The ASX All Ords: where to in 2012?

‘As goes January, so goes the rest of the year’ – or so the old adage goes!
As with so many fortunetellers, this can be read to take out any meaning you want.

Early in February this year there were predictions that the Australian sharemarket was due for an imminent retracement – in spite of the fact that January had delivered a 4.8% gain for the month! Conceded: there was a down day or two at the end of the month!

‘As goes January, so goes the rest of the year’:

  • Does this mean that the rest of the year will only show the 4.8% that we had for January?
  • Does it mean that each ‘gossamer of hope’ will be followed by a ‘lead lined cloud’?
  • Does it mean something else that when we get to the end of the year we can say – ‘As went January, so went the rest of the year’?

As a matter of interest Continuum Financial Planners posted their view on the outlook for various aspects of the financial markets in early February.

When considering lifetime wealth management issues, strategy is more important than timing – leading to another tried and tested investor’s adage: ‘time in the market is more beneficial than timing of the market’. As wealth management investors – and proponents for longer-term strategy – why do we bother to consider near-term outlooks?

Investors like to have a sense of how they might progress towards their strategic outcomes on a year-by-year basis: they try to anticipate what might cause volatility and look at ways to manage the risk associated with the predictable movements in the various markets. Akin to weather forecasters, few of us regularly ‘get it right’; but allowing for earlier occurrence (compression) of events – or slippage to a later time – if the general direction (if not the extent) is close to the mark then we can be satisfied that planning around that should be beneficial.

All things considered an investment in the ASX All Ords (not a commonly-held index for various reasons!) delivering a 4.8% rise in market value, another 4 to 5% by way of dividend; and yet another 1.5 to 2.5% by way of franking credit, makes for a reasonable return (around 11% before tax) – could be expressed as CPI (inflation), plus around 7%: most Balanced portfolio investors should be happy with that outcome I suspect.

[At time of posting the All Ords is up 8.6% year to date, 2012]

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