2 July 2012

In his inaugural  address in 1933, then American President Franklin D. Roosevelt made the now famous pronouncement : “So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself…”. In a variation on that theme, it would appear that given today’s economic outlook, the only thing we can say for certain is to expect more uncertainty.

You only have to look at the leaders in any of the current financial press to find this sentiment as the recurring thread. A typical example was in this Weekend Australian which pronounced: “Worldwide uncertainty likely to linger“. Without disparaging our friends in the financial media, that could have been the headline for any day since 2008 and could continue to be for at least the next 12 months. As the well regarded market analyst Ian Harding observes: “We don’t see much change for 2012-13 – pea soup is again on the menu.”

So with the consensus from the market pundits being that “we don’t know what is going to happen”, where does that leave the small investor? At Whites IFM we have consistently argued for simplicity, diversity, transparency and liquidity as the underlying tenets of investing. Now more than ever in the past 10 years is the time for back to basics with your investing. Keeping a sensible allocation in cash, income securities and equities and an emphasis on investing in solid underlying businesses is the key. Value is always the measure; remember the old adage of price being what you pay for an asset, value is what that asset is worth. Don’t pay more for an investment than it is really worth.  Avoid the temptation to “accelerate returns” through opaque hedge funds, derivative overlays or “long/short” strategies. Quoting Ian Harding again: “Share investors need to recalibrate for income being their dominant component of total return”

For more information on value investing, particularly for those of you running your own superannuation  funds, contact Whites IFM by email, phone or using the “Enquiries” section on our Home Page.