Clawing back your losses

Published in the Herald Sun, August 2009 by Katrina Barrymore

The share market has turned the corner, property is finally holding its own and interest rates are on the rise again – all good news for investors trying to claw back recent losses.

The global financial storm appears to be abating so how do you rebuild your finances?

Profits are trickling in to superannuation funds, as the sectors they invest in boost returns, but for independent investors the biggest danger ahead will be trying to recoup losses too fast.

Share market

"A lot of people are making the mistake of trying to makeup their losses in really quick time. 

What they are doing is taking too much risk to do that," Wealth Within founder Dale Gillham said yesterday.

"Already we are hearing from people who are going back in to margin lending in a big way and others who are highly leveraged in things like contracts for difference, options and currencies," Mr Gillham said.

"They think that all those sorts of things can get them back to where they were as fast as possible.

"People assume that this is a bull market, they are thinking the bull market is going to run again and therefore they can take a lot of risk.

"To me the next 12 to 18 months will still be quite rocky; it won't be strong- especially next year.

"For a lot of people it's going to take about three to five years to catch up to where they were, so my main message is `don't be in a rush'," Mr Gillham said.

DO
STICK to top 50 stocks.
GET professional advice
USE stop losses

DON'T
FOLLOW the herd
USE too much leverage
TAKE high risks

Property

Residential property, either as an investment or as the family home, is still the biggest single asset of most Australians.

The wealth tied up in property means the state of the property market has a big impact on personal finances.

The latest statistics show prices have stopped falling and are either steady or on the way backup.

According to Australian Property Monitors house prices increased 3.3 per cent nationally in the June quarter-back to the level of a year ago.

The recovery also had considerable strength, with Melbourne and Sydney recording big increases.

Melbourne house prices improved a significant 5.8 per cent in the three months to June to put prices 4 per cent ahead of June last year. 

And Sydney is now level with a year ago after a strong 3.7 per cent increase in June.

However, prestige property is still lagging with many upmarket locations still up to 10 per cent below their peak, according to APM economist Matthew Bell.

Investors, however, have fared the best in this downturn with unit prices showing the smallest price falls.

"The unit market didn't fall as much as housing and rental yields and are still better than they have been historically for quite a long time," Mr Bell said.

"Vacancy rates are low and there is strong population growth in Australia so we expect them to continue to put upward pressure on prices and rents for investment properties,' he said.

DO
WAIT until first-home buyers pull out of the market
PRESTIGE property offers good discount buying

DON'T
OVERBORROW
PUT up rents just yet

Savings

"Right now is a really great time to be investing money in a savings account or term deposit because the banks are really aggressively going after retail deposits," Infochoice chief executive Shaun Cornelius said

"There are some high interest rates being offered in the market, such as 5.1 per cent from online savings and we've seen those rates climbing over the past few months, during a period when the RBA hasn't increased official rates," Mr Cornelius said.

DO
WATCH online rates and switch to get maximum interest.
CHECK promotional rates versus base rates and conditions.

DON’T
MISS OUT on interest by keeping money in transaction accounts