Share Market Wrap 26th Oct 2007

New research conducted by Standard and Poor’s highlights that financial services professionals are ignoring SMSF investors, and failing to provide them with the necessary education and tools to adequately manage their investments. No doubt, this stems from the fact that there is no long term gain in providing services to the DIY market. Yet SMSFs have experienced record growth, accounting for around 25% of the nation’s total superannuation pool and this growth is expected to continue.

While the research indicated that the education needs specifically related to investment fundamentals, risk and return, risk management and the importance of diversification, I would argue whether financial professionals such as advisors are the best people to be educating the DIY investor.

Furthermore, while the current bull market has made it easy for investors to profit, I believe mistakes are being hidden by the strength of the market in recent years. This raises major concerns, particularly when the market changes, which it will invariably do, as to how SMSFs will cope if they do not have the required knowledge and skill to manage their own investments.

So what can we expect in the market?

The strong move up on our market last Thursday (18 Oct) potentially indicated the down move was over, however, it proved to be a false signal given that the market moved down on Friday and then again on Monday of this week falling 131 points in one day. As I have previously indicated, the market is currently in the time period for both increased volatility and unpredictability, and this is certainly the case right now.

During these times, investors need to be cautious as false triggers often arise, which was evident by the move last Thursday. I am expecting the volatility to ease around 1 November, at which point the market will settle into its normal rhythm.

While my medium term view is that the market will generally be bullish through to late December or possibly early January, it is possible that the current fall may continue for another week to around 1 November with the market falling to between 6480 and 6300 points. Following this, the market will present an opportunity to purchase some great shares at lower prices and with more certainty.

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