Premium Finance Services

Over the last 100 years we have seen share prices and house prices double in value every 7 to 10 years but the growth has not been consistent. When viewed over the medium term (5 to 7 years) there is a vast difference between shares and property in the level of volatility (how much an investment falls or grows in the short term). We just do not know in advance which short term direction a market will take and for how long.

What we do know is that the longer the time frame the better the return; 5 to 10 years for property and 10 to 15 years for shares seems to reduce the volatility to an acceptable level.

The long term achievement from investing is as much about the value of compound interest as it is about the merits of long term investing.

The reason for this is that the last 100 years was a bit of a bumpy ride. Australia experienced two World Wars, the “Great Depression”, several recessions, and a number of over upheavals as our young nation developed. Investors tend to get distracted by the “noise” of investment professionals and forecasters (economists) that give people the false knowledge as to when and how to “time markets” and with the aim of securing over concentrated investments. This sporadic approach to investing seldom delivers a return appropriate to the level of risk taken.

In 2008 the Australian Share Market posted its worst return over a calendar year in 109 years (-43.0%) which was worse than the Great Depression during which the Australian All Ordinaries managed to fall 3.6% in 1929 and a further 28.1% decline in 1930.

The early 1970’s was a period of economic upheaval that rivals 2008. If you had invested $1,000 in shares at the beginning of 1970, by the end of 1974 your investment would be valued at only $619 (excluding fees and taxes).

The advice from Premium Finance Services remains the same
• First get your financial structure correct; then
• Maintain your focus on your longer term goals; and
• Ensure you are doing the best you can; and
• most of all, ignore the market noise (short term volatility)

Tags: Brisbane, Melbourne, Premium Finance, Premiume Finance Services

This entry was posted on Tuesday, August 25th, 2009 at 12:03 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.