HEWISON INSIGHTS
Future thinking should be shared. With that in mind our team publishes insights weekly to help keep you in the (k)now.
HEWISON INSIGHTS
Hewison Insights
All insights
Long Term Investing
Investment Strategy
independent financial advice
Turn down the noise and invest for the long term
Simon Curtain
Partner/Private Client Adviser
17 Jan 2022
Share markets in Australia, and around the world, have had a good showing over 2021. Our local market increased around 10% over the year, and overseas markets fared even better. On that basis what’s my advice for 2022?
As advisers, we are often asked what the share market will do today, tomorrow, or next week? While I wish we had a crystal ball to determine such things, the simple fact is that nobody can predict share market movements over shorter time frames. Instead, you need to invest with a long-term focus.
Long term investing is key
Some time ago, Dr Shane Oliver, Chief Economist at AMP Capital, produced a graph (below) showing the percentage of time the Australian and US share markets recorded a positive result over varying time periods.
Percentage of positive share market returns
Source: Oliver’s Insights, 12 November 2015
As you can see in the graph above, on any given day there is a 50% chance that the share market will be ‘up’ (or ‘down’). This positive bias increases substantially over time, with the Australian share market providing a positive return 80% of the time over a yearly period and 100% of the time over a decade.
Turn down the noise
The key takeaway here is that you shouldn’t get too caught up in day-to-day movements of the share market, but instead focus on the longer term. In today’s 24/7 news cycle there is always something to write or complain about and while global and local events will shape the day’s result, the chance of picking the market’s reaction on any given day is pretty much the same as a coin toss.
If, however, you commit to investing for the longer term, and turn down the noise, the bias for positive returns is much stronger.
Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.