Financially Speaking April 2009

It has been said that we finally grow up when we forgive our parents and transcend our past. Deep stuff!!

Dear Client,

The economic crisis: Has a recovery begun? Have we seen the bottom? Well, I suppose there would always end up being a crisis when we spend money that never existed.

Many clients and investors have said they wanted to wait for things to improve before investing again. Well, I tracked a specific client’s little additional investment into their retirement annuity in February this year. The client had hoped that he had got in at the ‘bottom’. That would also mean that the rest of his retirement annuity would have been at its lowest value too!! I followed the unit price of the fund that he went into and it is already up by around 3%.

Anyone can see that our local stock market has risen since February. However, tracking the actual unit price makes it real for the specific investor. If that was indeed the bottom (for the next generation or so) then this client has captured that 3% to work for him on a compound basis from now onwards. Those investors waiting for the recovery will have missed that. You can’t get that starting point back again. This is the crux of understanding that ‘market bottoms’ create buying opportunities.

There have also been some interesting banking stories coming out of these times; of clients being offered a few US cent in the dollar from their deposits. (A true story from one of the world’s AAA rated banks who has now gone under).

A bank is as safe as its balance sheet. What is safer than a bank deposit? A unit trust money market fund is safer than a bank’s money market account. A general, balanced unit trust fund is arguably safer than a bank account.

Until next time

Please note that all the views expressed in this publication are based on my opinion and no action or advice is implied or intended.