Investing is challenging, and anybody who invests in growth assets such as property and shares should know that any asset that has the potential to produce capital gain, can also give you a capital loss. This is why I recommend that you do not invest in property or shares unless you have at least seven to ten-year time frame in mind.
But it’s even more difficult if you fall for rumours and half-truths. The following email is typical and refers to a recent article I wrote discussing assets with the potential to produce a return of around 9% per annum long-term.
In the article I mentioned that part of my superannuation was invested in property syndicates that invest in non-residential property.
This did not sit well with the reader who wrote “I was appalled that you would recommend commercial property syndicates which have a history from way back of collapsing and returning nothing. Some friends lost all their funds in a scheme not that long ago”.
I am sorry if that is the reader’s experience. But the fact is that the syndicates in which I have invested have performed very well and I’m comfortable having 10% of my super fund in that area. It’s a matter of selecting the right ones.
The reader continued ” Your second recommendation was investing in the index . What if the market falls say 30% – 50% – a likely scenario? Why recommend at the top or close to the top of the market? Are you completely hopeless?”
Let’s ignore the tone of the email and focus on the facts. It is well accepted that nobody can consistently and accurately pick the top and bottom of markets, and it is also well accepted that the market having fallen to a low point has never failed to reach a record high at some stage in the future. This is why I’m completely relaxed about having at least 60% of my superannuation fund in shares.
A unique thing about shares is that their performance is well documented. On my website, you can choose a starting and finishing date and enter a notional sum that you could have invested in a fund that matched the All Ordinaries Accumulation Index (which includes income and growth). You could then discover how much you would have had if the money was invested in the fund that matched that index on your chosen date. For example, $100,000 invested in January 2007 just before the GFC would now be worth $173,000 – a compound gain of 5.11% per annum.
By succumbing to half-truths, instead of doing the proper research, the inquirer has potentially lost many opportunities that are available to more aware investors.