The myth of the average return?

11 Feb 2013

By Shadforth Financial Group

As we head into 2013 and leave behind the five years since the start of the downturn into the global financial crisis, it may be time to put on our positive face.

While it is true that the past five years have been difficult for many in our local communities and around the world, it is easy to assume this negative outcome will continue into the future. However on a quick reflection of what transpired over the past year from a financial perspective, will give quite a different view of what you may have thought. The Euro economies have not broken up, the United States has struggled forward with no double-dip recession and while China has slowed, it certainly did not stop.

Australia has done it tougher and we have had a more visual impact of the world slow down with many empty shopfronts as small businesses close their doors no longer able to handle the extended downturn.

At the same time the property market has begun to slowly move forward with activity levels rising and auction rates increasing across most areas of Australia. The international equities (shares) markets have been very positive with a return of 17.18 % while Australian equities has accelerated more recently to produce a very healthy return of 19.57%, for the year ended 31 January 2013. Investors are starting to see the effect of this increase in their portfolios and superannuation balances. This always gives people a positive feeling and is often the kick start that is needed to boost confidence generally in the community.

While it has paid to be cautious over the past five years it certainly appears that people generally are starting to take on additional risk. That includes investors moving from term deposits to equities and property being snapped up from desperate sellers who can't or don't want to hold any longer. Debt repayments have also been at record levels over the past five years and it appears that these levels are continuing to decrease. However, debt at some point in time will begin to increase again as investors decide to take on additional levels of risk, although it is likely that there will be more caution here from both the investors and lenders in the near term.

Is it time to raise our heads and look forward rather than focusing on what has happened over the past five years? It is fine to remember all the pain over those years and to carry with us a healthy dose of caution. However we need to ensure that it doesn't stop us from moving forward with our investments, superannuation and future planning.

Being prepared for the road ahead means ensuring you have a plan or updating an existing one. Seek financial advice on your options and how to achieve them. Make the commitment today to take action like you would a new year's resolution.

You never know, maybe it is time to be more positive about your future!

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