Hello and welcome to this month's edition of Investment Insights.
Australia is considered to be a unique place for investing, not because of the types of investments that we have, but more because of the way we go about investing. The introduction of compulsory superannuation, and the subsequent proliferation of Self-Managed Super Funds, has empowered many people to take greater control of their money and make critical decisions about where and how they should invest for their future. In this article from Morningstar, the idea of performing your own investment management is challenged by considering ' the science of investing'. The author, Samuel Lee, writes that the most successful societies entrust scientifically trained workers with the most specialized tasks, such as performing brain surgery, designing airplanes, and setting market-wide interest rates. He goes on to question why some people choose to take investment matters into their own hands for no good reason other than a vague belief that they can do it if they put their minds to it. It's an interesting piece that then goes on to discuss some of the principles that we use for our clients every day.
Speaking of science, we have another two articles this month that don't look at the science specifically but they indirectly point us back towards it. In this article by Lydia DePillis from the Washington Post, she discusses a recent paper by Goldman Sachs showing that not only do most forecasters of economic or market data get it wrong, but they tend to get it wrong consistently. Even more surprising was the evidence that they are actually getting worse, not better, which is interesting given the greater access to data and information in modern times. In further support of this general inability to accurately forecast is this piece that discusses how successfully timing the markets is an urban legend. Eric D. Nelson, who is a CFA, notes that when looking at timing it is also important to look at risk, and that even a profitable, well-timed trade may not produce a better return when compared to the risk attached to it, as opposed to a more traditional balanced asset class approach.
Talking about asset class, it's that time of year again when we look back over the performance of portfolios and asset classes over the past 12 months. Daniel Minihan, our Director of Wealth Management, wrote a piece on his blog recently, including a really cool chart looking at not only the returns of the asset classes, but also on a balanced portfolio including all of them. Check it out here, and for a little further reading take a look at this piece he wrote on the old chestnut about 'time in the market, not timing the market', which provides further evidence on the need for a long term investment strategy.
This publication is issued by Moore Stephens Australia Pty Limited ACN 062 181 846 (Moore Stephens Australia) exclusively for the general information of clients and staff of Moore Stephens Australia and the clients and staff of all affiliated independent accounting firms (and their related service entities) licensed to operate under the name Moore Stephens within Australia (Australian Member). The material contained in this publication is in the nature of general comment and information only and is not advice. The material should not be relied upon. Moore Stephens Australia, any Australian Member, any related entity of those persons, or any of their officers employees or representatives, will not be liable for any loss or damage arising out of or in connection with the material contained in this publication. Copyright © 2011 Moore Stephens Australia Pty Limited. All rights reserved.
