So are markets expensive and due for a correction?

You may as well pull out your crystal ball. The simple answer is that no one really knows. But that’s not going to stop everyone espousing their opinion, whether you want to hear it or not! Below are a few key principles to consider when thinking about investment.

1.  Understand your financial goals and objectives

If you don’t know what you want, how will you know if you’ve achieved it or not? It’s worth spending some time taking stock of where you are now and what you would like to achieve in the short, medium and long term future. A financial plan can then be put in place to achieve your goals and objectives.

2.  Think long term

In the short term, history tells us that it is very difficult to predict what a market will do. In the short term markets can be extremely volatile and irrational. This can result in investors panicking, following the momentum and doing the opposite of what they should. Investment planning fundamentals will always win out in the long term. If you buy a quality asset without overpaying, you will be rewarded in the long term.

3.  Turn off the noise

This is extremely hard to do in today’s day and age with constant access to technology and availability of information. Even the experts have conflicting views, so who do you listen to? Follow the investment plan that has been laid out for you and ignore the noise.

4.  Diversification

A diversified investment approach is paramount. Markets are not perfectly correlated and diversification across different asset classes helps manage risk, as different sectors move in different directions.  Diversification is so important, as it is extremely difficult to predict the direction a market will head. If we knew what markets were going to do we wouldn’t need to diversify, we would simply put all our wealth in one investment that we knew was going to be the best performer. But really, who has a crystal ball? And if you do, can I borrow it?!

5.  Invest now

Timing markets is dangerous. Investors often delay investing, waiting for a market to fall and enter at more attractive levels. Many people considered parts of the Australian property market expensive five or even 10 years ago. If they had waited to enter that market they may still be waiting.

In Summary

A sound investment portfolio should be structured in a manner to meet your personal investment goals and objectives. A financial plan should be able to navigate through whatever markets throw at it.

If you’d like to speak to an Adviser regarding your financial planning and wealth accumulation strategies, please contact Hewison Private Wealth. We are specialists in financial planning, investment advice and self managed super fund (SMSF). If you’re interested in speaking to one of our advisers please contact us on 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.au

The information provided above is general information only.  It does not consider your needs, financial situation or objectives. You should seek specialised advice from a qualified financial adviser.