Want some good money making advice? Keep the faith. Believe in the ability of good companies to turn a profit and don’t let down days on the stock market blind you to what you’re trying to achieve. Oh yes, show some guts, but make sure it’s measured by sensible risk management.
Master of the markets
The other night I interviewed a guy a called Anton Tagliaferro, the founder of Investors Mutual, on my Sky News Business Channel program. He has been called a “Master of the Markets” but, in reality, he’s someone who works hard to discover value in the stock market and his record has created his reputation.
Of course, it doesn’t mean he’s always right — he ain’t God but he’s the kind of person who I like to talk to in order to put balance into my perspective on the market.
I asked him if he expected a pullback on the stock market and he made the point that we have already had one. And while he never portrays himself as an infallible expert, he indicated that he didn’t think we would go past the low points on the stock market that we saw in early March.
What he is more certain about is that the economy — both local and global — are in miles better shape now than they were in November. He actually called me in early December and said he thought the worst had past.
At the time, I was inviting experts to ring the bell on my show. The reasoning behind this was the old saying, “no one rings the bell at the end of a bear market”.
Some really smart guys, who will remain nameless, rang the bell on my show and were proven wrong by the collapse of Lehman Brothers, which redefined the crash of 2008 into the mega-crash that nearly bred a Great Depression. Fortunately, government policy response has left us with a Great Recession and it feels like the worst of it happened after Lehman and it’s nearly out of the global economic and financial systems. We now have to deal with the crash-like effects of a market and global economy that both boomed to levels that needed correction.
The long-term investor
The interesting point is that if someone took Anton’s advice and bought in December, they would have felt the losses up to December but then rode up the big 25 per cent rally from early March. This underlines a number of points that long-term investors in blue chip, dividend-paying companies should take on board — it doesn’t matter if you get in early when the market is around the low points of a new cycle. Sure, you could lose out for some time but eventually the market will resume its march up.
I also talked to Jeff Bresnahan who heads up SuperRatings and his latest figures show our super funds have had another bad year — that’s two in a row — with the median fund losing 13 per cent for the financial year.
However, if you had plonked $20,000 in a super fund since 1993, when compulsory super was introduced, you would have seen that lump sum turn into $60,000. That’s not a bad return at a low risk. Also, super returns are after tax numbers and so when you compare them to other investments remember you have to deduct an ultimate tax bill.
All in the timing
By the way, Anton thinks the next sector to recover will be listed property trusts but not all have great balance sheets, so you do have to do some homework.
Once again, you might get in too early but if you are a long-term investor it might prove to be the best timed mistake you ever made!
Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
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