Taste for risk starting to grow
Published in the Herald Sun, September 2010 by Karina Barrymore
Share market and super fund fortunes look set for a welcome revival as investors start to shrug off their safe haven investments in favour of riskier, but higher paying, shares.
With confidence high in Australia compared with other countries, investors and savers are expected to cash in their conservative investments for expected higher profits from the share market.
"Shares are likely to remain on a bit of a roller coaster ride over the next month or so, reflecting the ongoing uncertainty as to whether there will be a double dip back in to recession," AMP chief economist Shane Oliver said.
"However, beyond the near term uncertainties, we remain of the view that shares will see strong gains to year end and then through 2011," Mr Oliver said.
"Shares are very cheap relative to government bonds. Investors are still very bearish, which is positive from a contrarian perspective, and once it becomes clear that the US and global recovery is continuing, there is likely to be a big reversal of investment flows -- out of government bonds and back in to equities," he said.
Wiseowl analyst Tim Morris also said investment opportunities on the share market were starting to look good again.
"Share market conditions have stabilised over recent months and are now conducive to selective buying," Mr Morris said.
The overall performance, however, still was "likely to remain rocky", he said.
The average balanced superannuation fund is about 50 per cent invested in shares. As a rule of thumb whatever the share market does, a balanced super fund follows, by half the amount.
For example, if share prices go up or down by 2 per cent, a balanced super fund will go up or down by 1 per cent.
Fund manager Wealth Within chief analyst Dale Gillham also argues it may be time to cash up and plunge back in. "Many investors are staying away from the share and property markets, staying in or moving to cash. However, I would argue that the opposite should be occurring, as the best opportunities abound in times of uncertainty," he said.
"While I understand that Australians are wary about taking on risk right now, I have always said that those who are prepared to do their homework and take on risk will be rewarded in the long term."
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