Hello and welcome to this month's edition of Investment
With the financial year end now upon us, many will take the
opportunity to look back over the performance and returns of their
portfolios. Returns have been very solid over the past year which
has been led by Europe who was up around 30%, followed by the U.S.
up around 25% and Australia up approximately 15%. Due to this
year's performance, most investors will have seen solid gains
in their portfolios. The first article we have for you this month
looks at the problem that hasn't been a big issue in recent
what to do when you have a big capital gain. In this piece,
author Jason Zweig from The Wall Street Journal, tells the
story of two married finance professors and their investment in
Tesla Motors. The article offers great insight into the difference
between owning a stock or the stock owning you.
In our second article, we shift from looking back at gains you
may have made, to the biases you might need to get past, in order
to reset your portfolio. The Economist has a regular blog
on investing and I encourage you to take a look at this article
published in early May
which focuses on the many biases an investor has when making
decisions about existing or prospective investments. The piece
is based on a book by Bob Swarup titled Money Mania: Booms,
Panics, and Busts From Ancient Rome To The Great Meltdown and
the blog makes a great point about hindsight bias. We make
thousands of predictions in our lives in regard to ourselves or to
others, and we tend to remember the ones we got right, not the ones
we got wrong.
Speaking of biases, Daniel Minihan our Director of Wealth
recently posted a piece looking at the unemployment position in the
U.S. So what does this have to do with biases you ask? To put
it simply, if a random survey of people was conducted today and
asked the question around whether or not the U.S. economy is doing
well or poorly, most people would probably answer poorly. However,
the reality is that whilst things can still improve, (as we noted
above that the stock market returned a healthy 25%), employment
levels have returned to those seen before the GFC. In addition to
this point, Daniel also presents a chart showing the employment
recovery relative to other financial crises noting that this one
was actually the shortest on record.
In the years following the global financial crisis of 2008 many Australian investors lost their life savings as financial products failed and the Australian Stock Exchange shed over 3,000 points.
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