Spring in some years sees the media and then investors get excited (by negative news) and 2014 didn’t disappoint. After an uneventful six years of steady growth since the depth of the GFC, we were suddenly reminded by financial news headlines such as in October 2014 ‘September shocker as Australian Shares lose $90 billion’ that the life cycle is dynamic (if we could have forgotten).
So dynamic in fact that a few short weeks later the same journalists were reporting:
- The CBA increased dividends by 10% compared to the previous year;
- Wesfarmers (owner of Bunnings, Coles, Liquorland etc.) increased dividends by 5% compared to the prior year; and
- Ramsay Health Care increased dividends by 23% compared to the prior year.
It’s an unfortunate reality the media thrives on ‘doom and gloom’ which raises emotions to attract attention. When you combine this with the latest technology and our ever increasing addiction to online news (whether we like it or not), it’s not surprising how easy it is to get emotionally involved where it raises a temptation of some sort to react.
As an investor, when you hear negative financial news or a so called ‘expert’ prediction we encourage you to recognise it for what it is and then think about what they are actually saying. Has the climate changed or are they simply describing yesterday’s weather?
Most of the financial news is short term. How often do you hear reports of businesses delivering earnings growth which enables investors to meet the ever increasing rise of living costs?
With RBA interest rates at 50 year lows (2.50%), and the possibility of going lower before they go higher, investors can take comfort in the predictability of income from Australian equities (ASX200) which is currently 4.40% pa plus franking. Fortunately investment success does not depend on speculation or needing to rely on financial news or talk back radio. Rather true investment success is built on:
1. Planning – creating and documenting clear long term goals.
2. Strategy – focused around real risks and evidence based research.
3. Discipline – utilising compound maths and staying the course.