It’s a truism that the years fly by faster and faster. The year 2015 has been no exception. It is with some surprise that we find ourselves approaching the end of the year. In this edition of Investor Insights, we review recent developments at La Trobe Financial and in investment markets.
For La Trobe Financial, the year 2015 is ending on an exceptionally high note. In October, the La Trobe Australian Credit Fund passed $1 billion in funds under management across over 23,000 registered members. In mid November, La Trobe Financial was awarded ‘Best Investment Management Company’ and ‘Best Mortgage Fund – Australasia’ at the International Finance Awards in London. Then, in early December, Money magazine awarded La Trobe Financial’s Pooled Mortgages Option (“PMO”) ‘Best Mortgage Fund in Australia’. This highly coveted prize was awarded to the PMO for an unprecedented seventh consecutive year.
We are proud of our awards and independent ratings. But we are very well aware that we are ultimately judged by the value that we provide to our investors. That’s why we are so pleased to have built Australia’s largest and most robust portfolio in the exciting peer to peer investment sector. That’s also why we are so proud of the PMO’s strong outperformance in times of market volatility and low yields.
Market overview – the lost decade
Unfortunately, and once again consistent with our report at the end of last year, the same cannot be said for many alternative investments. And it has been another year of underperformance on the Australian stock market. Although the first half of the year looked promising, reality struck from May onwards and the market actually dropped over the twelve months by 2.86%. Eight years after the market peak of 6,748.90 on 15 October 2007, investors remain down by over 20% even before inflation is taken into account.
As we have said before, this does not mean that investors should avoid stocks altogether. Some individual stocks have produced excellent performance for their investors and dividends can be a valuable source of income. On the other hand, many who talk about market ‘volatility’ often suggest that losses today can be relatively quickly recovered. The truth is that – as we are seeing – it can take a decade or more for a market to recover from a crash and most people at or near retirement simply cannot afford to sit that decade out. They frequently require the money for living expenses. So losses such those experienced since 2007 are – for many investors – permanent and irrecoverable.
For this reason, we repeat our own investment philosophy as often as we can. Be alert to the risks of your chosen investment. Ensure that your investments are suitable for your own needs and objectives. At La Trobe Financial, we live and breathe the three golden rules of investment:
- Keep it simple, silly (“KISS”): As Warren Buffett once pointed out, investment is not like Olympic diving. You don’t get bonus points for degree of difficulty.
- Don’t keep all your eggs in one basket: Diversification is one of the few ‘free kicks’ in investment and reduces the risk of serious portfolio losses.
- Getting rich slowly never goes out of fashion.
Merry Christmas from La Trobe Financial
The year 2015 has been a busy one – we hope that it has been a prosperous and productive one for you and your loved ones. We take this opportunity to wish you and your loved ones a very merry Christmas and a happy new year.