Call us on 1300 794 893

Your Money

Am I being too conservative with shares in 2011?

I am running my own investments and trying to build up my wealth as safely as possible. Last calendar year, I gambled that shares would not go anywhere and so I locked up my money in a fixed deposit at 6.5 per cent but this year I am not sure whether this is the right strategy. I really only want to average eight per cent on my investments but I know if I am too conservative that I could make it hard for myself. What do you think about shares this year?

That was good judgement for the calendar year but for the financial year the returns have been around the nine to 10 per cent mark. In a portfolio, it’s good to get a rate like 6.5 per cent for a foundation of safety but you need to get a return of around 10 per cent or better on your shares to pull your average return up to eight per cent.

My feeling is that shares will do better this calendar year and most of the experts I talk to agree with me. Goldman Sachs in the USA has tipped a 20 per cent gain for shares over 2011 and this is bound to help our local market. I suspect if they are right with this big call, we could see the American central bank raise interest rates and that will help the greenback and maybe take our dollar down a notch or two. This could help local shares where the underlying companies see profits fall with a higher currency.

Also, if the Reserve Bank is less aggressive this year with interest rates, this could also help shares but this is a pretty big ‘if’ considering the RBA’s actions as well as comments recently.

On the flipside, Americans have reported money outflows from money market or bond holding into risk assets, such as shares, explaining why the Dow Jones has had the best start to the year in a long time.

I believe there are risks out there for the cautious investor and European sovereign debt is one of them, but even with this threat the recent noises from European officials have been more assuring than they were last year.

By the way, a colleague of mine who owns a big bond business has argued that stocks look more attractive to him this year than last year and even more attractive than bonds. It took a lot for him to admit this but it could be a good sign.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Related articles

Is now a good time to begin investing in shares?

How can I give a parcel of shares to my kids?

To become a serious investor, do I need options?

Should my portfolio follow the index?

Money tip #8 – share trading

Published on: Tuesday, February 08, 2011

blog comments powered by Disqus
Pixel_admin_thumb_300x300 Pixel_admin_thumb_300x300 Pixel_admin_thumb_300x300