Written by Choon Kwa, Financial Planner, Interworx Wealth Management

The last few years have been a little tough on investment returns. We saw massive losses on shares and other investment assets like property trusts in 2008, which resulted in large decreases on our super fund balances.

In 2009 we started to see a small recovery. The Australian stock market alone has risen over 50% from its low in March 2009. However, we are still below the peaks reached in 2007.

Not only did our stock market reach historic levels in 2007 but our property market ended its 5 to 6 year boom as well. Since then we have seen falls and stabilisation of investment prices but are yet to recover to where we were.

This in itself is a positive fact because it means we still have room to improve. In fact, for the Australian stock market to return to its peak of 2007 it would have to grow around 40% from current levels. Whilst residential property has not faired as badly over the last few years, it too has failed to shine as we have become accustomed to. In fact, depending on where you own property, it would be fair to say most values fell and have not necessarily recovered too much.

We are constantly being asked for investment advice, most of which is for residential property. Whilst we are not real estate agents and subsequently unable to provide specific property advice we are able to advise on property as an asset class. In most normal circumstances we believe property is a fantastic long term asset because it offers both growth, income and historically has lower levels of volatility than other growth assets such as shares.

In 2006 and 2007 we found ourselves cautioning our clients a lot more than normal. We felt, along with many others, that property investment had become very expensive. This combined with high interest rates meant for a lot of people this type of investment was simply out of reach. For those who could afford it, we advised to take a long term approach as the short term could be disappointing.

The new decade commenced relatively calmly. It wasnt too long ago that the headlines warned we were headed for a severe recession where unemployment would hit 10% and over one million people would be out of work. But this did not eventuate and in fact our economic conditions are starting to improve again. Whilst no one can predict with any great accuracy how our economy will perform going forward, the trend does seem up. We still believe that property and other assets such as shares are a great way to create wealth for the future as long as you consider holding them for long periods (e.g. 10 years+).

What has changed is the investment conditions have improved remarkably. Interest rates are still very low by historic standards, there is a general improvement in economic conditions and sentiment around our economy, unemployment levels have remained relatively stable which will continue to support the economic improvement and probably most importantly - the same investment you were looking at buying 2 or 3 years ago and could not afford is now cheaper - in some cases considerably so.

We believe 2010 is the year you should at least start thinking about investing. If at very least you start seeking investment advice, looking for property or speaking to your broker about a loan pre-approval then you will be doing yourself a favour. For those who sit on their hands and continue to wait for the right moment you may be waiting a long time. No-one knows when the exact right time to invest will be. We base our views on historical data and current indicators. Many of these are suggesting positive conditions for investors.

However, we recommend you seek advice before making any decision. More specifically consider your cash flow to ensure you can afford loan repayments, factor in future interest rate rises, be conservative on the estimated rental or income returns you generate and consider the various structures that can be used to invest to ensure you are maximising your future economic gains and managing the future tax consequences more effectively.

Sam and or Choon from Interworx Wealth Management (authorised representatives of Charter Financial Planning) would be happy to discuss any questions or advice you may be seeking relating to this. You can call them on 9440 1377.


This editorial provides general information only. Before making any financial or investment decisions we recommend you consult a financial planner to take into account your particular investment objectives, financial situation and individual needs. Charter Financial Planning and its Authorised Representatives do not accept any liability for any errors or omissions of information supplied in this editorial.