Understand your choices
The Australian population is considered to be (per-capita), more heavily invested in managed funds- than any other nation. Leaving aside (for now), all of the restrictions and complications of managed funds, another major weakness can be found in the fact that the most of these managed funds are limited to investing, exclusively, in the Australian share market.
While most Australian-equity-market investors have been left dissatisfied, with the returns of recent years (especially when considering the performance of foreign markets), many are still unaware of the fact that the average Australian managed fund does little more than match the performance of the Australian market, as a whole (we have statistics showing exactly this). In other words, the statistics would indicate that it’s almost to-be-expected…
In other words, while it may seem easy to simply stick with what’s familiar- it could also be very costly. If for no other reason than considering the all-too-often overlooked opportunity cost.
At the end of the day, it all comes down to achieving the right balance between:
- The ideal level of involvement/effort required of you, the client (according to your own preferences)
- The lowest level of risk
- The highest returns
- The greatest consistency (i.e. are you looking to draw a regular income, or are you simply looking for the best medium to long-term growth).
Therefore, there are certain questions that need be asked of oneself:
- Am I simply staying with what I know?
- Have I given proper consideration to alternatives?
- Have I properly mitigated my risk through diversification?
- Have I let lack of knowledge/fear-of-the-unknown prevent me from getting the most from the markets?
With a wide range of trading and investment products available to retail traders these days it can be more confusing than ever to decide which are right for you. It is however important to understand that finding the right market, or combination of markets, can very often lead to a far more rewarding experience- both personally and financially.
- For those who prefer Managed Services
- Self-directed traders/investors
- Signals/recommendations followers
- The minimum investment amount required by the service. Some have higher than others, but they can start as low as $1000-$2000
- Performance history (NET of fees)
- The extent of diversification the strategy will provide, in relation to your other investments
- The level of reporting & transparency provided by the account manager
- The level of risk taken; per trade, and as a methodology
- The safety of your funds
- The amount of funds that you have available to effectively and sensibly manage your account- some markets have higher trading costs and/or high minimum trade sizes than others
- What style of trader/investor you are or wish to become. I.e.- A day trader, swing-trader, medium term trader or longer-term investor
- What times of the day you have available- many traders have day jobs and therefore sometimes prefer markets that are open at night
- Your level of knowledge & skill, relative to the complexity of the particular market
- The minimum investment amount required to take the signals safely and effectively
- Whether a risk & money management system is provided to take the signals safely and effectively
- Performance history (NET of both subscription & brokerage fees)
- Whether certain brokers, and their particular costs & services are required to take the signals safely and effectively
- The extent of diversification the strategy will provide, relative to your other investments
- What times of the day you have available- many traders have day jobs and therefore sometimes prefer markets that are open at night (and/or strategies that can be properly managed during the hours they have available)
- Your level of knowledge & skill, relative to the complexity of the particular market which the strategy is designed for
Compare products: Choose the right markets for you
An overview of the most widely traded financial instruments:
Where to from here?..
The simple truth is that, even if we look at the most tumultuous market conditions of the past, there have always been those who have not only survived- but thrived. Unfortunately, yet understandably, far too many simply become either:
- Overwhelmed with information
- Confused by misinformation
- Discouraged by the lack of independent guidance
- Lose motivation and give up, due to a combination of the above
However, this simply doesn’t need to be the case…