Future Funds Blog

Monthly Report – July 2017

Grant Simpson - Saturday, July 01, 2017

Monthly Report – July 2017

A three-month graph of the Australian share market looks remarkably like the teeth on an inverted handsaw; we seem to have gone up and down by 100 points around the 5750 point mark, with not much to show for all the movement of late (as per the attachment).

The caution being shown by the Australian equity market is now catching on around the rest of the world as investors ponder the real impact of Donald Trump - will he be able to live up to his grand promises to make the USA strong again, protect the free world and keep threats like Kim Jong-Un under control? Or is it all bravado from a man who has never had to live up to his words before? I suspect we are seeing more and more investors giving up on their original hope.

In other words, what is being seen is an element of fence sitting. Even the Bond yield increases that we saw last month have come to an abrupt halt, with 3 year and 10 year Australian Government Bond yields effectively unchanged from the month before. To make matters worse, our own politicians can't seem to get themselves sorted out either, in terms of making decisions on their own, or knowing where they came from. The apparent frustration from the public is growing.

It is times like this you will hear of people starting to speak about Cash being the only "sensible" investment option for the circumstances. But take care what that means. When well-meaning people suggest that 100% of money should be in Cash, I would implore you to take great care; being 100% in cash is potentially even more dangerous than being 100% in equities; unfortunately accepting some risk is normal part of investing money - attempts to eradicate that risk altogether via the use of cash only guarantee losses from having to live on capital.

The real message should be that in times of increased uncertainty you want to be sure that you hold good reserves. Yes, that means some money in Cash. But it doesn't mean 100%. Once again we are focussing on keeping portfolios at the right risk level for your risk tolerance.

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