Investment Insights: January 2015

Welcome to our first edition of Investment Insights for 2015 and under our new brand ShineWing Australia.

2015-02-16

For our first article of the new year, we turn to Business Insider, which has put together a great piece looking at the volatility that occurred in the second half of 2014 and how this may have influenced some bad, but not unusual, investment behaviour from investors...

The article notes that “Corrections are part and parcel of the investment process, they come and go, and it is imperative to take a deep breath and realise that what is most important for building wealth is not ‘timing’ the market but rather ‘time in’ the market, and this was never more true as the S&P500 closed out the year at record highs, despite dips between June and December of 5% and 10%. The piece also makes reference to research conducted by JP Morgan that “illustrated how much an investor’s returns collapsed when they missed a few of the best days in the market. They found that if an investor stayed fully invested in the S&P 500 from 1993 to 2013, they would have had a 9.2% annualized return. However, if trading resulted in missing just the ten best days during that same period, then those annualized returns would collapse to 5.4%" Also included in the article is a great chart from Richard Bernstein of Richard Bernstein Advisors showing that “The performance of the typical investor over this time period is shockingly poor. The average investor has under performed every category except Asian emerging market and Japanese equities. The average investor even under performed cash (listed as 3-month t-bills)!"

Daniel Minihan, our Director of Wealth Management, has also written a number of pieces over the years on market timing including this piece on market timing which uses the same chart as the Business Insider piece and one of the most popular posts he has written titled “The Boss, the Secretary and Michael Jordan - Investing and Fortunes made and lost”. In this post Daniel looks at two separate investors and how their different approaches resulted in drastically different results and how hard work and perceived skills in picking the right stocks at the right time does not result in long term success.

So the next time the market starts to “wobble” be sure to re-read these pieces, take a deep breath, and stay invested!

If you would like to discuss your portfolio or any aspect of your financial affairs, click on the links below to contact one of our advisers today.

Daniel Minihan
David Foord
Matthew Baum

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