Online Stockmarket Trading Update

As the manager of a financial services company I always read a selection of finance related magazines to let me catch up on market and company news. This month I found the title and subsequent content of a Money Magazine article slightly amusing, “The Best of the Best”:

BT WINS BEST PERFORMING AUSTRALIAN SHARE FUND – ONLY LOST $34,600**

If ever you needed a reason to manage your money yourself, this article provided it. The best performing Australian Equities manager for 2008 was the BT Imputation Fund, which returned negative 34.60%.

I can imagine the fund manager s marketing people telling me about the fantastic return and the market outperformance of the index, but if you had 100k invested in this “best performing fund” you just lost over 34k in 12 months. The other catch phrase that gets played a lot in the managed fund and financial planning industries is that you should look at your returns over the longer term in this case the before mentioned fund returned 3.82% per annum over three years less than a CMT over the same period.

WHAT WOULD THE MANAGED FUND SALESMAN SUGGEST?

Buy and hold is the financial planning industry s new mantra. However with all of their projections for your retirement based on historical returns you really need to be on the ball yourself when considering the hold and hope approach. If anybody has had a projection done by these magical calculators in the last 12 months I would be interested to hear from you: how does their projection of your position at the end of 2008 tally with your actual position?

Financial planners tend to think of fund management as an industry for those without the time or knowledge to make their own investment decisions. With these poor results however, I would suggest individuals make the time to become better informed of the options available and of what is happening to your investments, with a view to taking more control over where your hard earned money gets invested.

I have read a lot of books in my time about making money and retiring rich, but the only people that I have seen achieve these goals from managed funds are either the fund managers themselves or the big institutions that back them.

BUT IS IT THE FUND MANAGERS FAULT?

Now, I am not saying the fund managers are entirely to blame. There are a number of factors contributing to the industry s recent poor performance, namely the government s inflexible approach to the way the funds management business can go about offering investment products to the public, and the financial planning industry s continued reliance on the ongoing commission gravy train reducing your chance of hearing from a planner that you should redeem you managed fund and invest directly.

So, for the 1.74% you pay in management fees for the fund that you paid 4% to enter what exactly are they allowed to do, and why is it not largely their fault that you lost your money? Simple – the most money that the fund manager is able to have in cash at any point in time is a maximum of 15% – they are obliged to have 85% of your money in the market, even when the share prices are plummeting.

In the last 12 months none of us were going to pick the market s high but when things took a heavy downward turn, would you have kept all of your cash in the stock market? Probably not, but if you were one of the investors in these funds managers there was no choice. Using a simple stop loss methodology of 5% could have saved you a lot of money.

Of our 6,000 customers I am sure that a large percentage of you would have investments either directly or indirectly in managed funds. My suggestion would be make it part of your new year s resolution to review your funds performance and assess the effect these funds are having on you future wealth and think to yourself, if I was managing this money myself what return would I achieve?

Now instead of going on about the inefficiency of the fund industry I m going to develop a strategy I would implement as a new investor with 50k, or as one that was having trouble identifying a winner in 2008. Part One of this strategy will be delivered next month.

I wish you all the best with your investing in 2009.
Damian
** based on an investment of 100k.

Gary Howells Web Development Team Leader+

Gary has 10 years for experience in the IT industry in a range of fields including software design, development and support, hardware development and support, and networking. As a Software and Web Developer, Gary has worked on projects with the department of defence (AMRL), rapid response emergency teams, and educational institutions, and from 2007 with MDS Financial Group. Since joining MDS, Gary has immersed himself in the various technologies utilised in-house and worked to develop quality solutions for MDS clients using the best technologies available.

Here is a little more about Gary;

Here is a little more about Gary;

• What drives you? New technologies
• What work activity brings you the most satisfaction? Using new technologies and discussing new ideas.
• What are the challenges you face every day? Ensuring the best outcome for clients using the right technologies, exceptional communication, and method of delivery.
• What key skills do you have to support the business? Development knowledge, business acumen, strong customer focus and results driven.
• Who are the most important people in your life? Family and my girlfriend
• What is your favorite past-time? Anything that brings a smile to my face.
• What movies do you enjoy? Action / Comedy
• What animal best describes your character? Monkey
• What person would you like to meet and why? Richard Branson, I have read quiet a few of his books and I think he would be inspirational
• Favorite Movie? Top Gun
• Favorite Football team? Collingwood / Manchester United
• Coolest place you have been on holiday? Prague
• What sort of car do you drive? Why? Holden Astra CDX, because it is reliable, inexpensive to run and environmentally better than a lot of other cars on the market.