Three Must Know Facts if you want a chance for better investment returns in the new year: Approaching the end of the year often sees investors go through the obvious steps of reviewing their holdings. The performance and working on the game plan for the new year.
Sadly for many, 2015 is a year to forget, with Australian shares going through a tough period. Trending very much downwards since Easter. For many investors, moves up or down in their stocks have in the past barely created a murmur. As many simply hold for dividends – in some cases, fully franked. Making them very attractive within Super.
However, for those taking a closer look at their income. Buy and hold has been a failure. I might add that failure is not too strong a word when you consider these THREE critical facts.
Fact One – Performance of the underlying stocks
The typical underlying portfolio stocks, held by most investors in blue chips, have been absolutely belted this year, as shown in the table below.
| Stock | 31st Dec 2014 | Current | Change |
| ANZ | $32.09 | $27.63 | -13.9% |
| BHP | $29.37 | $18.97 | -35.4% |
| NAB | $33.60 | $29.91 | -11.0% |
| RIO | $58.00 | $46.60 | -19.7% |
| STO | $8.25 | $4.11 | -50.2% |
| TLS | $5.97 | $5.43 | -9.0% |
| WBC | $33.16 | $32.22 | -28.3% |
| WES | $41.72 | $38.98 | -6.6% |
| WOW | $30.68 | $24.23 | -21.0% |
| WPL | $38.01 | $29.84 | -21.5% |
Naturally, past performance is no guarantee of future performance and, reading the above numbers. Sobering as they are, you would hope that to be true.
Fact Two – Your quality of life has been reduced
Investors who have simply held for dividends, while they have received a dividend, have received less income. Afterall, 4.5% on a stock worth 20% less is a 20% pay cut, simple as that!
To compound things further, through that time, we have continued to see the cost of living increase. This double whammy of higher costs and lower income has negatively impacted on many who rely on their investment income to live off, particularly in the superannuation space.
Fact Three – Opportunity cost
While the Australian Equity market has been getting battered there have been other opportunities out there. This doesn’t have to be different markets, but also different strategies within the same market.
Many investors, be that out of a patriotic thought, lack of awareness or simply resistance to change have remained steadfastly buy and holding Australian Blue chips, when they could have been doing significantly better by opening up to other strategies which, in the large part are lower risk.
To be clear, this isn’t about shifting your investments into another asset class or into the US, its about taking advantage of a supportive tailwind to push your investments along. Resist this at your own peril.
In fact, think about the story of Kodak – one of the most iconic businesses of the 20th Century. This is the company that actually produced the World’s first digital camera in 1975 but failed to recognise the shift and stuck with what it has always done. It was resistant to change. In 2012, Kodak filed for Chapter11 Bankruptcy! Going with the tide, not against it – shifting to what actually is working rather than sticking with the same old, is typically a smarter idea!
Do not let you share portfolio or Super have a Kodak Moment…
Rather than dig in and wait/hope/pray for a turnaround, how about checking out something that has been working – not just this year, but since the early 1970s.
Money only flows to those who are teachable
We have put together a 38 minute educational presentation that will step by step run through what you could be doing to create your own “recession proof” income. All you need to do is watch this video and see if this is for you.
If it is, great! We look forward to helping you.
If it’s not – no problem, at least you know.
But if you are still reading this now, chances are you don’t want another year seeing your investments get hammered – so now is the time to create a new ending to an old story…
