investment advice Archives - Newcastle Financial Planners & Financial Advisors

Being a Cool Investor

Harlan Marriott — Tue, 13 Dec 2011 09:13:21 +0000

Rather than constantly worrying about the daily global changes in sharemarket values and the attendant constant volatility, perhaps a smarter response for an investor is to go back to the basics of sound investment practice.

The prevailing investment environment underlines the value of ensuring that an investment portfolio is appropriately diversified in accordance with your personal circumstances – including your risk tolerance, your present and future needs and the investment timeframe.

Other investment basics for an investor to consider at all times, irrespective of what the markets are doing include:

Regularly review your long-term asset allocation investment strategy and rebalance your portfolio to ensure it fits with your asset allocation
Review your investment costs and research alternatives to ensure your costs are kept to a minimum. There is no need to pay for services that you don't use.
Know the companies in which you invest. Don't have so many stocks that you can't keep up with what is happening in the companies.
Remember that a dividend is the company paying you for the use of your money.
Remember that a little and often does work. In investment terms this is called dollar-cost-averaging when you invest amounts at regular intervals so as to even out the costs of the stock. By buying regularly you can buy more stocks when the price is lower and less stocks when the price is high, so you average out the price and reduce the risk of investing large amounts before a price fall, and also reduce the risk of making an investment which is emotionally driven. Align this with a review in investment costs to ensure you have an optimal scenario.

What do successful long-term investors say?

Patience is your friend
When buying shares, think like a prospective owner of a business
When making a stock market investment, if you don't plan on holding it for 10 years then don't waste more than 10 minutes considering it
You don't need a lot if good investments, you need a few outstanding ones
Keep investment costs to a minimum. This is one of the factors over which investors have much control.
Practise dollar-cost-averaging. This involves investing regular amounts in the sharemarket at regular intervals. In this way, you buy more stocks when prices are lower and fewer stocks when prices are higher. You average your buying costs and reduce the risk of investing a large amount shortly before a fall in share prices.

Are you an investor?

Speak with one of our Newcastle financial planners and investment experts today to help with your investments and self managed super funds

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Newcastle Financial Investment Tips

Harlan Marriott — Mon, 08 Nov 2010 22:19:52 +0000

SIGNS THAT A STOCK IS ABOUT TO SLIDE

When considering shares to purchase, a company that generates below average earnings, has poor cashflow or a weak balance sheet may be one for you to look at especially carefully before purchasing. Whilst there are other characteristics of weakness to look for, these offer clues that unpleasant issues may be about to surface.

One things that companies must always keep to the fore is to communicate, communicate, communicate, even if over and above the regulatory requirements – especially in troubled times.

1. Earnings Guidance – it is not uncommon for companies to lower their earnings guidance previously issued. Reasons may be related to the economy generally, or to a specific company related issue. However, if the company does not meet the revised earnings rate the effect can be one of negativity in the marketplace and well as with employees and shareholders and a downward spiral quickens. Stock analysts may then scale back their recommendations and reduce earnings estimations further – all of which may have a subsequent further negative on the share price.

2. Executives Selling – neither is it uncommon for executives of publicly listed companies to sell shares they hold in their company. There are often very legitimate reasons for executives to download their share holding – they may be purchasing a new home or need money for some family reason, or to just earn some profits or diversify their holdings (such as the recent downselling of Telstra shares by the Future Fund).

There are, however, times when some selling activity can and should raise eyebrows, such as when more than one executive is looking to off load parts of their holdings, or when an individual sells a large proportion of their holdings, or when executives sell at or neat the 52 week low. Whilst executives might comment that they have other need for funds, the action does tend to raise alarms in the investment community- both in terms of management practices within the company as well as the personal expertise of the executive.

3. Stopping Quarterly or Annual Financial Forecasts – Whilst it is not always easy to provide the investment community with quarterly or annual financial forecasts as corporations are large entities and the business environment can change rapidly over time, with revenue changes both up and down. However, companies should still endeavour to provide some operational guidance to ensure confidence remains in the business and investment community.

A signal that there may be trouble brewing is when a company abruptly stops issuing forecasts. Silence in this case is not golden as it can raise concerns as to what is happening, Not having some future earnings guidance can give the impression of actually trying to hide information, so investors and analysts become wary, when in fact there may or may not be a reasonable explanation.

4. Suspending Dividend – For income-seeking investors, companies paying dividends are always tempting, and in fact necessary. That a company is paying a dividend (especially fully franked) is often viewed as a sign that the company is doing well. So if a dividend-paying company suddenly suspends dividends it may be a signal that the company is experiencing some financial difficulty. Also, the company may see a significant sell off of its shares as those income-seeking investors off load their shares. Additionally a dividend suspension may herald serious job cuts, production reduction, asset sales and plant closures. A reduction in the dividend, or the franking amount are reasons to investigate company operations and ask appropriate questions.

5. Termination of Buy Back – If a company has been buying back shares and suddenly stops, it may be a signal that the company is short of cash, or the shares are not as good an investment at the time, and that investors are eager to offload without any brokerage fees. None of these scenarios would be especially attractive to new investors.

6. Lack of Diversification and Innovation – Successful companies need to achieve growth over time and it is important for a company to consider new products and to encourage innovation, especially in a fast-moving business environment where new products may take a long time to introduce. Comapanies that do not embrace innovation run the risk of becoming irrelevant, especially if new technology or an improved and superior product hits the marketplace. Whilst there are exceptions to the rule be wary of companies not considering building on their business through diversification with new or improved offerings.

7. Industry Trends – Companies operating in the same industry may experience similar trends. Investors should be on the lookout for signals of how a company may be doing compared with others in the same industry, if one is declining others may also, or if one is declining and others are doing well. Look at verious industry trends as this could also signal economic trends on a larger scale.

8. The Bottom Line – In addition to the traditional valuations and measures there are several indicators that may signal trouble to come for a company. It is necessary for an investor to do research to avoid making incorrect decisions leading to losses in income or capital.

By using a financial advisor for investment, who does the research for you and then makes recommendations specifically for your needs, you are limiting your risk factors.

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Leenane Templeton Chartered Accountants & Financial Advisors

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Call T: 02 4926 2300

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Investment Advisors – Active, Passive, Aggressive or Defensive?

Harlan Marriott — Thu, 21 Oct 2010 00:52:20 +0000

It is not surprising that various investment advisors have different views on what are the best investment options at the moment. As it is exactly two years since the International Monetary Fund (IMF) met to first discuss the Global Financial Crisis, we felt that a distillation of some commentary from recent press articles may be of interest to readers.

According to James Dunn of The Australian newspaper, whilst volatility has always existed in the sharemarket, it has never been as confronting to investors as it has been during the past two years. In fact, for much of the past three years Australian investors have lived with volatility well above levels previously considered normal.

This market’s downside has, according to investment advisor Jamie Nemtsas, caused many investors to reassess their reliance on the sharemarket and much of the money now held in term deposits, a doubling since September 2007 to $200 billion, has been from those fleeing the sharemarket, whether totally or partially.

Mark Thomas of van Eyk Research, whilst supporting active investment managers comments that a real return of 3% – 4% pa should be regarded as an attractive investment every day of the week, and this is what term deposits offer – with zero risk thanks to government guarantee. He states that whilst this is on offer it makes absolute sense to advocate term deposits as good investments.

Research house Zenith Investment Partners considers that globally, due to a more severe downturn, developed world governments will be heavy bond issuers as they attempt to borrow to fund the numerous fiscal packages they have initiated as responses to the global financial crisis. It indicates that the Australian Federal government issuance is expected to reach more than $300 billion by 2013, up from about $55 – $60 billion in 2008.

Historically, government securities have produced lower yields than corporate ones, so reduced income will be a factor for investors (and for Governments if increased aged pension funding is required).

It is important for investors to regularly reassess their appetite for risk and not just wait for market fluctuations. Volatility is not necessarily an ideal definition of risk, it is simply a measure of variance in the prices of a stock or returns from an index over a period of time. Whilst the active versus passive debate has focussed on equities, investors also need to consider their fixed interest portfolios. However Mohamed El-Erian of PIMCO considers the risks are high for passive bond investors and that the levels of government debt and currency investment risk demonstrate the importance of actively managed fixed income exposure. Perpetual’s Richard Brandweiner says that fixed income assets should provide certainty and predictability, but unfortunately. In the last two years many fixed income investments proved to be lacking in defensive characteristics.

By 2016 analysts indicate that 30% of our superannuation assets will be owned by people relying on those assets as their primary source of income. With retirees increasing and living longer there is a constant view that a high proportion of their assets should be in growth, however not everyone is convinced that holding a relatively high allocation in growth assets in retirement is a good plan. PIMCO’s John Wilson argues that people should hold their age in bonds, and others support this view indicating that the downside of investing in equities for people who are unable to sustain large drops in their wealth should invest in annuity products which provide a guaranteed income stream over a defined period of time. However, these products can be costly.

The importance of maintaining strategic asset allocations applies at all levels and as it can be difficult to understand the risks and the market conditions in which they perform well and those in which they don’t.

At the end of the day, everyone is an individual, people are different and have differing needs and objectives. Whilst there are mechanical ways of measurement in investments, there is nothing mechanical about investing or investors. There is no one-size fits-all. So the bottom line is to seek professional advice from your investment advisor. Andrew Frith at The Self-Managed Super Specialists is here to actively assist you make the best decisions for your needs.

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Financial Advisers in Newcastle – New Web Site

Harlan Marriott — Fri, 03 Sep 2010 06:05:54 +0000

This is the first blog on our new website for Newcastle Financial Planner to help with all of your financial planning needs in the Newcastle, Hunter, Central Coast, lake macquarie, maitland. Our financial planners can travel to your location or meet at our financial planner offices at 239 King Street, Newcastle. Leenane Templeton has an excellent team helping with a variety of financial advice for individuals and businesses. We are supported by Lonsdale.

We have a professional team of Chartered Accountants, CPA qualified staff, taxation specialists, wealth management experts, financial planners, business accountants, business advisors and marketing expert in order to help you in all areas of your life whether you are just starting out or in retirement.

Our firm has regularly financial events including SMSF Trustee Seminars, Financial planning seminars and even Business bites a seminar designed for business owners to maximise chunks of information from guest speakers over a lunchtime. Please feel free to call our team or subscribe to our Newcastle office financial updates through email. We look forward to working with you

For more details about our firm you can visit

Business Accountants in Newcastle

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Financial Advisers in Newcastle

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We look forward to working with you over many generations.

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