Being somewhat of a ‘student’ of market behavior, I have been particularly interested in the analysis of assorted media experts about the continued record highs being enjoyed by the US share market.
And as is always the case with these things, there are differing opinions.
The ‘bearish’ commentators view this record-breaking as actually the harbinger of impending market doom, whilst the ‘bulls’ are suggesting it’s just the start of the good times. Whoever is right only time will tell, but if nothing else, it is certainly providing us, with a stark reminder of our very own stock markets woeful underperformance.
There have certainly been no record highs for the Australian market; in fact, it hasn’t even come close to the previous one. Now for a country boasting continuous economic growth for over 25 years, this is indeed strange market behavior.
But spare a thought for all the index investors out there. Index funds have become the new “black’ of recent years, and although they have been around for a long time, their popularity has grown exponentially as a result of advisers moving to a fee for service model.
It seems the cheaper management fees of index funds when added to an adviser service fee’ gives a total cost result far more palatable for the average advice client.
So most financial plans written after 2008 will probably include an Australian Share Index fund and no doubt it will have been illustrated with the ubiquitous graph depicting a 7% growth rate year on year. Unfortunately, as the saying goes “past returns are no indication of future returns”, and
boy, has that been correct. In fact, my ECG is showing a greater uptrend. (I’m not sure if that’s good by the way!)
But, unfortunately, that’s the problem when hugging an index. You will be guaranteed to hit the highs and the lows, but you also spend a lot of investment time, ‘marking time’ between the two.
For some further reading about the pitfalls of index investing click here. Thanks for reading see you soon I hope. Homepage
