News and Views

• It is worth being patient with share investments
• Give your kids / grandkids good money habits early in life
• Investment returns

It is worth being patient with share investments

It's getting close to three years since we reached the bottom of the Global Financial Crisis share market crash (March 2009). Since then the Australian All Ordinaries is up 37%. It still needs to rise 61% to fully recover. At the moment, that happening seems to be a distant hope.

However, if you were invested through the GFC (and still have the tolerance for sharemarket risk), then history suggests it is worth being patient and staying invested. In the past it has taken up to 6 years for the Australian share market to recover from a crash. Even if it takes 7-10 years this time (until from March 2016 - 2019), returns from here should average 7-11%pa plus dividends. But they won't come consistently - there will be good and bad periods.

In August 2009, not long after the bottom of the share market crash, we published, "Share market recovery profiles". This paper looks at what has happened in the years after previous share market crashes. We have updated this paper to see how the current recovery is tracking and you can read it here.

Give your kids / grandkids good money habits early in life

This March edition of, Money Magazine is running as their cover article, "The $50,000 Challenge".  As part of this, they asked us to write an article about how someone in their first job should save their first $50,000.  If you have adult children just starting out in the working world, they might find this article useful.  We have put a copy on our web site: Money Magazine - March 2011

For those of you with younger children, make this savings challenge easier for your child by instilling good money habits early.  Parents who buy their children everything they want – be it toys they see and absolutely need or their first car - are not helping their child manage their finances well in later life.

We believe that you can start teaching children good money habits as early as 5 or 6.  Jo is currently experimenting with this on her own two (5 and 7).  She says, “I talk to them about what things cost, give them pocket money so they can make decisions about purchases.”

“Can I have this”, when answered with, “Yes, you can buy it with your own money” have resulted in better and more considered purchase decisions.  The kids have opened savings accounts and I double any savings they decide to make.  “I even talk to my thoughtful 7 year old daughter about the share market so she will have had plenty of experience with it before she starts investing.”

Investment Returns Update