10 July 2012

As we head into the new financial year, there is a growing realisation that we are in a new investment era – one in stark contrast to the 25 years from the early 1980’s to 2007/08. After the oil shock of the 1970’s and the associated stagflation that marked that decade, the global economy (principally the US, Europe and Japan) emerged into  a generational period of strong growth , rising employment and falling inflation. World stock markets reacted with enthusiasm and equities (and to a lesser extent, property) were the only game in town. Despite the sharp market correction in 1987, share markets continued to trend ever upwards in all major markets except Japan.

The main driving factor pushing share and property markets higher was the loosening of credit – there was now an abundance of cheap, readily available credit where investors could gear to previously unimaginable levels to push asset prices higher. When the financial crisis hit in 2008, the asset inflation game of the last 25 years was over. It has taken 3 years for this message to sink in. Investors now are realising that the markets (property and equities) don’t just keep rising indefinitely; and they don’t necessarily rebound sharply after a fall. In two very worthwhile articles in the Wealth section of the Weekend Australian, Tony Negline argues strongly in favour of investing for income and the perils that can accompany investing in unitised funds. We recommend you read both articles – Rules to live comfortably in retirement and Retirees need funds to show good incomes.

As Mr Negline stats in these articles: “For a successful outcome, you should deal with advisers who have appropriate income-earning experience with their own investments across the medium to long term.”

At Whites IFM we strongly endorse these views and urge all investors to act on this advice. For those wishing to learn more about the Whites IFM approach to investing, please contact us by phone, email or the Enquiries section on our Home Page.