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It’s been a gloomy week for markets across the globe. The local bourse has shed close to 5% and the Aussie dollar has slipped back to more palatable levels, at least for exporters, who will see this as a near-term positive for buyer demand.
European nations continue to flounder, with a new French President not inspiring much confidence and Greece once again on its knees. America is now looking like a ‘golden child’ compared to the dire Euro economy.
I find myself looking back to similar situations in recent years and ask: What has changed? A slew of days in the red and the general consensus is that the heavens may fall at any moment.
Whether or not you should be worried depends on your investment strategy.
Dividend Key investors need not be worried. Markets will always rise and fall and as long as you stay true to your plan and manage your risk, these volatile times should prove nothing more than a bend in the road on a path to inevitable success.
We faced a very similar situation a few months ago. Europe was in the doldrums, we had a flailing Greek bond auction and confidence was on the ropes. Markets then regained confidence and the benefits flowed to anyone holding a US or Australian portfolio.
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Income investing is about buying the right stocks - with a long term view - while maximising Dividends and making regular contributions. Oscillations mean little and company earnings and debt levels are paramount to ongoing outperformance.
Regardless of what vehicle they use, investors seek assets with two main components - capital growth and income generation. For those invested in shares, this equates to increasing share prices and dividend payments. For property investors, it’s capital growth and rental returns.
So where will the markets head next? We all have our view and frankly, I’m not overly concerned. I have the ability to diversify, take advantage of outperforming sectors and make regular contributions to a consistently growing portfolio. Looking at many Australian and US companies indicates and you can see that company-specific performance across many investment sectors is actually very strong. Earnings are on the rise, demand is clear and, provided European exposure is kept to a minimum, it’s likely we will continue to see higher share prices across many top performing stocks.
Choose wisely!
Stay Ahead of The Game,
Lachlan McPherson
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