When the share market falls heavily we often see an increase in the number of people questioning their Advisers with many believing they could do better themselves. But is this really the case?

Investors who use Advisers tend to apply a dump and run strategy, with many preferring not to get involved in the process. The expectation is that the Adviser will produce consistently good returns on their investments. But during those periods when their investments don’t perform, they simply blame the Adviser and then look elsewhere repeating the process again.

Investors need to understand, however, that markets move up and down, and in order to manage expectations they need to take an active approach and educate themselves. Many investments lost 40 to 50 per cent during the volatile times in 2008 with some as much as 70 per cent. Investments that achieved better returns, however, were managed by those who had taken the time to educate themselves to understand the share market.

So what can we expect in the market?

Many believe that the Australian market follows the Dow, and whilst on the surface this may appear to be the case, the statistical correlation between our markets is only 60 per cent.

Currently the Dow is trading below its low of November 2008, whereas the All Ordinaries Index is still trading above this low. Both markets tend to have peaks and troughs at different times; for example, the previous major low on the Australian market was in March 2003 while on the Dow it occurred in October 2002. Why do I say this? Because it is possible we won’t follow the Dow as it trades to new lows given that our market has been holding up well over the past few weeks.

I still believe the current sideways move will continue until mid to late March after which we should see a strong move up into around mid year to levels of between 4200 and 5000 points.

Dale Gillham
Chief Analyst
Wealth Within

Dale Gillham, ‘one of the country’s most respected analysts’ (Wealth Creator Magazine, Nov/Dec 2004), sought after key note speaker and author of the best selling book ‘How to Beat the Managed Funds by 20%’, has assisted thousands of traders and investors to become confident and profitable in their direct share investments. Tired of an industry saturated by quick fix gimmicks and expensive short-courses, Dale co-founded Wealth Within to provide ‘ real education and ongoing personalised support’, as well as independent investment advice to traders and investors who have become disillusioned by the market for one reason or another. As testament to this, Wealth Within launched Australia’s first and only nationally accredited Diploma and Advanced Diploma of Share Trading and Investment.

For more information please visit www.wealthwithin.com.au

Last week I was reminded of a quote by Warren Buffet who stated following the extreme market pull in 1974 that we are fearful when others are greedy and greedy when others are fearful. Times have definitely changed, and people have swung from the greedy heights of the long bull-run between 2003 and 2007 to being fearful of the recent bear market.

Research by AMP Capital Investors, however, indicates that the average rise out of a bear market in the first 12 months is 34% but only those who take action will avail themselves of this gain. If we accept that the low that occurred on 21st November 2008 is the end of the current bear market in Australia, then probability suggests that investors who follow Buffets wise words should be well rewarded.

Sadly, however, most investors will sit on their hands and do nothing rather than avail themselves of the opportunity, and in so doing will potentially see their portfolios continue to underperform for quite sometime. In my opinion, it will be the investors who educate themselves and who take an active approach to their share market investments that will be profitable in the next 1 to 2 years.

So what can we expect in the market?

As I have said before in volatile markets we can expect the unexpected. While the volatility has eased, I expected the All Ordinaries Index to rise over the past two weeks. And while it did rise last week, this week it is now trading at its lowest levels in three weeks and continuing the sideways trend it has been in since last November. Given this and the fact that the market has so far failed to break above 3762 points to confirm the low of 3201.5 achieved on 21 November was the longer term low, we now need to reassess our position.

Often when a market falls heavily, the resulting rise struggles to gain momentum and instead displays signs of bearishness, which is what I believe is occurring right now. It is possible that the current sideways move will continue for the next month before we see any strong move up into around mid year to levels of between 4200 and 5000 points. There are a number of good shares that presenting profitable opportunities for those who are prepared, but as always we need to be careful and wait for confirmation.

Dale Gillham
Chief Analyst
Wealth Within

Dale Gillham, ‘one of the country’s most respected analysts’ (Wealth Creator Magazine, Nov/Dec 2004), sought after key note speaker and author of the best selling book ‘How to Beat the Managed Funds by 20%’, has assisted thousands of traders and investors to become confident and profitable in their direct share investments. Tired of an industry saturated by quick fix gimmicks and expensive short-courses, Dale co-founded Wealth Within to provide ‘ real education and ongoing personalised support’, as well as independent investment advice to traders and investors who have become disillusioned by the market for one reason or another. As testament to this, Wealth Within launched Australia’s first and only nationally accredited Diploma and Advanced Diploma of Share Trading and Investment.

For more information please visit www.wealthwithin.com.au

This week there has been intense debate in parliament about the government’s proposed ‘financial rescue package’. Now I may be looking at things too simplistically, but if people are scared about how the economy will unfold in the future, it is unlikely they will spend money which is exactly the opposite of what the government is trying to achieve. Incentivising people to spend money when they are more concerned about whether their jobs are secure will most likely result in any funds passed on by the government going towards reducing personal debt which in my book is a good thing and something I would encourage.

On another note, if the government wants to encourage spending, why do they continually push a negative spin about the economic conditions? It is a fact that consumers will not spend money if they do not believe their future is secure. Surely it would be more productive if the government spent time and money on encouraging us to be more productive, buy Australian goods and services, and support small business to create more jobs to get the economy moving. After all the back bone of this country is small business, with more people employed in this sector than any other. While it is good that the government wants to spend some of the funds on infrastructure projects, in my opinion they should be encouraging us all to support small businesses, who in the end, will see us through this economic downturn.

So what can we expect in the market?

While the market has fallen away slightly this week, it has been highly resilient given the pull back was only mild. This is a positive sign as it means there is a higher probability the market will rise over the next week to break above 3762 points and confirm the low of 3201.5 achieved on 21 November was the longer term low.

If this occurs the market could rise to around 4200 points before we see any short term resistance, and then onto around 5000 points and beyond by mid year. While the news is positive, as I have said before, it is essential that we sit back and wait for confirmation rather than grab a bargain in the hope that the market will rise.

Dale Gillham
Chief Analyst
Wealth Within

Dale Gillham, ‘one of the country’s most respected analysts’ (Wealth Creator Magazine, Nov/Dec 2004), sought after key note speaker and author of the best selling book ‘How to Beat the Managed Funds by 20%’, has assisted thousands of traders and investors to become confident and profitable in their direct share investments. Tired of an industry saturated by quick fix gimmicks and expensive short-courses, Dale co-founded Wealth Within to provide ‘ real education and ongoing personalised support’, as well as independent investment advice to traders and investors who have become disillusioned by the market for one reason or another. As testament to this, Wealth Within launched Australia’s first and only nationally accredited Diploma and Advanced Diploma of Share Trading and Investment.

For more information please visit www.wealthwithin.com.au

The common mantra amongst many in the financial services industry is to be patient, invest for the long term and diversify your portfolio. No doubt many of you would be familiar with these clichés, especially after the events of 2008. But if investors hoping to self-fund their retirement have followed these guidelines and invested in managed funds, why then are 75 per cent of all retirees still reliant on some form of government pension.

Indeed, how many parents or grandparents do you know who invested in managed funds and believed they would be adequately prepared in retirement are now reliant on the government for assistance? Obviously, this strategy has not worked for fund managers in the past and nor is it likely to work in the future – although the advocates in the industry who promote these clichés continue to grow rich, not because they are successful investors but because they continue to receive hefty commissions and fees every year.

According to the experts, investors in managed funds should accept the inevitable negative returns in the short term in order to achieve growth over the longer term. But just what is acceptable in regard to negative returns? Surely not the 40% to 60% negative returns delivered in the past year? I firmly believe that the time has come for fund mangers to stop using these cliché’s and start learning better risk management techniques to ensure the investor is protected in up and down markets.

So what can we expect in the market?

The market has risen 5 per cent from the low of last Friday, which suggests the current down move may be over. However, before we get too excited we still need to confirm the low of 3201.5 achieved on 21 November, as the current move may just be a false rally before further falls occur.

To confirm the low, we need to see a sustained move up with price rising above 3762 points. If this occurs then we could see the market rise to 5000 points and beyond by mid year. Although as I mentioned last week nothing in the share market is guaranteed and it is still possible the market may fall to below 3000 points. Given this, right now is the time to sit back and wait rather than try to grab a bargain in the hope that the market will rise.

Dale Gillham
Chief Analyst
Wealth Within

Dale Gillham, ‘one of the country’s most respected analysts’ (Wealth Creator Magazine, Nov/Dec 2004), sought after key note speaker and author of the best selling book ‘How to Beat the Managed Funds by 20%’, has assisted thousands of traders and investors to become confident and profitable in their direct share investments. Tired of an industry saturated by quick fix gimmicks and expensive short-courses, Dale co-founded Wealth Within to provide ‘ real education and ongoing personalised support’, as well as independent investment advice to traders and investors who have become disillusioned by the market for one reason or another. As testament to this, Wealth Within launched Australia’s first and only nationally accredited Diploma and Advanced Diploma of Share Trading and Investment.

For more information please visit www.wealthwithin.com.au