About every six months AXA Australia publish an interpretation of what has been happening in the local markets and economy in the context of the global economy. Of the many commentaries published by Australian product providers the AXA guide is one I feel is most written in plain, accessible language.
In January I sold an investment asset that I had bought only one month earlier – and the sale netted me just under a 5000% return on investment. The investment I made was in buying an Internet domain name. It is like virtual property investment. To help you start learning more about investing in Internet domain names I’ve interviewed my domainer mentor, Ed Keay-Smith. Listen to the interview here.
In January I sold an investment asset that I had bought only one month earlier – and the sale netted me just under a 5000% return on investment.
Now I got lucky when a motivated buyer emerged within a month of my purchase. This is uncommon.
But what is common is that level of percentage return on investment, according to my mentor in this investment type Ed Keay-Smith.
The investment I made was in buying an Internet domain name. For example: MattHern.com.au. It is like virtual property investment.
I refer to this type of investment as frontier investing as it reminds me of the days centuries ago when people rode off into the Wild West and pegged some land.
Whilst very high percentage returns are possible, of course just like any investment you need to first learn a lot so that you know how to make a good investment decision. Otherwise you are just speculating. And if you are blindly speculating you are one small step from gambling.
How to invest in domain names
To help you start learning more about investing in Internet domain names I’ve interviewed my domainer mentor, Ed Keay-Smith. Ed is one of Australia’s leading authorities on the subject of domain names and domain investing and his blog and podcast at ozdomainer.com is read and listened to by domain investors across the globe.
In this 40 minute interview you’ll discover:
What exactly is an Internet domain name
Why you may want to invest in this type of asset
Why you may not like to venture into this frontier investment type
Several golden tips from Ed on how to generate domain ideas and work out if they may be valuable
Where to go next to learn more about investing in domain names
If you are absolutely brand new to planning your money and investing then this book may be useful in enlightening you of concepts that are essential to understand. In a sense it is about increasing your base financial literacy. Things you may discover include:
Mainstream types of investments (asset classes)
Main risks of investing
Risk based investment portfolios
Avoiding financial scams
The book does include some useful check lists such as the one about getting ready to invest.
One of the interesting graphs presents the historical annual returns of the Australian share market from 1900 to 2008. (Page 29). You can see that it is similar in shape to the bell curve with most annual returns being between zero and 20%.
One of the fascinating areas for me as a financial planner was the information on risk profile based investment portfolios (pages 26 & 27). In particular ASIC have published the expected annual average return from each portfolio based on historical returns.
It fascinated me as a planner since the expected returns are higher than we as licensed professional advisers could get away with using when advising clients. Maybe I’ll start including those two pages in my statements of advice as proof of my “reasonable basis of advice” if ASIC’s lawyers ever come knocking. 🙂
What you won’t get
One of the limitations of publication from a Government regulator is that that can’t really express their opinion nor give you detailed processes for how to make a decision that is appropriate for you. They just tell you to make your own decisions and here’s a few basic things to keep in mind.
That’s where sites like mine (The Money Guide) come in. You’ll find articles where I take a stand and share my opinion. Plus in the detailed resources I share the processes I use when selecting the appropriate strategies for clients. So if you are not yet a subscriber now is a great time to get on board as I have lots more detailed resources planned for publication this year.
If you decide you want to participate in the recovery by investing but are nervous about picking specific stocks or even managed funds then remember to always start simple. The easiest, simplest and also lowest cost way to invest is by using a index managed fund. Your return will be the market return – so if the market goes up you should also make money. (To learn more call me.)
What do you think of the AXA guide?
Please let me know your reaction to the AXA guide in the comments section below.
Was it informative or too full of jargon? Did it take you closer to making an investment decision? What else would you want to know? Share your thoughts below.
Exchange Traded Funds (ETFs) are like traditional managed funds (which you may be familiar with) but they are instead traded on a stock exchange like other company stocks.
For do-it-yourself investors it is handy to know about ETFs and how they work. It is also important to understand how they are different to Listed Investment Companies (LICs). To learn a little more about how ETFs work I recommend this brief article from Vanguard Investments Australia called “ETFs: Market Making, Spreads and Liquidity“.
One of the messages I teach is to “Do What You Love; Outsource The Rest“. When it comes to direct investment in residential property it can be tricky to implement this due to the presence of too many biased spruikers. Neil Jenman refers to them as “selling machines” in his insightful article, which I recommend you read in full here.
Following the recent drop in real estate prices I have noticed many spruikers coming out again in force promoting their services and properties. If you perceive property to be “cheap” and are tempted into buying now please read Jenman’s article.
One of the valuable insights in Jenman’s article is when he busts the myth that property prices double every seven to ten years:
“In 1890, the average Sydney home price was $1,446 (£723). If property really does double every seven years then, in 2009, the average Sydney home will be worth $189,530,112.”
Neil Jenman has been in the real estate industry for decades and is now also a consumer advocate. Here’s his view on investing through property investment clubs and the like:
“In my opinion, investing in property via a Selling Machine company, which is rapidly becoming the most common way to invest in property, is the worst way to invest in property.”
“…all [investors] have been ripped off because they have paid far too much at the start – and they often pay far too much in holding costs.”
When direct investment in real estate becomes the right strategy to achieve your life goals find the right mentor to help you and ensure they are biased and/or incentivised to achieving your best outcome rather than theirs.
At some time during the recent bear market did you sell most or all your investments to cash? Or maybe have you been holding out on your regular investment plan because you haven’t felt comfortable? Watch the video below for some insights into how to decide when to start investing again.
At some time during the recent bear market did you sell most or all your investments to cash?
Or maybe have you been holding out on your regular investment plan because you haven’t felt comfortable?
If you made that decision based on an emotional trigger such as “feeling tired of losing money” then you face the real predicament of getting back in too late and missing out on big gains which often come in the early days of an economic recovery.
Watch the video below for some insights into how to decide when to start investing again.
“Buy Amercian. I am.” declared Warren Buffet in an opinion piece in the New York Times on October 17th, 2008. This article is written by Warren Buffet and I highly recommend you read it here.
In his own personal account he says that he has been buying American stocks. He also says that people who currently have their wealth in cash should not feel comfortable at the moment. Read the full article to understand his reasoning, including some historical context.
Following the historical context Buffet writes:
You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.
Slow, steady and committed wins the race. Chopping and changing in line with your emotions will cost you dearly.
With the sharemarket hangover fairy still bashing around inside our heads it can be tempting to proclaim “never again will I drink from that font of wealth creation.” But where’s the fun in that?
It’s time to continuously remind ourselves to take a strategic view and keep a long term perspective that matches the period we will be alive and investing. Finally some articles to that affect are appearing among the mass media doom and gloom.
You may think you have heard it before but keeping reading the good news – you need at least two pieces of bright news to outweigh the psychological impact of each piece of gloomy news.
Following is an excerpt of a long article by James Dunn in The Australian today. Rational analysis that enables you to learn from history.
Andex Charts has calculated the returns made by investments in the main accumulation index (share price growth plus dividends) of the Australian share market, made at every month-end since January 1, 1950, and held for 10 years. In the period to August 31, 2008, there have been 585 10-year investment periods — and not one had made a loss.
The lowest 10-year return was 2.9 per cent a year (for the 10 years ended September 30, 1974), while the best return was 28.7 per cent a year (for the 10 years ended September 30, 1987. The median 10-year return comes in at 13.3 per cent a year.
The most recent completed 10-year return — for the decade to August 31, 2008 — is 12 per cent a year. This is despite a 13.1 per cent fall in the last 12 months of that period. Reid says the index would need to have fallen by 66 per cent in September to produce a negative 10-year return.
The lesson in these numbers is that if you are certain that you can give a share market investment (that is, in the accumulation index) time, you can be confident that it will make money for you.
A financial planner would get into trouble for describing the share market as capital guaranteed but, statistically, the accumulation index is, if you hold it for 10 years.
Wealth creation is a long term project. Investing in growth assets like shares must always be considered with at least a 10 year horizon before you need to spend the money. Any time frame less than that is gambling with odds that are turning against you.
In the Wealth section of today’s edition of The Australian there is a very useful article by Don Stammer summarising some of the great wealth creation wisdom. Cut through the noise and focus on the fundamental, timeless principles of creating wealth. Read Don Stammer’s article: “Wise words: the 10 most important investment sayings“.