Future Funds Blog

July 2014 report

Ascend 7 - Tuesday, August 12, 2014

By definition, "Volatility" is an expression for rapid, and often unexpected change. Usually, when referring to shares, it is code for loses. Over the month of July however, we saw volatility of the Australian sharemarket in the other direction, that is an unexpected and rapid jump UP in values. The Australian share market jumped 4.4% over July as concerns about Chinese growth eased, and increasingly positive news emanated from the US. The result was a recovery from some of the negativity that had built up over May and June. When combined with another month of no interest rate changes by the RBA, investors grabbed the opportunity to pour extra cash into the market, and so the big leap in values happened.

The first week of August has seen a bit of that leap taken back, but it is interesting that global markets seem to be taking the Ukrainian and Middle Eastern conflicts in their stride. My suspicion is individual stocks are being closely assessed for future earnings capacity, so most stocks in Australia are currently sit at fair value. In circumstances where stocks are fairly priced, it tends to be economics, rather than sentiment that drives prices. With the news that the global economic picture is slowly improving, the negative sentiment that had built up over May and June was dumped, and hence the snap up in value.

We've now had a chance to assess the Future Funds model portfolios for the previous twelve months, and we are very happy with the results, as follows;

Defensive 6.39% (90% Income funds, 10% Growth funds)

Conservative 9.06% (70% Income funds, 30% Growth funds)

Moderate 12.94% (40% Income funds, 60% Growth funds)

Growth 16.34% (20% Income funds, 20% Growth Funds)

Aggressive 18.67% (0% Income funds, 100% Growth Funds)

These results are after manager fees, and confirm that a higher exposure to shares and property in the last twelve months has produced higher total returns.

What these results don't show is the increased volatility that the higher growth component funds experienced. Furthermore, the need for retirees especially to hold a number of years worth of cashflow in income funds to have certainty about meeting their cash needs, means the higher results may not be accessible to all. We are always happy to discuss your own situation and needs versus your current setting if you have questions around this.

Finally, I'd like to include a link to an excellent page I read today on Estate Planning tips. It comes from Terry Purcell at RetireLaw and provides a list of common inadequacies in Simple Wills.

http://www.retirelaw.com.au/inadequate-wills-nsw-testamentary-trusts-estate-planning-law-sydney

Feel free to make a time to have a discussion with us about Estate Planning if you are concerned about your current Will. Whilst you'll still need a specialist to draw up the Will, we can make sure you go their knowing what you need!

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