Monday, September 30, 2013

Jim Parker's Coffee Break links...

by Jim Parker, Vice President, DFA Australia Limited 

“All I want you to tell me is when will the market go up and when will it go down.” How often do we hear that cry? Perhaps the better question to ask is whether it is really in our best interests to trust predictions about something, like the financial markets, that is inherently unpredictable. This article from Carl Richards in the New York Times provides a useful perspective on the dangers of market timing.

Have you ever noticed the similarity between commercials for lottery tickets and those by investment managers promising market-beating returns? Just as you rarely see images of a mug punter tearing up is lottery ticket, you rarely will see ads with pictures of dejected investors realising ‘the sure thing’ was anything but. The good news is you don’t need to treat investment as a gamble.

Spending more than you earn, failing to have a cash emergency fund on hand and neglecting insurance. Those are three of the big 10 money mistakes cited by The Sydney Morning Herald as most common among Australian consumers. But perhaps the most dangerous one is the “hot tip”, the get-rich-quick idea based on a speculative gamble on a single security or scheme. As always, getting sound and independent advice is a good starting point