| Welcome to the October issue of the Select Wealth Management Dashboard Newsletter.
Are we there yet? Three weeks have passed since election day, and still we don't know who is going to run the country (at time of writing). No doubt Winston and the board will make a decision soon, and the Members of Parliament in the Beehive can get back to their day jobs of running the country. What's clear to me is that whoever ends up Governing, there will have to be a lot of compromise to ensure that all the parties involved are satisfied. Such is the nature of MMP – very good in some respects (checks and measures), but quite restrictive in others. Aside from local politics, there has been a lot happening in the world over the past month. However, none of it has resulted in any change. In Germany, Angela Merkel has been re-elected as Chancellor (although her Christian Democratic Party is now in MMP negotiations like New Zealand). In Catalonia, citizens voted overwhelmingly (90%) in favour of breaking away from Spain and becoming independent, but the referendum was deemed illegal and as such unenforceable. Again, negotiations are underway. In Australia, the USA and New Zealand, Reserve banks have all met and left official cash rates unchanged. In America President Trump continues to promise tax reform, but nothing has eventuated yet (although this is gaining traction now). A lot of activity – but nothing particular to report at this stage. So I thought that instead of reporting on news this month, I would take some time to talk about a concept that every investor has to grapple with from time to time – the temptation of trying to "time the market". This month, many share markets around the world (including New Zealand) reached all-time highs. On the other hand, volatility is at record lows. The S&P500 (American share market) has not fallen by more than 3% this year before reverting back to positive performance. This is unprecedented – corrections of over 3% are typically very common. The "bull run" in markets is now over 8 years old (since March 2009). So the question becomes "Is now a good or bad time to invest more in markets?" My answer to this is the same today as it always has been – nobody knows, and it's a mug's game trying to guess. In fact, there have been several studies done by different institutions which have measured returns that actual investors (you and I) experience relative to the actual markets. All of these studies have identified what is called the "investor gap". The investor gap is the difference between what the actual markets deliver relative to the return the investor receives over the same period. In all these studies, the investor gap is a negative number – typically more than 1%. That is, if the markets deliver 6% over a certain period, investor's actual experience is 5% or less. This is directly attributable to the timing of purchases and sales – trying to time the market. These studies are comprehensive, and consider various time periods (1 year through to 10 years), but they all point to the same result – we can't time the market with any degree of consistency. Not even Warren Buffet picked the market well. This is why you will never find me trying to "pick the market". What you will find me doing however, is constantly trying to understand what your goals are and how much risk you are willing to tolerate as an investor, and then following a disciplined investment process (backed by as much research as possible) to ensure that your investment returns match this risk tolerance and ultimately achieves your goals. A good investment adviser is not a magician who picks the market perfectly, it is someone who acts like a personal trainer and helps you achieve your goals – even when the going gets tough. The past month has seen very strong numbers. All markets are up – Japan as much as 7%. Exchange rates, interest rates and property values were muted. Here are the numbers: |
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In terms of your Select Wealth Management investment, your 30 September performance reports have been uploaded to the portal (for those of you who use the portal). If you receive your report in the mail, this will be with you shortly. The returns for the quarter have been very strong – particularly for the more aggressive portfolios. If you have any questions regarding your performance report or would like to meet to review your portfolio, please don't hesitate to contact me – I am here to help. Finally, thank you once again to all of you that have referred your family, friends and colleagues to Isaacs Financial Planning. Our current Giving Back campaign for the Wellington Free Ambulance continues to be well supported, and we hope to exceed our target of a $2,500 donation. You can follow our progress at www.mifinancialplanning.co.nz/giving-back.html . We will be looking for a new cause for the first 6 months of 2018 soon, so if you have any suggestions that you would like to discuss with us, please feel free to make contact. Until next time. Warm regards Dave and the team at Isaacs Financial Planning dave@mifinancialplanning.co.nz |
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This newsletter is intended for general distribution and does not constitute personal financial advice. Copy of my primary disclosure statement and secondary disclosure statement.