What Happened Last Week in 60 Seconds
Australian Equity Market Fact
Whilst we always endeavor to look long term with our investments at the time of writing the Australian sharemarket is set to have its first negative year since 2011. This is of no surprise to many with the banks having capital requirement changes, the miners hit hard with falling commodity prices and the supermarkets and Telstra subject to more competition. Over the 10-year period to December 2012 Australian shares returned 8.9%. For the same timeframe Australian residential investment property returned 6.5%. On a 20-year basis; Australian shares returned 9.8%, while residential investment property returned 9.5%.
International Equity Market Fact
International equities enable investors to benefit from the performance of sectors that are either poorly represented or entirely absent from the Australian market, such as pharmaceutical, information technology and defence. They include fast-growing sectors that are yet to reach full maturity, and sectors with very different growth profiles to those which dominate in Australia (Financial services and mining account for 60% of the Australian stock market).
This week in the economy
The Australian stock market rose 1.5% as the US Federal reserve increased interest rates (0.25 to 0.5%). The rates decision was unanimous and was positively received by equity markets; noting that, in the US, financials have historically outperformed as central bank interest rates start rising.
Although the rate of growth of SMSFs is slowing, mainly because of Baby Boomers retiring and drawing down their pensions, at about $600 billion funds under management and more than half a million funds they remain the biggest superannuation sector.
Over 95% of Australians do not have adequate levels of life insurance despite the availability and relatively low cost of life insurance. A life insurance plan pays a lump sum if the insured person dies, or; is diagnosed with a terminal illness and is given a life expectancy of less than 12 months.