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Capital Markets Analysis and Economic Update<Date>
Presented by: <Adviser name>Authorised Representative, RetireInvest Pty Ltd AFSL 238429
2
Disclaimer
RetireInvest Pty Limited (ABN 23 001 774 125) holds Australian Financial Services Licence Number 238429 and is licensed to provide financial product advice and deal in financial products such as: deposit and payment products, derivatives, life products, managed investment schemes including investor directed portfolio services, securities, superannuation, Retirement Savings Accounts.
The information presented in this seminar is current as at March 2008 and may be subject to change. Performance figures may have been calculated before fees and taxes. Past performance is not indicative of future performance.
It is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. RetireInvest strongly suggests that no person should act specifically on the basis of the information contained herein but should obtain appropriate professional advice based on their own circumstances.
Taking a look at history
4
Taking a look at history - Recovery from market crises
Source: Iress
1987 Share Market CrashUS market
Time to recover: 22 months
15001700190021002300250027002900
01-Sep-87
01-Nov-87
01-Jan-88
01-Mar-88
01-May-88
01-Jul-88
01-Sep-88
01-Nov-88
01-Jan-89
01-Mar-89
01-May-89
01-Jul-89
Do
w J
on
es
5
Recovery from market crises
Asian Financial Crisis 1997Time to recover: 55 days
9000
9500
10000
10500
11000
11500
22-O
ct-9
7
29-O
ct-9
7
05-N
ov-9
7
12-N
ov-9
7
19-N
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26-N
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7
03-D
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10-D
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17-D
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24-D
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31-D
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S&
P/A
SX
300
Acc
umul
atio
n In
dex.
Source: Iress
6
Recovery from market crises
9/11 Terrorist Attacks on the USTime to recover: 26 days
14000
14500
15000
15500
16000
16500
11-S
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1
18-S
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1
25-S
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16-O
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S&
P/A
SX
300
Acc
umul
atio
n In
dex.
Source: Iress
Volatility over time
8
Short term volatility vs long term consistency – Australian Shares
Source: S&P/ASX300 Accumulation Index, Iress
Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec
89 91 93 95 97 99 01 03 05 07
Volatility of Shares Australian Market (S&P/ASX300)
Rolling Returns - Periods from 31 December 1989 - 31 December 2007
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
Rol
ling
Ret
urns
.
1 Year
10 Year
9
Short term volatility vs long term consistency – US Shares
Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec
89 91 93 95 97 99 01 03 05 07
Source: Dow Jones, Iress
Volatility of Shares US Market
Rolling Returns - Periods from 31 December 1989 - 31 December 2007
-30%-20%-10%
0%10%20%30%40%50%60%
Rolli
ng R
etu
rns.
1 year
10 year
Strategies for investing – Time, diversification, financial planning strategies
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Strategies
The two greatest strategies to reduce risk of a negative outcome include:
1. Time – Time in the market reduces the chance of a negative outcome
2. Diversification – spreading investments across multiple asset classes helps reduce risk
12
Time in the market
Time In Versus TimingHow missing the best trading days can significantly affect returns.
All Ordinaries Accumulation Index - 01/01/1993 to 21/01/2008
Source: Iress
All Days $62 710
13%
Minus 10 Best Days$45 513 10.6%
Minus 25 Best Days $35 525
8.4%
Minus 50 Best Days $19 992
4.7%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
Retu
rn (
% p
.a.)
13
Strategies - Timing the market
Time In Versus TimingMissing the best trading days can significantly affect returns.
All Ordinaries Accumulation Index 01/01/1993 to 21/01/2008
Source: Iress
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
31-D
ec-92
31-D
ec-93
31-D
ec-94
31-D
ec-95
31-D
ec-96
31-D
ec-97
31-D
ec-98
31-D
ec-99
31-D
ec-00
31-D
ec-01
31-D
ec-02
31-D
ec-03
31-D
ec-04
31-D
ec-05
31-D
ec-06
31-D
ec-07
Value of $10 000 Invested 01/01/1993
All Days $62 710
Minus 10 Best Days $45 513
Minus 25 Best Days $35 525
Minus 50 Best Days $19 992
14
Asset class returns - Historical
Timeframe: 01/01/83 - 31/12/2007
Data: Australian shares - S&P/ASX 300 Accum. Index, International Shares - MSCI World (ex Aus) in $A, Listed Property Trusts - S&P/ASX 200 Prop Trust, Australian Fixed Interest: Commonwealth Bank Bond Index (Pre Sept 89) / UBSA Composite Bond All Maturities Index (Post Sept 89), Cash: 11am Cash Rate (Pre Apr 87) / UBSA Bank Bill Index (Post Apr 87)
Source: RBA, IRESS
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007
Australian shares$361,527
Listed Property$264,718
International shares$199,519
Aust. fixed interest$113,614
Cash $82,639
Growth of $10 000 over 25 years
15
Asset class performance – past 3 years
Calendar Year returns
-15.00%
-5.00%
5.00%
15.00%
25.00%
35.00%
45.00%
AustralianShares
InternationalShares
AustralianProperty
AustralianFixed
Interest
Cash
2005
2006
2007
Timeframe: 01/01/83 - 31/12/2007
Data: Australian shares - S&P/ASX 300 Accum. Index, International Shares - MSCI World (ex Aus) in $A, Listed Property Trusts - S&P/ASX 200 Prop Trust, Australian Fixed Interest: Commonwealth Bank Bond Index (Pre Sept 89) / UBSA Composite Bond All Maturities Index (Post Sept 89), Cash: 11am Cash Rate (Pre Apr 87) / UBSA Bank Bill Index (Post Apr 87)
Source: RBA, IRESS
16
Why diversify? – every asset class has it’s day in the sun
Australian Shares
International Shares Property
Australian Fixed Interest
International Fixed Interest Cash
1987 -7.86% 7.56% 5.75% 18.60% 8.94% 15.25%1988 17.88% 4.68% 16.06% 9.39% -11.85% 12.88%1989 17.40% 26.77% 2.35% 14.89% 12.60% 18.43%1990 -17.52% -14.59% 8.70% 19.01% 14.79% 16.13%1991 34.24% 20.63% 20.08% 24.75% 17.88% 11.20%1992 -2.31% 5.22% 3.21% 10.41% 16.54% 6.92%1993 45.36% 24.82% 30.73% 16.32% 14.77% 5.39%1994 -8.67% -7.62% -7.09% -4.66% -10.44% 5.36%1995 20.19% 26.66% 14.28% 18.63% 24.13% 8.03%1996 14.60% 6.71% 14.24% 11.87% -2.96% 7.57%1997 12.23% 42.19% 21.91% 12.23% 22.18% 5.63%1998 11.63% 32.82% 18.44% 9.54% 22.49% 5.14%1999 16.10% 17.57% -4.68% -1.22% -10.26% 5.01%2000 4.80% 2.49% 19.71% 12.08% 19.99% 6.27%2001 10.49% -9.65% 14.60% 5.45% 7.48% 5.24%2002 -8.64% -27.13% 11.76% 8.81% 8.63% 4.77%2003 14.96% -0.29% 8.80% 3.05% -14.12% 4.90%2004 27.92% 10.43% 32.01% 6.96% 6.06% 5.62%2005 22.45% 17.39% 12.50% 5.79% -0.33% 5.73%2006 24.51% 12.02% 34.03% 3.16% -1.25% 6.04%2007 16.22% -2.14% -8.41% 3.46% -0.42% 6.73%Average return 12.67% 9.36% 12.81% 9.93% 6.90% 8.01%
Timeframe: 01/01/83 - 31/12/2007
Data: Australian shares - S&P/ASX 300 Accum. Index, International Shares - MSCI World (ex Aus) in $A, Listed Property Trusts - S&P/ASX 200 Prop Trust, Australian Fixed Interest: Commonwealth Bank Bond Index (Pre Sept 89) / UBSA Composite Bond All Maturities Index (Post Sept 89), International Fixed Interest: Citigroup WGBI Ex AUD Hedged, Cash: 11am Cash Rate (Pre Apr 87) / UBSA Bank Bill Index (Post Apr 87) Source: RBA, IRESS
17
Diversification within asset sectors
*Gross performance returns are before fees and taxes. Performance as at 31 Jan 08
Source: Iress, INGIM
Top 10 stocks in 2003 v's ING Wholesale Australian Share Trust up until Feb 08
2.33%
66.43%
12.47%
-0.60%
19.46%
11.77%6.60%
-2.85%
32.98%
-0.36%
14.82%20.20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
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18
Financial planning strategies
Given the recent market volatility, the following are some possible options for further discussion:
• Re-visit your Investor profile—Risk Profile
• Re-balance your portfolio—Growth vs Defensive to Strategic Asset Allocation
• Set up a Regular Investment Plan—Dollar Cost Averaging
• Pension Drawdowns—Use of defensive asset classes for funding pension income
Conclusion – 8 thoughts for 2008
20
Conclusion
Eight thoughts for 2008The major economic, market and investment themes in 2008 are as
follows:
1. Slower world economic growth2. Emerging economies to outperform3. Monetary policy easing4. Inflationary pressures rising5. US landing ‘hard to soft’6. Sub-prime and credit market concerns7. Australian economy still looking good8. Near-term caution is recommended
And remember, in periods of market volatility – it’s the long term that counts
Thank you