Monthly Newsletter - July 2009

Editors Note

This edition includes an inspirational and funny quote, the main market index returns during June 2009, a market commentary and a feature story. I encourage you to make comments.

Mixed economic results out of the US were reflected in the flat result for June with rising apprehension about the upcoming US earnings season. However, the Australian market continued to recover in June with the economy having avoided a technical recession.

Inspirational Quote

Behold the turtle: He only makes progress when he sticks his neck out - James Bryant Conant.

Funny Quote

October: This is one of the particularly dangerous months to invest in stocks. Other dangerous months are July, January, September, April, November, May, March, June, December, August and February - Mark Twain.

Market Statistics

The table below shows the monthly returns for the main market indices during June 2009. 

Market Commentary

World equity markets moved into positive territory for the calendar year as the MSCI World Accumulation Index (AUD Hedged) posted a gain of 0.2% for the month or 16.4% for the quarter. Policy initiatives by governments and central banks have started to take effect and there are clear indications that market conditions have improved and are less likely to re-test March lows. Markets took a breather and sold-off in the last two weeks of June after mixed economic results and as investors took profits ahead of the 2nd quarter earnings results. Oil prices rose sharply during the quarter on the back of an improved economic outlook and peaked at over $71pb at the end of June as unrest in Nigeria's Niger Delta raised concerns about supply.

The US equity market (in local currency terms) gained 15.9% over the quarter on upbeat announcements on the economy by the government and central bankers. Mixed economic results out of the US were reflected in the flat result for June with rising apprehension about the upcoming US earnings season. Recent weak consumer delinquency numbers released by the ABA served as a reminder of the frailty in US household balance sheets and the continued weakness in the US housing sector.

In Europe, markets collectively gained 16.1%, with Greece (+31.7%), Spain (+29.8%), Austria (+28.0%), Sweden (+27.6%), Denmark (+27.1%) and Finland (+25.5%) the outstanding performers over the quarter. An upturn in leading economic indicators suggests that the Euro zone is bottoming out and starting to stabilise, particularly the German economy. The UK market rose +10.2% over the quarter while in Asia, Japan gained +20.2% in increasing signs that the country's recession is easing and business confidence improving. Singapore and Hong Kong rose sharply over the quarter posting gains of +39.0% and +35.8% respectively.

With the passing of the stress test and several banks paying back TARP money in June, conditions in the financials sector are improving and this is reflected in the June quarter 32.0% gain. This was followed by Industrial stocks (+20.6%), IT (+19.5%), Consumer Discretionary (+18.8%) and Materials (+17.7%). The Energy sector provided a gain of +11.1% over the quarter, Consumer Staples (+10.2%), Utilities (+10.0%) with Healthcare (+7.2%) and Telcos (+5.4%) trailing behind.

Australian stocks rose for the first time in 7 quarters in the 3 months ended 30 June after signs emerged that the global economy is stabilising and reports showed Australia was one of the world's best performing economies. The benchmark S&P⁄ASX300 Accumulation Index rose 4.0% for the month or 11.5% for the quarter.

The Market Commentary has been sourced from Global Value Investors Ltd and Barclays Global Investors.

Feature Story - 10 Rules for Achieving Financial Freedom (Rule 2)

Follow all 10 rules and you will be on the way to achieving financial freedom.

Rule 2 - Save and invest 10% of your income

After allowing for essential expenses including household expenses, debt repayments, personal expenses, medical costs and insurance, a budget should allocate 10% of your income to savings. Invested wisely, those savings can build into a small fortue over time.

For example, assuming an annual return of 7% and based on an income of $50,000 per annum, saving 10% or $5,000 per annum, after 10 years of regular savings and allowing the benefits of compound interest, you'll have $71,543 (consisting of $50,000 contributions and $21,543 investment returns). After 20 years of regular savings and allowing the benefits of compound interest, you'll have $214,742 (consisting of $100,000 contributions and $114,742 investment returns).

Saving and investing a portion of your income is a great way to create wealth.

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Past Issues

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Important Information

The above information provides an overview or summary only and it shouldn’t be considered a comprehensive statement on any matter or relied upon as such. The above information doesn’t take into account your personal objectives, financial situation or needs. It’s important for you to consider these matters before making any financial decision and I recommend you seek help from a financial adviser.