Victor Frankl once wrote, “Everything can be taken from a person but one thing: the last of human freedoms - to choose one’s attitudes in any given set of circumstances, to choose one’s own way.” Frankl was right. Attitude is a choice. You could be faced with a thousand problems, many or most over which you have absolutely no control. However, there is always one thing you are in complete and absolute control of and that is your own attitude.

When you surrender control of your attitude to what appears to be a negative situation, you will react to that situation. More often than not, reacting is inappropriate. On the other hand, if you were to remain objective, you would respond to the situation appropriately, thereby creating a winning situation.

If attitude is such an important word, why do so few people understand it? To be honest, it wasn’t until I was in my late 20's when I finally understood its full impact. All through my teens and into my early adult life, I can’t tell you the number of times that I heard, “Bob, if you’d just change your attitude, you would do a lot better.” In retrospect I can easily see the cause of my problem. I didn’t know what attitude was, let alone know how to change it!

Attitude is the composite of your thoughts, feelings and actions. Your conscious mind controls feeling and ultimately dictates whether your feelings will be positive or negative by your choice of thoughts, then your body displays those choices through action and behaviour.

Attitude is actually a creative cycle that begins with your choice of thoughts. You choose your thoughts and that choice is where your attitude originates. As you internalize ideas or become emotionally involved with your thoughts, you create the second stage in forming an attitude; you move your entire being, mind and body, into a new vibration. Your conscious awareness of this vibration is referred to as “feeling”. Your feelings are then expressed in actions or behaviours that produce the various results in your life.

Positive results are always the effect of a positive attitude. Attitude and results are inseparable. They follow one another like night follows day. What I mean by that is: one is the cause, the other, the result. There is a term we use to distinguish this “cause and effect” relationship, it is called The Law of Cause and Effect. Simply stated, if you think in negative terms, you will get negative results; if you think in positive terms you will achieve positive results. Ralph Waldo Emerson reiterated that same point when he said, “A person is what they think about all day long.” The results you achieve in life are nothing more than an expression of your thoughts, feelings, and actions. Take a close look at your life and evaluate the results you are achieving in various areas. See if you are able to relate your attitude to your results.

Winning and losing are opposite sides of the same coin – and that coin is attitude. There are many things wrong in this world; unfortunately that is all some people are able to see. Those who view the world in this light are often unhappy and somewhat cynical. Usually, their life is one of lack and limitation and it almost appears as if they move from one bad experience to another. I know people who are like this and I’m certain you do as well. It would appear as if they were born with a streak of bad luck and it has followed them around their whole life. These individuals are quick to blame circumstances or other people for their problems, rather than accepting responsibility for their life and their attitude.

Conversely, there are others who are forever winning and living the good life. They are the real movers and shakers who make things happen. They seem to go from one major accomplishment to another. They’re in control of their life; they know where they are going and know they will get there. They are the real winners in life and their wins are a matter of choice.

You can experience that kind of life as well, you only need to decide. Making that simple decision is the first step to a new life. Dorothea Brand once said, “Act as if it were impossible to fail,” and I challenge you to do so. By simply becoming aware that you can choose your thoughts each and every day, you will change your entire outlook. You have the power to choose an abundant life no matter your circumstances. That active choice will allow other positive people and opportunities to be attracted into your life. Don’t wait to experience all the wonderful things the universe has in store for you. Start today by working on your attitude and welcome the abundant life that you were meant to lead.

The above article has been sourced from LifeSuccess Productions and was written by Bob Proctor. 

Bob Proctor is widely regarded as one of the living masters and teachers of The Law of Attraction. Featured in the blockbuster hit, The Secret, Proctor has worked in the area of mind potential for over 40 years, is the best-selling author of You Were Born Rich, and has transformed the lives of millions through his books, seminars, courses and personal coaching.

Editors Note

This edition includes the regular Inspirational Quote, Funny Picture and Market & Economic Report. This month I have also included an Educational Video about investment.

Europe’s debt problems pose the biggest threat to the global recovery. Given a likely European recession, a slow global growth phase for 2012 appears the main scenario. Australia - While mining investment is booming, retailing, housing, manufacturing and tourism are likely to remain soft. Given global concerns and mixed Australian indicators, the RBA is likely to cut rates again in 2012.

Inspirational Quote

Success is to be measured not so much by the position that one has reached in life as by the obstacles which he has overcome.

Booker T. Washington (American Educator)

Funny Picture

Who would like a beer watercooler like this at their workplace?

Market & Economic Report

Global economy

Review: The European debt crisis continues to dominate financial markets and undermine confidence. However, US economic data has been resilient in the face of global turmoil. The US ISM manufacturing survey improved in December rising by 1.2 points to 53.9, suggesting that the US economy ended 2011 with activity expanding at a +2% GDP pace. The American labour market picked up with a gain of 200,000 jobs in December and the unemployment rate falling further to 8.5%. US house prices drifted lower with the Standard & Poor’s Case Shiller Major 10 cities Index recording a 1.1% decline in October. More encouraging was the Conference Board’s confidence survey which rose almost 10 points to 64.5 in December, as well as the Bloomberg Consumer Comfort Index which climbed to -44.8 in the period ended 31 December, the best reading since mid-July 2011. US nominal retail sales proved mildly disappointing in November recording a marginal monthly rise of 0.2%. The US Federal Reserve (Fed) maintained the federal funds rate target range between 0% to 0.25% at its December meeting, reaffirming previous guidance that interest rates should remain “exceptionally low” until mid-2013. In the meeting minutes for December, the Fed noted that there were a number of factors restraining US economic growth such as “fiscal and banking issues in the euro area” as well as “fiscal tightening in the US, high levels of uncertainty among households and businesses, the weak housing market and household deleveraging”. After much debate, the US Congress agreed to extend a payroll tax cut and increased unemployment benefits beyond their December expiry which should help mitigate a sharp fiscal contraction in 2012.

European leaders met on 9 December to address the sovereign debt crisis and generally agreed on a number of key proposals: A ‘fiscal compact’ limiting Government budget deficits to -0.5% of nominal GDP, the European Financial Stability Facility will be “rapidly deployed” and the European Stability Mechanism brought forward to start in July 2012. There was also a proposal to provide the International Monetary Fund with €200 billion of loans to “deal with the crisis”. Later in the month, the ECB announced that 523 European banks will take a total of €489 billion in three-year loans under its long-term refinancing operations. Yet European business surveys continue to indicate recession in the region. The purchasing manager’s index (PMI) manufacturing survey for December rose marginally by 0.5 to 46.9, but suggests that European industrial production is still contracting. The ECB decided to lower its key policy interest rate at its December meeting by a further 0.25% to 1.0%.

In Japan, September quarter GDP rose 1.4% quarter-onquarter (qoq), revised slightly down from the previous estimate. Monthly economic data releases were more mixed. Vehicle sales improved rising 23.5% year-on-year (yoy) in December, bank lending picked up at +0.2% yoy in November and the tertiary activity index beat market expectations increasing 0.6% month-on-month (mom) in October. Yet Japan’s exports fell again in November, providing another reminder of the global slowdown.

In China, the official PMI rose to 50.3 in December after dipping below 50 in November. Overall, this report is consistent with China’s economy slowing to around 8% growth in the first half of 2012. Elsewhere, Chinese economic data was positive. Retail sales improved 17.3% yoy in November, industrial production was up 12.4% in the month and fixed asset inventories rose 24.5% yoy year-to-date.

Outlook: Europe’s debt problems pose the biggest threat to the global recovery. Given a likely European recession, a slow global growth phase for 2012 appears the main scenario.

Australian economy 

Review: The Reserve Bank of Australia (RBA) cut interest rates by 0.25% to 4.25% in December affirming that Australia's "inflation outlook afforded scope for a modest reduction in the cash rate". The central bank also stated that Europe's banking and sovereign debt problems are "likely to weigh on economic activity there over the period ahead". Australian economic activity was solid in the September quarter. Real GDP expanded by 1.0 % qoq in the July to September period with annual growth now running at +2.5% yoy. The labour market softened in November with a loss of 6,300 jobs and the unemployment rate edging 0.1% higher to 5.3%. Australia’s business confidence and conditions were generally stable in November according to the National Australia Bank survey. Consumer sentiment slipped back in December with the Westpac Melbourne Institute survey falling by 8.9 points to 94.7 in December. Retail trade in November was flat, similarly to October’s marginal 0.2% mom rise. Australia’s trade surplus narrowed in November to A$1.38 billion from October’s A$1.42 billion. While only a marginal contraction, the trade result does indicate tougher global trading conditions for exporters over recent months.

Outlook: While mining investment is booming, retailing, housing, manufacturing and tourism are likely to remain soft. Given global concerns and mixed Australian indicators, the RBA is likely to cut rates again in 2012.

Australian shares

December review: Australian shares experienced continuing volatility during December as global share markets fluctuated on sovereign debt issues in Europe. The S&P/ASX 200 Accumulation Index fell by 1.4% for the month overall.

Short-term outlook: While short-term volatility will remain high, Australian shares are likely to provide positive returns on a 12-month view. The turn in the Australian interest rate cycle suggests the period of underperformance by Australian shares is coming to an end.

Medium-term outlook: Reflecting reasonable growth prospects, medium-term returns of around +10% per annum are likely (or +11.5% if franking credits are allowed for).

Australian bonds and cash

December review: Australian bond markets were volatile in December in line with global movements. 3-year Australian government bonds opened the month at a yield of 3.22% and closed 9 bps lower at 3.13%. 10-year bond yields also fell, opening the month at 4.01% and closing 34 bps lower at 3.67%. Money market yields were mixed as the market continued to price in interest rate cuts in the first quarter of 2012. The 3-month bank bill yield opened at 4.53% and fell 6 bps to close at 4.47%, while the 6-month bank bill opened at 4.31% and closed 12 bps higher at 4.43%.

Short-term outlook: Australian bonds are poor value at current yields but they are a good diversifier against global concerns.

Medium-term outlook: Returns from local sovereign bonds over the medium term are likely to be low, reflecting low yields.

Key financial markets

The above article is by Dr Shane Oliver, Head of Investment Strategy & Chief Economist, from AMP Capital Investors Limited.

Educational Video - Credit's role in a portfolio

Jeff Brunton, explains credit's role in a balanced portfolio.

The above video is from Jeff Brunton, Head of Credit Markets, from AMP Capital Investors Limited.

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.

The following quotes relating to Warren Buffett are from author Robert Miles who has dedicated much of his life to understanding how the world’s greatest investor built his empire.

Warren Buffett would say you should be a business analyst not a market analyst. A market analyst would concern themselves with the direction of interest rates, the direction of the Australian versus the US dollar, the price of oil and all those external factors. Whereas a business analyst would look at a stock as a business and value that stock as if they were to buy the whole thing. He suggests doing that first and the last thing you should look at is the price of a particular stock – these are unchanging principals.

Most people look at market volatility as risk in terms of how much prices will go up or down. Warren perceives risk in a different way to the rest of the market. To Warren risk is not knowing what you’re doing and not understanding what you own. The market also thinks risk is having too few investments but Warren would define risk as having too many investments.

The way he looks at investing is he looks at what he can take out of an investment over its useful life and then discounts that back to today. Within that strategy is predictability and the durability of earnings.

The US is where he lives, was born, what he knows and fortunately for him where 50% of the world’s capital markets are based. If he would come to Australia and make an investment he would increase his risk exponentially because not only does he not live here, he doesn’t know the market. There are also the political and currency risks outside the market risks so he would not want to add all those risks to his investment position. Conversely, Australians should invest in what they know – in investing in overseas stocks they are adding to their investment challenge.

The above quotes from Robert Miles have been sourced from IFA Magazine December 2004.

My Comments: How many Australian investors follow the above principles? I believe it wouldn't be many. For direct share investing, I use an investment method similar to that used by Warren Buffet as detailed on a previous Blog Update: Direct Share Investing - Warren Buffet Investment Method.

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.

2011 in review: should we be concerned about 2012?

Dr Shane Oliver reviews the events of the past year and looks towards 2012. 

Oliver's Insights 2012: Australia's Economy

Dr. Shane Oliver, focuses on the Australian economy and provides his outlook for 2012.

The above videos are from Dr Shane Oliver, Head of Investment Strategy & Chief Economist, from AMP Capital Investors Limited.

Do you want to achieve your most important goals? In my opinion it gets down to two simple words, "easy" and "neglect". People often ask me how I became successful at the early age of 31, while many of the people I knew did not. The answer is simple: During that 6-year period of time (age 25 to 31), the things I found to be easy to do, they found to be easy not to do. I found it easy to set the goals that could change my life. They found it easy not to. I found it easy to read the books that could affect my thinking and my ideas. They found that easy not to. I found it easy to attend the classes and the seminars, and to get around other successful people. They said it probably really wouldn't matter. If I had to sum it up, I would say what I found to be easy to do, they found to be easy not to do. Six years later, I'm a millionaire and they are all still blaming the economy, the government, and company policies, yet they neglected to do the basic, easy things.

In fact, the primary reason most people are not doing as well as they could and should, can be summed up in a single word: neglect.

It is not the lack of money - banks are full of money. It is not the lack of opportunity - America, and much of the free World, continues to offer the most unprecedented and abundant opportunities in the last six thousand years of recorded history. It is not the lack of books, libraries are full of books - and they are free! It is not the schools - the classrooms are full of good teachers. We have plenty of ministers, leaders, counselors and advisors.

Everything we would ever need to become rich and powerful and sophisticated is within our reach. The major reason that so few take advantage of all that we have is simply neglect.

Neglect is like an infection. Left unchecked it will spread throughout our entire system of disciplines and eventually lead to a complete breakdown of a potentially joy-filled and prosperous human life.

Not doing the things we know we should do causes us to feel guilty and guilt leads to an erosion of self-confidence. As our self-confidence diminishes, so does the level of our activity. And as our activity diminishes, our results inevitably decline. And as our results suffer, our attitude begins to weaken. And as our attitude begins the slow shift from positive to negative, our self-confidence diminishes even more... and on and on it goes.

So my suggestion is that when given the choice of "easy to" and "easy not to" that you do not neglect to do the simple, basic, "easy"; but potentially life-changing activities and disciplines.

The above article has been sourced from Jim Rohn - American Business Philosopher.

Updated: Returns are now for the period ending 31 December 2011

For direct share investing, I use an investment method similar to that used by Warren Buffet.

For the first step, I use a software program that scans the entire market, to find the small number of companies that meet my stringent "Warren Buffett" criteria. The criteria I use includes: debt to equity, current ratio, quick ratio, interest cover, stability of earnings, stability of sales, return on equity, return on capital, at least a 4 year performance track record and a market capitalisation threshold. The second step is to perform more detailed analysis on the companies that passed through the first scan. The third step is calculating the right price to pay. It's not a question of whether a company is undervalued or overvalued according to some theoretical model but to calculate what return can I expect under my own margin of safety.

So who is Warren Buffet?

He is one of the most successful investors in the world. He is the Chairman and CEO of Berkshire Hathaway, a diversified investment company valued at over US$191 billion (as at January 2011). Before that Buffett ran private investment partnerships.

Suppose someone had the good sense to invest US$10,000 in one of Buffett's original partnerships back in 1956 when they first started. And suppose that when the partnerships terminated in 1969, that person reinvested the proceeds in Berkshire Hathaway. Today that person would be worth over US$280 million - after all taxes and expenses.

To understand the Warren Buffett Investment Method, we need to recognise that he does not think about the stockmarket. "We look at individual businesses," he once said. "And we don't think of stocks as little items that wiggle around in the paper. We think of them as parts of businesses."

One of the best quotes that describes the Warren Buffett Investment Method is the following: 

"Your goal as an investor should be simply to purchase, at a rational price, a part interest in an easily understandable business whose earnings are virtually certain to be materially higher 5, 10 and 20 years from now."

Suppose we used the Warren Buffet Investment Method to invest in Australian companies between Jan 2001 and Dec 2011. The income and growth returns* using this method are shown below as the CMP Portfolio and are compared to the returns from the All Ordinaries index.

Chart 1 - Calender Year Returns 

Chart 2 - Performance Over 11 Years - Starting With $100,000

* Past performance is not indicative of future performance. The future value of investments may rise and fall with changes in the market. I have assumed 3% annual dividends with 60% franking.

The total returns above show there is a strong case for using the Warren Buffet Investment Method to invest in Australian companies.

 
To learn more about direct share investing and the Warren Buffet Investment Method for your investment portfolio or self managed super fund, call 9372 7955.

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.

Editors Note

This edition includes the regular Inspirational Quote, Funny Picture and Market & Economic Report. This month I have also included an Educational Video about shares.

The global recovery is likely to continue, albeit slowly. Europe’s debt problems pose the biggest threat. While mining investment is booming, retailing, housing, manufacturing and tourism are likely to remain soft. Given global uncertainty and mixed Australian indicators, the risk is that the RBA may cut rates further next year.

Inspirational Quote

I honestly think it is better to be a failure at something you love than to be a success at something you hate.

George Burns (American Comedian)

Funny Picture

Hungry lions thinking what's for lunch.

Market & Economic Report

Global economy

Review: US economic conditions have remained consistent with continued economic growth, although growth remains fragile and constrained. The Institute for Supply Management (ISM) survey for manufacturing climbed higher to 52.7 in November while the ISM non-manufacturing conditions index fell to 52. America’s labour market strengthened in November with 120,000 jobs added and the unemployment rate dropping sharply to 8.6%. October nominal retail sales rose 0.5% month on-month (mom) and industrial production increased 0.7% mom, revealing solid economic activity. The US Federal Reserve (Fed) left interest rates at 0%-0.25% in November and maintained its commitment to "exceptionally low" interest rates until mid-2013. The Fed also downgraded its US growth forecast for 2011 in recognition of slower activity. US growth is now expected to be circa 1.6% compared to the June forecast of circa 2.8%. The Fed’s November meeting minutes showed forecasts for "moderate" economic growth but also expressed concern that Europe's banking and debt crisis is a "significant downside risk". Notably, the Fed’s survey of bank lending surveys showed that US banks were tightening loan standards for European banks to a "considerable" degree.

In the Eurozone the sovereign debt crisis continued to intensify. After a turbulent start to the month governments in both Greece and Italy were replaced with technocrats focusing on implementing austerity and economic reform packages. The European Commission revised downwards its growth forecasts with Europe now expected to expand by +1.5% in 2011 and then slow further to +0.5% in 2012. We expect a mild recession in 2012. Eurozone data remained weak. The region’s purchasing managers’ index (PMI) for manufacturing fell to 46.4 in November, continuing to highlight the immediate recession prospect for the region. Europe announced another set of measures in December focused on a fiscal union, a strengthening of bailout funds and more money for the International Monetary Fund. Unfortunately it does nothing to address the economic deterioration and liquidity problems in bond markets. More aggressive European Central Bank (ECB) support is required, but it remains reluctant for now.

In positive news, growth prospects for Japan continued to improve with real gross domestic product (GDP) for the September quarter expanding by 1.4% quarter-on-quarter (qoq), or 5.6% annualised. This came after the 0.5% qoq decline in Japan’s real GDP for the June quarter and 0.9% decline for the March quarter. Japan’s index of coincident economic indicators also rose a preliminary 1.3 points in October, rising for the first time in three months and vehicle sales picked up rising 24.1% year-on-year in November. 

The Chinese economy continued to cool with the manufacturing PMI falling to 49.0 from 50.4 in November. While this was the lowest reading since February 2009, the index is at levels that suggest China’s industrial activity is continuing to grow but at a more moderate pace. Industrial production, fixed-asset investment and real estate indicators also point to a slowdown. Fortunately inflation has fallen sharply providing room for policy easing going forward.

Outlook: The global recovery is likely to continue, albeit slowly. Europe’s debt problems pose the biggest threat. Watch the ECB.

Australian economy

Review: The Reserve Bank of Australia (RBA) cut rates by 0.25% to 4.25% in December, stating that Australia's "inflation outlook afforded scope for a modest reduction in the cash rate". Meanwhile, Australia’s economy grew by more than expected in the September quarter with GDP rising 1.0% qoq but was largely driven by mining investment. The labour market softened with new jobs falling by 6,300 and the unemployment rate rising to 5.3% in November. Consumer sentiment improved significantly with the Westpac Melbourne Institute survey rising by 6.2 points to 103.4 in November while retail sales rose only 0.2% in October. The National Australia Bank business survey for October showed an improvement in business confidence which increased by three points after a sharp fall in August. The housing sector remained weak with building approvals falling 10.7% in October. In its Statement of Monetary Policy for November, the RBA revised down its Australian growth and inflation forecasts for 2012 and 2013 by approximately 0.5% compared to August.

Outlook: While mining investment is booming, retailing, housing, manufacturing and tourism are likely to remain soft. Given global uncertainty and mixed Australian indicators, the RBA is likely to cut rates further next year.

Australian shares

November review: Australian shares fell back in November in line with the global trend as global share markets weakened on fears that the ongoing Eurozone debt crisis will damage global growth. The S&P/ASX 200 Accumulation Index returned -3.5% for the month overall.

Short-term outlook: While short-term volatility will remain high with further weakness possible in the next few months, Australian shares are likely to provide positive returns on a 12-month view. The turn in the Australian interest rate cycle suggests the period of underperformance by Australian shares is over.

Medium-term outlook: Reflecting reasonable growth prospects, medium-term returns of around 10% per annum are likely (or 11.5% if franking credits are allowed for).

Australian bonds and cash

November review: Australian bond markets rallied in November further to the erosion of risk sentiment throughout the month. 3-year Australian government bonds opened the month at a yield of 3.80% and closed 58 bps lower at 3.22%. 10-year bond yields also fell back, opening the month at 4.43% and closing 42 bps lower at 4.01%. Money market yields fell significantly at the start of the month, following on from October’s losses. The 3-month bank bill yield opened at 4.64% and fell 11 bps to close at 4.53%. The 6-month bank bill opened at 4.59% and closed 28 bps lower at 4.31%.

Short-term outlook: Australian bonds are poor value at current yields but they are a good diversifier against global uncertainties.

Medium-term outlook: Returns from local sovereign bonds over the medium term are likely to be low, reflecting low yields.

Key financial markets

The above article is by Dr Shane Oliver, Head of Investment Strategy & Chief Economist, from AMP Capital Investors Limited.

Educational Video - Do shares still outperform?

Dr Shane Oliver discusses the long term outlook for shares and answers questions on whether they do still outperform.

The above video is from Dr Shane Oliver, Head of Investment Strategy & Chief Economist, from AMP Capital Investors Limited.

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.

Trauma cover remains one of the least understood, least appreciated forms of life insurance, a fact borne out by industry estimates suggesting that only 3% of Australian families own trauma cover.

And whilst the relatively higher premiums for trauma cover can obviously prove a barrier, another issue may be that the true costs of a major medical event may not be fully understood. It is quite likely that many people – when asked to consider the cost of a health trauma – tend to concentrate mainly on the immediate health costs, falsely believe that the public health system will meet most of these costs, and also tend to underestimate the time it takes to truly recover from such a condition.

The relatively obvious costs of a major medical event can include:

• Lost income 

• Medical treatment 

• Business interests

Some less obvious costs can include: 

• Stress/depression 

• Stress for those close 

• Future plans 

• Lost dignity

Research by Macmillan Cancer Support (UK) estimates that 1 in 6 cancer patients struggle to meet their rent/mortgage repayments as a direct result of the financial consequences of their illness, and sadly 1 in 17 actually end up losing their home altogether (1 in 11 for self employed). The experience in Australia is likely to be similar, as is the experience across other health traumas such as heart attack, stroke, and accidental injury. In this context, trauma is not a "nice to have" insurance but an essential part of any robust wealth protection plan, as the case studies below help to show.

Case study 1 - Tony’s heart disease battle

Tony was 44 when first diagnosed with heart problems, which lead to a double bypass. A superfit police officer, who regularly participated in endurance sports, everyone was shocked by the diagnosis.

While Tony’s surgery was successful, his recovery was complicated by depression and stress, which on his doctor’s advice lead to an extended period off work. On the financial side, you might say that Tony was relatively fortunate even though he had limited personal cover in place. Being a member of the police force meant that almost 80% of his income was paid to him while he spent the next 13 months convalescing (under a combination of regular sick leave, a sick leave "bank" in his award and Work Cover). When Tony returned to work, his reduced salary continued because he couldn’t perform at his previous level. Within 5 months, Tony’s depression returned and he decided to retire from the police force.

2 years on, Tony and his wife now rely on her nurse’s income to pay all their living expenses, sizeable mortgage repayments and ongoing medical bills ($130 per visit for Tony’s counselling and $300-$400 per visit for his cardiologist).

On the advice of his doctors, Tony is planning to take a year off to rest before looking for another job. He is also expecting to receive a lump sum disability payment from his super fund soon.

While Tony was fortunate to get considerable financial support from his former employer, the financial stress of a high mortgage and job insecurity – fearing he could no longer cope as a policeman – impeded his recovery.

What difference would trauma cover have made? It would have allowed the couple to reduce their substantial mortgage debt and give Tony the breathing space to reevaluate his employment options without worrying about money.

Did you know?

Cardiovascular disease:

• Kills 1 Australian every 10 minutes 

• Affects more than 3.5 million Australians 

• Prevents 1.4 million people living full lives because of a disability

Source: Heart Foundation

Case study 2 - Monique’s accident survival story

Monique was a 33 year old sales executive when she fell off a platform while boarding a train 6 years ago. One leg had to be amputated above the knee, the other was seriously damaged. Monique spent 3 1/2 months in hospital, 6 months in live-in rehabilitation and 2 months in part-time rehabilitation. During this time, Monique’s earnings reduced from an annual package in excess of $100,000 to $45,000 in compensation payments. When the time came to return to work, Monique found her old job too physically challenging and now works for a charity earning $42,000 per annum. She has moved back in with her parents and spends $300 per month on massage and therapeutic treatments to deal with "phantom" pain.

Since the accident, Monique has lost around $250,000 in after tax income and spent more than $18,000 on treatments. One small blessing is that the cost of her replacement prosthetic leg once every 5 years and the cost of her specialised shoes – which are replaced once every 3 months – are covered through government compensation.

With trauma cover in place, it is quite likely that Monique could still have realised her pre-accident goal of buying her own house, instead of being forced to move back home with her parents. As it is, that dream appears shattered, at great personal cost to her, and her parents.

Did you know?

• In 2007/08 there were 425,949 hospitalisations due to accidental injury or poisoning 

• Of which 83,214 involved a "high threat to life"

Source: Australia’s Health 2010, Australian Institute of Health and Welfare, December 2010.

Case study 3 - John’s journey to cancer recovery

John was in his late 40's when a persistent eye infection led to being diagnosed with Chronic Myeloid Leukemia (CML). After 4 months of combined chemotherapy and immunotherapy treatments that were ineffective, John went on the waiting list for a bone marrow transplant. He had the transplant 15 months later, recuperated in hospital for 19 days and spent 3 months undergoing intensive outpatient treatments. After 5 months on anti-rejection drugs, he was considered "cured".

Leading up to the transplant, John and his wife Julie decided to sell their café business, which Julie had been forced to run on her own since John became ill. After the operation, the couple lived off the business sale proceeds and what was left of John’s 2 year income replacement benefit, before applying for Centrelink benefits.

2 years later, the couple restarted the business.

During John’s recuperation, the couple spent $1,200 in 6 months on steam cleaning the house (such was the fragile state of John’s immune system) and their weekly grocery bill went up $150 per week as they started buying fresh organic foods.

Stress caused Julie to go through premature menopause, and 2 years of treatment and counselling, at a cost of around $250 per month.

While John remains clear of CML, he estimates that the illness cost his business about $520,000 through the forced sale of his business and lost productivity. The emotional cost was obviously a heavy one, on Julie as well as John. This stress was compounded by the fact that their youngest son was still in high school – at a local private school – at the time John contracted his illness.

Trauma cover would have helped alleviate much of the emotional stress, by alleviating much of the financial stress. A trauma benefit would have allowed Julie to stay home to help John recover, whilst still being able to afford to employ someone to run the business. Day to day expenses – including the school fees for their youngest son – would no longer have been such a headache.

Did you know?

• By the time a male reaches age 85 there is a 1 in 2 chance they will have been diagnosed with cancer at some point (1 in 3 for females)

• Around 108,000 new cases of cancer are diagnosed each year (more than the capacity of the MCG) and there are 109 cancer related deaths every day

• Between 1982 and 2007 there was a 200% increase in the number of new cancer cases diagnosed (the population grew by only 30% over the same period)

Source: Cancer in Australia, an overview, Australian Institute of Health and Welfare, December 2010.

The above article has been sourced from Zurich Financial Services Australia Ltd.

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. 

When sharemarkets are in a downturn, some investors may feel the urge to take action, such as selling their shares.

When facing this urge for action, ask yourself these questions:

• Why did I first buy the share that I'm considering selling?

• Was the share bought as a long-term investment based on sound research?

• Have the long-term prospects for that share changed?

• Am I basing the decision to sell the share on my emotional response to the sharemarket rather than a decision based on research?

• Am I allowing myself to be caught up in the mood of the sharemarket rather than acting in my best interests?

• Do I have an inflated opinion of my ability to read the sharemarket when I should be seeking professional financial advice?

• How does selling the share relate to my long-term asset allocation (allocation to growth and defensive assets)?

It can be difficult to control your emotions during sharemarket downturns but it's vital if you wish to be a successful long-term investor.

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. 

Number 1

Life is worthwhile if you LEARN. What you don't know WILL hurt you. You have to have learning to exist, let alone succeed.

Life is worthwhile if you learn from your own experiences, negative and positive. We learn to do it right by first sometimes doing it wrong. We call that a positive negative. We also learn from other people's experiences, both positive and negative.

I've always said it is too bad failures don't give seminars. We don't want to pay them so they don't tour around giving seminars. But the information would be very valuable – how someone who had it all, messed it up. Learning from other people's experiences and mistakes.

We learn by what we see - pay attention. By what we hear – be a good listener. Now I do suggest being a selective listener, don't just let anybody dump into your mental factory. We learn from what we read. Learn from every source. Learn from lectures, learn from songs, learn from sermons, learn from conversations with people who care. Keep learning.

Number 2

Life is worthwhile if you TRY. You can't just learn; you now have to try something to see if you can do it. Try to make a difference, try to make some progress, try to learn a new skill, try to learn a new sport. Life is worthwhile if you try. It doesn't mean you can do everything but there are a lot of things you can do, if you just try. Try your best. Give it every effort. Why not go all out?

Number 3

Life is worthwhile if you STAY. You have to stay from spring until harvest. If you have signed up for the day or for the game or for the project - see it through. Sometimes calamity comes and then it is worth wrapping it up. And that's the end, but just don't end in the middle. Maybe on the next project you pass, but on this one, if you signed up, see it through.

Number 4

Life is worthwhile if you CARE. If you care at all you will get some results, if you care enough you can get incredible results. Care enough to make a difference. Care enough to turn somebody around. Care enough to start a new enterprise. Care enough to change it all. Care enough to be the highest producer. Care enough to set some records. Care enough to win.

Four powerful little words: learn, try, stay and care. What difference can you make in your life today by putting these four words to work?

The above article has been sourced from Jim Rohn - American Business Philosopher.