New life of the party

Published in the Cairns Post, July 2008 by Karina Barrymore

The investor with a long and steady approach will reap rewards this financial year.

INVESTING

Have you made new financial resolutions for the year ahead? It's not all doom and gloom, there's new life in the year ahead.

For most investors it will still be a case of taking extra care with your investment choice. Share market players, for example, will need to carefully pick their stocks, even within the so-called recession-proof sectors.

For property investors, it is definitely a case of those who can hold and those who can't.

Unfortunately, it's grim news on the superannuation front with all funds likely to report a loss this year.

Some $50 billion has been wiped from super accounts this year as the value of investments has plunged. Knee-jerk reactions, such as switching funds or investment choice, need to be thought out - the long and steady investor usually wins the race.

SHARES

Despite a rally from the March low, half the stocks in the All Ordinaries index are now at fresh lows, Wise-owl equities analyst Tim Morris laments.

But good things can still happen in a bear market. Resources and food are a good starting point.

We are in a true stock-picker's market, characterised by a wide gap between the best and worst performing stocks, a trend that is expected to continue throughout the new year, Mr Morris said.

"There will still be plenty of money-making opportunities around, as the recent out-performance of the mining and energy sectors has demonstrated," he said.

However, investors will need to be very stock and sector specific.

"We expect the bulk commodities, copper and gas to continue leading the mining and energy sectors."

There should also be strong opportunities in the steel and rural sectors later in the year.

"After the worst drought in decades we expect opportunities in the rural sector to open up for companies with exposure to rising global food prices. The global food theme remains very strong," Mr Morris said.

Wealth Within analyst Dale Gillham thinks we'll see the share market improve as the new year moves along.

"I believe the market will be bullish and I expect the All Ordinaries index to peak sometime between March and
June 2009 with the opportunities in the coining year most likely in the energy, resources, materials and health care sectors," he said.

"That said, I urge investors to exercise caution right now, as there is still a possibility that the market could fall away between now and September.

"If it does fall then I would expect the market to find support between 4800and 5000 points on the All Ordinaries.

"Sectors likely to be hit hardest being financials, consumer discretionary, industrials and property trusts."

PROPERTY

There won't be any extravagant real estate fireworks this financial year.

"The market has started to react to high interest rates. Investors by and large have moved away from buying secure investment property," buyers advocate Chris Koren from Morrell and Koren said.

"Limited stock is maintaining prices on A-class real estate but any marginal investment property has reduced from last year's historical high by between 10 to 15 per cent," Mr Koren said.

"This correction should continue for at least the next 12 months, however, for those cashed up there should be an increased number of buying opportunities at the right price.

"With the lack of investment property available for renters, rental returns should increase in this tight market sector. Vacancy rates are at a historical low level which is good for investors, not good for tenants.

"Wise investors are still looking at bullet-proof, irreplaceable inner city real estate such as Art Deco apartments, small Victorian houses."

SUPERANNUATION

Every worker has a superannuation fund these days and they have learned to watch their nest eggs closely.

Unfortunately this year almost every fund is expected to report a loss. Just how big the loss is will depend on your investment option.

"Our research shows super members realise the share market is a long-term investment and, like any financial market, there are fluctuations," Industry Funds Network executive director David Whiteley said.

"Yet, that same research shows two-thirds of fund members still expect an increase in their super balances despite a year of volatility."

However, leaping out of one fund and into another based on this year's performance may not be the answer, all the experts warn.

The latest negative performance follows six years of steady bull market returns and on a five year average super funds are still well into the positive.