Wealth Within - All Ords Report 3 July 2007
Last Friday was the last day that people could take advantage of the Governments tax incentive to place up to $1 million in super funds. In speaking to a number of people who have set up self-managed super funds (SMSF) as a result of this offer, it is evident that they are unaware of the compliance requirements of running a SMSF. This is supported by the recent Australian Audit Office report, which found that around 25,000 SMSF had failed to lodge a tax return.
While I am a strong supporter of investors controlling their assets, three issues need to be made really clear; firstly, there is work involved in operating a SMSF in comparison to a managed super fund; secondly, if compliance issues are not handled correctly it will potentially cost the investor a lot of money as a non complying SMSF can be fined up to 50% of the assets in the fund; and thirdly, the individual is the investment manager of the fund, therefore they need to have a working knowledge of the various investments available to them.
Let me say, that if you are not prepared to take the time to understand these issues, it might be better for your superannuation to stay where it is.
So what is happening in the market?
In my last report I indicated that because the market was moving into its yearly low we would most likely see some weakness, which was certainly the case as it fell 2.76% over the next week to 27 June. Since then, the market has risen slightly although it has continued in its sideways move that it has been in for the past two months. Today (3 July) the market is trading up based on the Dow rising 120 points overnight; however, it is likely that this will present a number of false triggers as we are in a period increased volatility. Given this, I believe this short term rise could trick a few people into thinking the market is trading up again.
As regular readers of this report, you will be well aware that I have been expecting the market to fall into its yearly low and without trying to sound like a broken record we are still waiting to confirm that the market is heading down. This will occur when the market falls below the low of 6200.10 achieved on 13 June, which I expect will happen in the next week. Once this happens I believe the market will continue to trade down to between 6000 and 5900 points before it finds support. As I have also previously indicated, it is highly likely that the fall will last into mid July after which the market will trade up strongly once again.
Until next time
Good luck and profitable trading.
Dale Gillham
Chief Analyst
