Upfront Investor | Drop the ‘Gamblers’ Approach….

While it is quite common to see uneducated investors with portfolios containing stocks that are low priced with low liquidity, what I often find is these same people would never consider buying into property assets that could be similarly classed, being located outside of major capital cities. Doesn’t this lead you to question how there could be one approach for property and another for shares?

There are two possible reasons for this; 1) individual investors have been buying directly into property for a lot longer than shares and therefore more people have a greater understanding of some of the typical investment principles around buying bricks and mortar, and 2) is the level of exposure required for each type of investment. The minimum investment for property is quite large, whereas a few thousand dollars is all that is required to start a share portfolio, which means many investors often fail to apply satisfactory scrutiny to their share investments.

Further, what this shows is twofold, firstly, many investors still look at the market with a gamblers mentality which demonstrates there still exists a knowledge gap that needs to be filled. Secondly, although over the long term Australian shares typically outperform other investments when taking into consideration the total return including franking, what I find generally is investors still tend to think too short term.

So what do we expect in the market?

The Australian market moved lower earlier this week to test a well-known technical support level at 5200 points, however led by Wall Street, the market sentiment here later reversed to lift our market back up so as to recover most of the decline. This is so far a very good sign for Australian equities in the shorter term. However, what is needed now is for a continuation of this move and therefore confirmation that support at around 5200 points is likely to hold. Whilst I believe we will see this occur over the next week or two as the market builds momentum for the next rise towards the target zone between 5600 and 5800 points it is nonetheless important to put the current period in perspective.

Typically markets experience strong rises as well as periods of decline and the rises tend to be longer in time than the falls. Also, the time between important market lows can typically be around four years in length, and at times out to around six years. Given that the market is still strong the analysis suggests that the most likely scenario is for a further move up this year before it takes a breather to create the next low.


To your profitable trading,

Dale Gillham
Chief Analyst
Wealth Within

Dale Gillham, ‘one of the country’s most respected analysts’ (Wealth Creator Magazine, Nov/Dec 2004), sought after key note speaker and author of the best selling book ‘How to Beat the Managed Funds by 20%’. Dale has assisted thousands of traders and investors to learn to trade shares and become confident and profitable in their direct share investments. Tired of an industry saturated by quick fix gimmicks and expensive short-courses, Dale co-founded Wealth Within to provide ‘ real education and ongoing personalised support’, as well as independent investment adviceto traders and investors who have become disillusioned by the market for one reason or another. As testament to this, Wealth Within launched Australia’s first and only nationally accredited Diploma and Advanced Diploma of Share Trading and Investment.