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In my recent column for Your Trading Edge magazine, I took the words from that great Welsh classic film of the 40’s “How Green Was My Valley”. I see some parallels with the market where over the last three years we have lived off the fat of the land, but now we are facing leaner pickings.
There are still returns to be made in the Australian equities market, but as we are now well into the bull market the same levels of easy returns will not be available for the average investor.
Continuing great returns will be available for those who are prepared to think and act outside the investment pattern of recent times.
Property, Equities, Margin Lending and CFDs are investment spaces that have become familiar to many investors. We have to be careful though that we don’t get lulled into a false sense of security with these asset classes, only to find out 12 months down the track that we did not have the appropriate diversification.
So how might you diversify outside the equities market and in particular the Australian market?
Emerging markets are still showing great promise, but direct investing in these markets is not really an option for the average investor. As the interest rate hikes near the end of their cycle we will see bonds come back into favour with the prospect of attractive gains. This may be some time off in Australia but there will be other markets where bond prices will come into favour in the coming year. But again, direct investing in bonds is not for the faint-hearted. Bio-techs and small cap stocks also offer some promise if well selected, but like the other investment classes we have just spoken about it can be really tough to know where to start.
So how can you get a part of this action? The answer is Managed Funds. Over the next few weeks, I will offer some (occasional) thoughts on how you might get on board this new gravy train.
Enjoy the ride
Tom Scollon
Chief Editor
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