Monthly Newsletter - September 2009

Editors Note

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

World equity markets rose during August on continued indications that global economic activity is on the mend. The Australian market also rose in August as the economic slowdown is set to be milder than initially thought.

Inspirational Quote

You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.

R. Buckminster Fuller

Funny Quote

When a man's stomach is full it makes no difference whether he is rich or poor - Euripides.

Market Statistics

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

Market Commentary

World equity markets, as measured by the MSCI World Accumulation Index (AUD Hedged) posted a 3.9% gain for August on continued indications that global economic activity is on the mend with an improved outlook for many major economies as they move towards a recovery. Germany, France and Japan returned to growth in the June quarter according to recent data with the prospects for a return to growth in the US economy appearing more positive. Strong optimism in August was a feature as investors reduced their cash holdings and increased their weighting to equities with risk appetites growing on the back of improved economic growth and corporate earnings. However, lingering doubts still remain about the strength and sustainability of the recovery.

Higher unemployment numbers in major economies around the world threaten to restrain the recovery as companies cut costs and dismiss workers in order to survive the worst recession in over sixty years. As such, consumer spending is expected to be weighed down as households look to hold back on spending and save more. Additional concerns for investors relate to the risks that the economic recovery may falter when the record levels of monetary and fiscal stimulus end and the potential impact on economic activity when central governments begin to reign in the massive levels of liquidity injected into the financial system.

The US market rose by +3.5% in local currency terms over the month as Fed Reserve Chairman Ben Bernanke's buoyed investor sentiment by stating that the prospects for a return to growth in the near term appear good. In Europe, the central bank cut its benchmark interest rate to a record low of 1% to help kick-start the real economy. This improved sentiment and the region made a strong gain of +5.9% in August. The UK market also performed strongly led once again by financial stocks with a 7.4% gain. In Asia, Japan made relatively more modest gains (+1.3%) while Singapore and Hong Kong fell over during August by -2.5% and -7.1% respectively.

The Financials sector once again led the market forward with a surge of 9.38% in August followed by Industrial stocks (+4.0), Utilities (+3.7%), IT (+2.5%), Healthcare (+2.4%), Energy (+2.3%) and Consumer Discretionary (+1.7%). Consumer staples (+1.6%), Telcos (+1.4%) and Materials were the laggards for August.

Australian stocks rose for a sixth straight month in August after companies reported earnings that showed they had survived an economic slowdown that is set to be milder than initially thought. The S&P/ASX 300 Accumulation Index gained 6.6%, to end the month 46% above its March lows.

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

Feature Story - 10 Rules for Achieving Financial Freedom (Rule 4)

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

Rule 4 - Dollar cost averaging

Once your non-deductible debt is paid down, you can direct 10% of your savings to a dollar cost averaging strategy. This is one of the most effective strategies for saving on a regular basis. For example, if you invest regularly while sharemarkets are down, you will accumulate many more units than if you wait for markets to improve before you invest. Put simply, dollar cost averaging allows you to buy more units when sharemarkets are down and buy less units when sharemarkets are up.

The easiest way to implement a dollar cost averaging strategy in the sharemarket is to use a managed fund that will allow you to invest smaller amounts of money on a monthly basis. In the long term, you will average out the price you pay for your units and will generally end up with more units than if you invest all your money at the one time.

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Past Issues

Please click on the Newsletter category on the left or click Newsletter Archive to view past issues.

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.