Hello and welcome to this month's edition of Investment insights.
With the financial year end now upon us, many will take the opportunity to look back over the performance and returns of their portfolios. Returns have been very solid over the past year which has been led by Europe who was up around 30%, followed by the U.S. up around 25% and Australia up approximately 15%. Due to this year's performance, most investors will have seen solid gains in their portfolios. The first article we have for you this month looks at the problem that hasn't been a big issue in recent times.... what to do when you have a big capital gain. In this piece, author Jason Zweig from The Wall Street Journal, tells the story of two married finance professors and their investment in Tesla Motors. The article offers great insight into the difference between owning a stock or the stock owning you.
In our second article, we shift from looking back at gains you may have made, to the biases you might need to get past, in order to reset your portfolio. The Economist has a regular blog on investing and I encourage you to take a look at this article published in early May which focuses on the many biases an investor has when making decisions about existing or prospective investments. The piece is based on a book by Bob Swarup titled Money Mania: Booms, Panics, and Busts From Ancient Rome To The Great Meltdown and the blog makes a great point about hindsight bias. We make thousands of predictions in our lives in regard to ourselves or to others, and we tend to remember the ones we got right, not the ones we got wrong.
Speaking of biases, Daniel Minihan our Director of Wealth Management, recently posted a piece looking at the unemployment position in the U.S. So what does this have to do with biases you ask? To put it simply, if a random survey of people was conducted today and asked the question around whether or not the U.S. economy is doing well or poorly, most people would probably answer poorly. However, the reality is that whilst things can still improve, (as we noted above that the stock market returned a healthy 25%), employment levels have returned to those seen before the GFC. In addition to this point, Daniel also presents a chart showing the employment recovery relative to other financial crises noting that this one was actually the shortest on record.
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