I wrote a piece for Intelligent Investor Share Advisor on Monday titled The Case for Equities Remains. One of the comments underneath questioned my motives in remaining positive on equities.
“So it needed to be asked, are you clients withdrawing from Forager Funds? You do have a conflict in interest writing this article though!!”
Fair call, too. They say you don’t ask a barber if you need a haircut.
For the record, we’ve experienced minor net inflows over the past few months. And I wasn’t writing the article just to drum up business. Not consciously at least.
I also wasn’t suggesting hold onto every stock (or fund) you have. Some stocks and parts of the market look particularly expensive to me. It makes perfect sense to be doing some selling and, perhaps, holding a bit more cash than a year ago.
My point was that you should have a general rule in life: hold most of your long-term investments in real assets that protect against the perennial debasement of cash. There may be times when that rule should be broken, but I don’t think this is one of them.
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Aside 1: Even if you were unfortunate enough to invest in the All Ordinaries Index at the absolute pre GFC peak on 18 October 2007, you would still be 17% up your money today (assuming dividends are reinvested). That’s about 2.2% per annum. Throw in some franking credits and you wouldn’t be far off the return on cash in the bank.
Aside 2: If you had invested $10,000 at the pre GFC peak and added $10,000 each year on the anniversary of your first investment, your $80,000 outlay would be worth $113,524 today, again assuming the All Ordinaries Accumulation Index Return. That’s a weighted average annual return (or IRR) of 8.9% per annum.