Diversification or De-worsification

http://www.youtube.com/watch?v=8RhnEPfjLfk

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

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