Twiggy” Forrest has been doing something clever with a suppose loophole in Bitcoin that “has experts in awe and big banks terrified”.

He has already stated clearly he’s had nothing to do with this scam, but it keeps appearing in my inbox, liberally sprinkled with the logos of every media outlet from ABC News to Nine’s 60 Minutes. Logos are scarily easy to move.

Have a brief play with this nonsense.

“Minutes after the interview was over, National Australia Bank called to stop Forrest’s interview from being aired- it was already too late”.

With all due deference to the people at NAB, do you really think they can move that fast and, more relevantly, do they have the clout to stop an ABC interview in its tracks? NO. And I won’t even start on how poor the hucksters’ grammar is. That’s a sure giveaway.

I’ve also just been sent a spruik entitled “Discover how and where Kochie invests his millions.”

“David Koch refuses to keep quiet despite pressure from bankers”, it says, under The Australian’s carefully placed logo, and a shot of David Koch’s beaming mug.

It’s the same tactic. A big name and the hint of untold wealth to be made. Again, do you really think David Koch consented to an online campaign to say how rich he supposedly is? And do you think the bankers are leaning on him?

I understand former New South Wales Premier Mike Baird has been dragged into something similar. I’m not sure how the scammers get round the fact that far from being a target of some NAB shutdown campaign, he’s actually an NAB executive. It doesn’t take a minute to see it can’t possibly be true.

It’s all phooey but clearly some people are falling for it, since imitation has always been the sincerest form of flattery.

3. Keep an eye on risk.

It’s much misunderstood. Some people wildly overestimate it (for instance, eschewing air travel even though it’s safer than crossing the road), while others go the opposite way and park their money in scary places, as in the examples above.

A specific issue to be aware of is the promised returns from fixed interest investments. While there are a lot of thoroughly safe places to put your money that will pay between four and five per cent per annum, which is way better than bank interest, there are solicitations out there offering seven and eight per cent.

They might also be thoroughly safe, but consider this. Some of the more generous ones are based on construction loans: loans to developers to complete projects. What happens if the demand for apartments dries up and they can’t sell them? That’s not to say it will happen, but such loans are right out on the pointy end of risk.

Take advice. If returns look really juicy, why are they asking you for your money when they could borrow it themselves at lower rates? Perhaps they can’t.

4. Filter out the noise.   

Every time the share market has a major down day, the headlines scream that the lurch “wiped X billion off the value of shares”. I spent years as a financial journalist writing those stories and someone else wrote the headlines.

They are a shorthand that scares people. Where’s the money that’s been lost?    

You haven’t lost it until you’ve sold into a market dip, and then only if you paid up in the first place. The Warren Buffetts of the world like to buy stocks after the prices have been hit.

Where Buffett absolutely nails it is that he knows in advance which stocks he wants to get into, and at what price.  You don’t need to be rich to play that game.

5. Discipline is all.

Of course there can be merit in being opportunistic but if you know what you are trying to achieve, even in the share market, and you take a longer term view, say five years, you can’t go badly wrong. Investors mostly get carted out when they borrow heavily to invest and the market goes against them. In terms of scale, bite off what you can safely chew. If you’re well enough resourced to have the market go against you for a while, you won’t need to sell stocks at lower prices. You might even care to pick up a few.