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The investment outlook - it's not all that bad! Here are nine reasons why
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The past financial year has been rather messy for investors with another long worry list, a bear market in most share markets and record low bond yields.
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However, returns for diversified investors were not disastrous and followed several strong years.
·      More importantly there are nine reasons for optimism: okay growth, easier for longer monetary policy, rising prospects for easier fiscal policy globally, we may have seen the worst of the commodity bear market, deflation risks are likely receding, the global profit slump may be close to over, share valuations are okay, investors seem to be getting used to a falling Chinese Renminbi and there is still a lot of bearishness around.
·      So expect investment returns to remain constrained and volatile but they are likely to be reasonable.
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Crash calls for the Australian property market - how valid are they?

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Very expensive housing and high household debt leave Australian housing vulnerable. However, in the absence of either a recession or much higher interest rates a property crash looks unlikely.

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The Sydney and Melbourne property markets are likely to slow further this year and have another cyclical 5-10% price downswing around 2017-18.

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The combination of high house prices, the strong gains of the last few years in Sydney and Melbourne, low rental yields and possible changes to tax concessions around property mean investors need to be careful.

Click here to read more.

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Global politics in the year of the monkey

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There is a seemingly long list of global political issues that could affect investors this year: the US presidential election, a vote on Brexit, the rise of populism in Europe, tensions in the South China Sea, tensions between Saudi Arabia and Iran, and an election in Australia.

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The bulk of these issues should turn out okay for investors, but it's worth keeping a close eye on them.

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Shares hitting bear market territory - the fear of fear itself or something more fundamental?

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The malaise in financial markets is continuing with Australian shares now joining Europe, Japan and emerging markets in a bear market.

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Global growth worries could drive more short term weakness. But in the absence of a US/global recession it's hard to see a deep and long bear market.

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The key for investors is to recognise that periodic declines in share markets are normal, that selling after big declines just locks in a loss, that dividend income from a well-diversified portfolio is little affected by share market volatility and that income flow from Australian shares is now very high relative to bank deposits.

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2016 – a list of lists regarding the macro investment outlook

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2016 should end much better than it has started off for investors, ultimately providing ok investment returns, but expect a continued volatile ride.

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Watch the Fed, the $US, global business conditions indicators, China and business confidence in Australia.

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The investment cycle still favours growth assets over cash and bonds – despite all the volatility.

Click here to read more.

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A rough start to the year, which could have further to go. Seven reasons not to get too concerned though

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Financial markets have started the year on a rough note as last year's worries about China and global growth in the face of US monetary tightening continue.

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This could drive more short term weakness. However, in the absence of US/Global recession, which still seems unlikely, it's hard to see a GFC style bear market.

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The key for investors is to recognize that shares offer a higher return potential after sharp falls, selling after big declines just locks in a loss and that is dividend income from a well-diversified portfolio is little affected by share market volatility.

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The Australian housing market starting to cool (in parts)
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Australian housing remains overvalued and this has gone hand in hand with high household debt. Against this, supply has been constrained and there has not been a deterioration in lending standards.

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The hot Sydney and Melbourne property markets are showing signs of cooling as APRA measures bite. Expect price falls of around 5-10% around 2017.

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Property investors need to be careful.

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Putting recent share market falls in context
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Periods of declines and volatility in share markets are a normal part of the way they work.

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Share market falls tend to be deepest when associated with recession (particularly US recessions).

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Share market falls boost the medium term return potential from shares and once share markets bottom they are invariably followed by a strong rebound. Trying to time the bottom though is always hard, so averaging in after falls makes sense for those looking to allocate cash to shares.

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Shares and global growth worries
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A perfect storm of factors led by China worries have caused turmoil in shares.

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Our view remains that what we have seen is likely to be a correction (albeit severe) rather than a new bear market.

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It's too early to say shares have bottomed but valuations have improved, investor sentiment has quickly become very negative (which is good from a contrarian perspective) and China's easing move should help if it's followed up with more easing.

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Investors should allow that: shares often go through rough patches; selling after falls just turns a paper loss into a real loss; market falls throw up opportunities; and dividends remain more attractive and more stable than bank interest.

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Global share markets fall despite sound fundamentals
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Markets have been volatile recently, especially the Australian equity market and there has been a lot of media focus on this.

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All major share markets have been sold down heavily over recent days. The correction on equity markets has also been accompanied by ongoing falls in the price of commodities and emerging markets currencies.

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The investment outlook - can the good returns continue?
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The past financial year saw a third year in a row of solid returns for diversified investors.

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While returns are likely to slow over the year ahead, they should still be reasonable as share valuations are okay, the global economy is continuing to grow and the uneven and constrained nature of that growth is keeping inflation low and monetary conditions easy.

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Greece after the "No" vote
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The Greek No vote means more uncertainty ahead regarding Greece, with significantly heightened risk of a Greek exit from the Euro.

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The threat of a flow on to other Eurozone countries is likely to keep markets on edge in the short term. However, contagion is likely to be limited as the rest of Europe is now in far stronger shape than was the case in the 2010-12 Eurozone crisis and defence mechanisms against contagion are now stronger.

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As a result we don't see the Greek debacle derailing the European or global economic recoveries. So while the correction in shares looks like it might go further, the broad rising trend in markets is likely to continue.

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Are you super ready for year end?
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Receive a free super top-up with government co-contributions

·      

Salary sacrifice and pay less tax with extra employer contributions

·      Help your spouse with tax offsets on spouse contributions
Click here to read more.      
·     Ten other financial planning tips before 30 June
Click here to read more.

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Finding income opportunities in bonds and equities
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In this article, Jeff Brunton, Head of Credit Markets, and Michael Price, Co-Head of Australian Equities, explore the various options available to investors who will be relying on an income stream to fund their living expenses.

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We look at the opportunities available in equity and fixed income markets, and discuss why it's important investors consider products that can provide capital growth and protection from the unknown.

Click here to read more.

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Another 21 great investment quotes
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Investing can be profitable as well as fun, but it can also be unnerving and unprofitable if you don't understand markets and don't have the right mindset.

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The basics of successful investing are timeless and some experts have a knack of encapsulating these in a way that's insightful.

· A year ago Dr Shane Oliver wrote on 21 investment quotes he found useful. Here are some more.
Click here to read more.

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2015 - a list of lists regarding the macro investment outlook
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2015 should be another reasonable year for investors reflecting okay growth and easy monetary conditions, but expect a bit more volatility.

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Watch global business conditions indicators, US wages, Spanish and Italian bond yields, the ECB, the Chinese property market and confidence readings in Australia.

·       The investment cycle still favours growth assets over cash and bonds.
Click here to read more.

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The end is nigh, or is it? Try to turn down the noise
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A combination of the blanket news coverage of economic worries, the associated information avalanche we are now exposed to and our innate fascination with crises is likely making us worse investors: more fearful, more jittery and more focussed on the short term.

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Investors should recognise that shares climb a wall of worry, try and turn down the "news" volume, focus on investing for the long term, and remember the best time to invest in when everyone is gloomy.

Click here to read more.

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Sub-par global growth, aging populations and the search for yield
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The search for assets providing decent investment yield is continuing. The aging population is playing a role but the main drivers are low interest rates and bond yields.

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With global growth remaining uneven and inflation falling again, global and Australian monetary tightening remains distant so a sharp back up in bond yields threatening investments such as shares, commercial property and infrastructure still looks a way off.

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A range of assets continue to provide attractive yields relative to low cash and term deposit rates.

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Australian house prices - a bit too hot in parts
·      The Australian housing sector is doing its part in helping the economy rebalance as mining investment slows.
·      Thanks largely to a persistent undersupply of new homes, Australian housing remains overvalued. Negative gearing, foreign and SMSF buying are just a sideshow to the supply shortage.
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The home buyer market is still not seeing the bubble conditions of a decade ago, but the market is too hot in parts and the risks have grown. Expect increasing jawboning from the RBA with a rising likelihood of credit growth restrictions for investors if it doesn't slow soon.

·        The medium term return outlook for residential property is likely to be very constrained.
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Why I love dividends and you should too
·      Dividends are great for investors as decent dividends augur well for earnings growth, they provide a degree of security in uncertain and volatile times, they are likely to comprise a relatively high proportion of returns going forward and they provide a relatively stable and attractive source of income.
· If dividends are allowed for the value of an investment in Australian shares has surpassed its 2007 record high.
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It's important that dividend imputation is retained in Australia to ensure dividends are not taxed twice and companies continue to pay out decent dividends.

Click here to read more.

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Investment outlook after another solid financial year
·       The past financial year saw solid to strong returns from most asset classes drive good returns from balances and growth oriented investment strategies, including from super funds.
·      Investors should expect returns to slow over the year ahead, but they are likely to remain sold as share valuations are still reasonable, the global economy continues to grow, the Australia growth outlook improves and monetary conditions remain easy.
Click here to read more.

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 Common myths and mistakes of investing
 ·      Investors frequently employ common sense rules of thumb that often turn out to be wrong.
         
 ·  Because investment markets are forward looking it often makes sense to turn common sense logic on its head.
 Click here to read more.

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 Why investors need to be wary of crowds
 ·     For periods of time it may pay to back the crowd in investing, e.g. when a bull or bear market is developing.
 ·     But at extremes the crowd is invariably wrong. Eventually everyone who wants to buy will have done so and the only way is down (or vice versa during crowd panics.
 ·      Investors are best off taking a contrarian approach - buying into assets that are unloved by the crowd and undervalued and selling assets that have become overloved by the crowd and overvalued.
 Click here to read more.

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 2014 - a list of lists
 ·     Thanks to improving growth and very easy monetary conditions, 2014 is likely to be another year of good returns for investors, albeit a bit slower than in 2013.
 ·     Watch global business conditions indicators, wages growth in the US, European bond yields, Chinese lending growth and Australian consumer related indicators.
 ·     Australian growth is likely to pick up a bit thanks to stronger housing investment and consumer spending.
 ·     Right now the investment cycle is still moving away from cash and bonds in favour of equities and growth assets.
 Click here to read more.

 

The information contained on this webpage is provided in good faith. While the contents are obtained from various sources that are deemed reliable, it is not guaranteed as accurate or complete and should not be relied upon as such.

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