All Ords Report 09 February 2016
"How to secure your financial future?"
To answer this question, the first thing we all need is a reality check on the average Australianís habits when it comes to money and investing.
I believe that most Australianís either donít want to know, or are just afraid to really be proactive with investing and looking at better ways to handle money. Inevitably this only delays the pain.
Letís face it, we are all going to retire, how we retire is dependent on the decisions we make and the steps we take.
When we do a reality check on the average Australian in terms of money and investment, even after more than 30 years of compulsory superannuation, we are still finding the average Australian retires on far less than whatís needed for a comfortable retirement. So ask yourself, if the average Australian is struggling to retire what can you do now to ensure you do better?
Unfortunately, the situation is unlikely to change, as the data reveals that most Australians still donít personally add to their superannuation, nor do they invest outside of super.
Rather, a large majority tend to live for now, pay to pay, and spend most of what they earn. To change your future you have to make better decisions now to have more choices in retirement.
Iím not sure about you, but I find these statistics rather alarming. Even more so is the research which indicates that 75% of Australians are still retiring on some form of Government pension, and as you might already know a full pension is only around $20,000 per year.
To be perfectly blunt, this means most retirees have an existence rather than a lifestyle, and worse, every year we see more and more baby boomers retiring to put even more strain on a system that isnít coping now.
Spare a thought for our children. What will we teach them to do differently?
Every day we are confronted with the fact that it is almost impossible for young people to buy a house, and when they do buy, they invariably have to borrow up to their eyeballs and put themselves at greater risk. In doing this, they condemn themselves to spend the best part of their lives struggling to clear the debt, and if interest rates rise, and eventually they will, the house of cards will fall.
Is this the future we want for our young people?
So here are a couple of questions that I would like to ask you.
What future do you want for yourself?
What are you prepared to do to ensure you get it?
Feel free to email me your answers at firstname.lastname@example.org.
If you want more on how to secure your financial future, today I recorded a two part series podcast, so click here to listen to part one (TWP 627).
On another note, before I get into my thoughts on the market, Iíve decided to do a live one day workshop on 20 February. In the workshop I will share with you how to find shares to buy, how to sell them, proper money management, and portfolio construction, so you can create a winning portfolio.
Plus you get to ask your most burning questions and I will help you with solutions to your biggest challenges around the share market. Lastly, I apply what Iím going to teach you to any share you choose so that you can see how itís done.
There is a special offer if you get in early, so give my team a call on 1300 742 738 or 03 9290 9999 and I will see you there on the day.
What do we expect in the market?
Last week the Australian share market behaved like a roller coaster. After trading up strongly at the start of the week to 5122 points, the All Ordinaries Index (XAO) pulled back hard to close below 4950 points mid-week. A strong rebound in the oil price gave wings to mining stocks and financials late in the week and this saw the market close back above 5000 points.
This week mining stocks have found strength, with the Materials sector having made its first decent move off the low in some months, whilst Financials and other stocks that have been rising are softer as our market tests the 18 January low.
Apart from a few days where the market has been quite volatile, and we may see a few more of these in the weeks ahead, this recent period on our market has been a relatively soft landing by historical standards. That said, my overall view remains unchanged, the XAO may still continue lower to around 4750 points before the next significant rise unfolds.
Currently, my analysis also indicates that the Australian market will change direction in the current quarter. Remember, not every stock has mirrored the marketís decline. Many stocks have actually been rising. This is where having solid rules for stock selection and your entry will minimize risk and make your portfolio more defensive.
Amidst all of the noise on the market recently, the head of Indiaís central bank flagged a day of reckoning for artificially inflated asset prices. So should we be concerned? Apparently this got the attention of ex Federal treasurer and member of the governing body of Australiaís Future Fund.
Firstly, when you see prominent figures citing doom and gloom I suggest that you take whatís being said with a grain of salt. When do we typically hear from economists and central bankers? Well, in my experience itís rare before a major correction, particularly from central bankers, whose job it is to create financial stability. Too many times Iíve heard this well after a correction is underway.
This may sound harsh but often big statements like this are made by people in prominent positions to justify their position, and this can make investors fearful when they donít need to be.
For an investor, understanding that fear doesnít result in sound financial decision making is probably one of the most important things you can learn. While this may seem obvious, Iíve met so many well educated people who have made decisions that are far from logical, simply because they are being driven by fear, which can lead to disaster.
If you are managing your own share market investments and you are fearful at the moment this should tell you something. Chances are you donít have a proper plan in place to manage risk. If you would like to talk to someone who can assist you feel free to call us on 1300 742 738.
One final point on the matter, I personally believe that this recent message is there to influence the FED to stick to its policy of rate rises in 2016.
To the traders, now's the time to finalise your analysis and trading plans in preparation for the next rise.
Dale Gillham is Chief Analyst at Wealth Within