28 January 2021
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9 rules investors should live by

Shane Oliver
14 January 2021

5 reasons Australia is likely to outperform

  1. It’s done a better job of controlling coronavirus than many.
  2. It’s seen a stronger policy stimulus than most countries.
  3. It continues to benefit from a high exposure to China & Asia – with the high iron ore price swamping tensions with China.
  4. The drag from the mining bust is over.
  5. The Australian economy and share market are relatively cyclical and so should benefit from a cyclical global recovery.

9 things investors should remember

Yeah – I had these last year, but they are mostly timeless!

  1. Make the most of the power of compound interest. Saving regularly in growth assets can grow wealth substantially over long periods. Using the “rule of 72”, it will take 144 years to double an asset’s value if it returns 0.5% p.a. (i.e. 72/0.5) but only 14 years if the asset returns 5% p.a.
  2. Don’t get thrown off by the cycle. Falls in asset markets can throw investors out of a well thought out strategy at the wrong time - as some were in March last year.
  3. Invest for the long term. Given the difficulty in getting short term market moves right, for most it’s best to get a long-term plan that suits your wealth, age & risk tolerance & stick to it.
  4. Diversify. Don’t put all your eggs in one basket.
  5. Turn down the noise.
  6. Buy low, sell high. The cheaper you buy an asset, the higher its prospective return will likely be and vice versa.
  7. Beware the crowd at extremes. Don’t get sucked into the euphoria or doom and gloom around an asset.
  8. Focus on investments that you understand and that offer sustainable cash flow. If it looks dodgy, hard to understand or has to be justified by odd valuation measures or lots of debt to stack up, then it’s best to stay away.
  9. Accept it’s a low nominal return world – when inflation is 1.5%, 7% average superannuation returns are pretty good.

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