Bruce Brammall, The West Australian, 21 December, 2019
Christmas is only a “Ho, Ho, Ho” away and I hope there are plenty of goodies under the tree for you.
But this week, call me “Investment Santa” … I want to give you one present to unwrap early. Right now, actually.
Here it is: Turn on your computer. Login to your share-trading, investment or super-fund account. Pull up your performance for exactly the last 12 months, if you can.
Now, look at … those … pretty … numbers!
Breathe it in deep. Wow! Right?
If that didn’t put a smile on your face, there could be only two reasons. First, you don’t have any investments. Second, you do have investments, but they contained too many flea-ridden dogs.
Since this time last year (roughly December 23, 2018, when the market bottomed), total returns for Australian and international shares are straddling either side of 30 per cent.
Australian property has returned about 12 per cent, international property 19 per cent. (To stave off arguments, I’m using Vanguard figures.)
Even the relatively boring asset class known as fixed interest – loans to governments and businesses – did okay. Between 6 and 8.5 per cent.
In fact, the only way you could have lost in 2019 was to be totally, or mostly, in cash. (And even then, if you had your cash parked in an offset account, rather than a bank account, you did okay.)
Do you know why your returns were so good?
Do you remember this time last year? Global investment markets were in meltdown. They’d fallen 10 per cent since the October.
Largely, the panic was about the United States and China getting into a global trade war that was feared might end civilisation, but was certainly going to be the start of an economic ice-age, whose only benefit might have been to potentially provide a counter-balance to global warming.
Even Frozen’s Princess Elsa’s love couldn’t have defrosted it.
But, well, whaddya know … the world’s economy didn’t freeze (and half of Australia is now on fire. God bless our fireys). A huge, collective, fiscal soiling of pants, for nothing. A year later, The Donald and Xi Jinping are still arguing. They might sort something out. Or not.
What’s my point? Apart from wanting to spread a little Christmas joy to investors – have another look at your returns! – it’s a message about taking the long-term view.
Had you, along with many investment experts, bought the story that the world was imploding last Christmas and sold up, you should feel like a right idiot now, having missed upside of 20-something per cent over the last year on a growth portfolio covering property and shares.
Had you, instead, stayed calm and done absolutely nothing … you’d have enjoyed a 20 per cent return which has just paid for not only this Christmas, but your holiday to boot.
The message is, as always, to invest for the long term and don’t panic. (Though, if you have enough guts, invest more when the world is panicking.)
But if you never have invested, if you didn’t a year ago, if you want to but don’t know what you’re doing, if you know you should but don’t know where to start, then just sit back and enjoy the next few weeks. There’s no point trying to rush into anything right now.
But keep that frustration in mind. Let it burn into your psyche a little.
Because in a couple of weeks from now, you’re going to be looking to make good on your new year’s resolution. About your finances.
Get some advice. See a financial adviser. Get your superannuation sorted. Make the commitment to start an actual financial plan. One that involves you tipping in real money, real savings, to prepare for your future.
The most important part of this, of course, is making an ongoing commitment tip in a regular amount, each and every month.
So that when the market finds its next reason to stink the joint up – US/China, Brexit, etc – you will actually be celebrating. Because you’ll be buying new investments every month, whether the market is going up, down or sideways.
For the next 10 days, put that thought on the backburner. Enjoy the returns of the last year. And just enjoy some time with your family.