2015 was Challenging Times for Investors
2015 in investment markets was a challenging time for investors, with global economic uncertainty causing more financial market volatility than we have had in a number of prior years.
At the beginning of 2015, we broke from the crowd and forecast this to be a year where returns would be low, and the emphasis should be on capital preservation. This sometimes happens. Markets don’t just go straight up, as the ebb and flow of global economic forces and the business cycle have their effect on stock markets, commodities, bond markets, and foreign exchange markets. There is no point in fighting against it, as that usually ends in tears. The trick is to fully recognize the type of market you are in, recognize what global forces are at play, recognize the inflection points, and then position yourself accordingly with a view to the future (rather than the rear-view mirror).
Our clients know that we run a ‘safety first’ approach, where risk management plays a vital role. This year has been a classic example of that approach coming to the fore, and protecting capital amid volatile market movements.
Looking at a graph of the past 9 months, where we plot portfolio returns against the movement in the share market provides a good example. With the ASX 200 down around -12% since the start of March, our average portfolio is flat to mildly positive over this same timeframe with a low level of overall volatility. In the context of the year we have had, this is a pleasing result.
Moving forward, our indicators are more positive and we have been taking this opportunity to buy quality assets at a discount to their intrinsic value. This has already started to pay off, with gains of around 12%, 8%, and 11% respectively on those positions (at time of writing). This again reinforces the benefit of a disciplined, ‘value’ approach to investing.
If you would like to discuss investing, ask about investment portfolio advice or management services for self managed super funds please give Graham or Sherman a call or talk to your accountant on 07 5343 1000.