The collapse of Opes Prime last week once again highlights the need for investors to be better informed and better educated. It seems that all too often we hear stories of consumers losing money because of companies going bust. Some of the blame needs to be placed squarely in the hands of the regulators who need to ensure consumers are properly informed before they invest, but consumers also need to take responsibility to ensure they understand what they are investing in.

Investors tend to focus considerable attention on returns and costs, and while these are important, consumers need to look beyond this to ensure they are fully informed and educated about the investment they are undertaking. As an educator and fund manager I see many investment opportunities come across my desk and on the surface they generally look pretty good but once I read the fine print, most end up in the bin. It seems that only after these disastrous events do the regulators and consumers look at the fine print and try to do something about it – but as we all know this is often too late.
    
So what can we expect in the market?

In my last report I indicated that the market was likely to find resistance to the current rise around 5666 points. On Friday, 4 April, the market traded through this level, however, it failed to close above it. On Monday, 7 April, the market tried to rally higher once again but there was not a lot of strength in the move, suggesting the market was about to fall again.

Over the past 3 days the All Ordinaries has fallen just over 2% and I expect this fall to continue at least into next week. If the market is bullish, it should find support soon and start to rise up next week, however as I have mentioned before I believe there is a high probability of further falls to around 4800 points before the market finds support and starts to rise in its next bull run. Remember patience is the key right now.

A common question that is often asked is how prepared are we for retirement? According to statistics, approximately 1 in 5 people are not sure they can afford to retire, 1/3rd don’t know how much money they need in retirement, while the remaining believe they can comfortably retire at age 65. The concern for many investors nearing retirement right now, however, is whether they will have sufficient income given that the volatility in the share market in the past nine months has had a significant impact on superannuation funds. Add to this the fact that we are living longer and you can start to see why there is continuing concern that many may not have enough to sustain themselves in retirement. Given this, when it comes to investing it pays to ensure you spread your risk across various asset classes so as to minimise your exposure to the downside risk in any one asset class. In other words, building up a diversified portfolio of shares, property cash and/or bonds will ensure you have a balanced portfolio that will support you in accumulating wealth to enjoy your years in retirement.    

So what can we expect in the market? 

The Australian market has continued to rally this week and it is the first time this year that the market has risen over two consecutive weeks. Whilst this is a positive sign, it is not an indication that the down move is over because to confirm this we need to see the market rise for a further five weeks. That said there is a possibility that the market could continue to rise although the probability of this occurring is not that strong.  In the short term, the market should rise over the next week with the next resistance level likely to occur around 5666 points. If the market rises through this level, it should continue to rise to around 6000 points before finding any further resistance. While this news is positive, right now it is wise to be patient and to wait until the market confirms it is rising.  

Given that the volatility in our market has continued to unfold in recent months, many are beginning to question whether the share market is really a good investment. However, as many of you would know with every pull back there are always opportunities that present when the volatility settles. Over the past few months many of the top shares on our market have fallen as much as 30% to 50% in price and while this presents some great opportunities for those who are patient, the question that a lot of investors are asking is when is it time to buy? While I believe there is still some more volatility to come, I expect it to settle in the not to distant future and when it does it will reward those who are patient.

So what can we expect in the market?

In my last report I indicated that if the market fell through 5222 points that it could fall to around 4800 points before rising in the next bull-run. Last week the market fell to 5130.10 points and while it closed higher at 5182 points for the week, the market was still displaying signs of weakness. You will remember in my last report I indicated that the market should rise for at least one to two weeks, and although this was delayed, it looks as though this is occurring now.

While the market has been trading for 13 weeks during 2008, it looks as though this week will be only the second week for the year in which it will close higher than it opened. Whilst this is encouraging, it is not a sign that the down move is over although the strength of the market this week is indicating that the buyers are keen. Given that the market has not risen for more then two weeks since October 2007, I would like to see it trade up for at least two more weeks before I start to change my outlook.     

That said I do expect the market will continue to rise over the next one to two weeks before it pulls back once again. I believe the market will bottom out in the not too distant future, and when it does it will reward those who are patient. Remember, the share market is a medium to long term investment therefore as I indicated above, I would recommend sitting back and waiting until the market finds a direction before deciding to invest.

Depending on where the economy is in regards to the business cycle, there will always be those who will win and those who will lose. In today’s current economic conditions the winners are those who are generating a high income from their investments as interest rates continue to rise while others are struggling to meet their mortgage repayments.

Falling share prices in recent months has caused dividend yields to rise considerably, and it should come as no surprise to find Centro and Allco with the highest yields at 128.55% and 127.54% respectively. That said I am not suggesting you buy these shares to capitalise on the income, as the risk to your capital is likely to be much higher than the potential return right now. But it does highlight that there are some great opportunities for those seeking higher income with a longer term outlook.

Of the banks Suncorp pays the highest dividend at 8.9% followed by St George at 7.5% whilst the best of the big 4 is NAB at 6.97%. All of the banks are paying fully franked dividends, which means the actual return is much higher and with returns like this you can bet there are many retirees are smiling all the way to the bank.

So what can we expect in the market?

The market fell away earlier this week and instead of finding support at 5222, price continued down to form a new low at 5164 points. Right now the market is very sensitive as it continues to over react to any news, which makes it very difficult to determine with any sought accuracy what will unfold in the short term.

That said I believe the market will be up over the next one to two weeks as many bargain hunters come in to buy what is perceived to be cheap shares right now. While this strategy is fine if you take a long term view of 3 to 5 years, it is not the smartest strategy if you are seeking quick returns as the market is yet to define a direction. If the market does rise over the next two weeks, I believe it will reach a target of between 5500 and 5700 points but only time will tell.