The Market Wrap Friday 24-6-11

Bottom of the trading range.

By Jason Fittler

There are no doubts that we are now in some difficult markets.

Once again we are trading at the bottom of the trading range between 4500 and 4800.

Does the market have the support to move back higher? Short term yes, long term not for quite some time.

It is very easy to lose your way in these sorts of markets.

The classic mistake is to shift into another asset group either cash or property.

If you move to cash then you have indeed capped the value of your portfolio. We all know cash is the safest way to invest, we try and fool ourselves that we will get back in once the market turns, most never do.  Cash would have been great around the start of 2008 but it is now too late to start talking about holding only cash.

The other option is property, if you are looking at large property trusts this makes sense but residential property will surly break your spirit over the coming years. You must make sure you are changing investments for the right reasons.

Property typically lags the share market by a couple of years; we are just seeing property start to fall as vendors realize that the highs of 2007 are behind us. Property prices will most likely bottom some time in 2013. They will not bounce back then, they will linger much like the share market is doing now.

I expect that we have at least another 3 years of volatile markets which will provide relatively flat growth.

For property I would not be look to see signs of life until 2018.

During this section of the economic cycle the astute investors know it’s all about two things.

First make sure you are holding high quality assets and second only hold high quality assets which are paying high levels of income.

The capital gains will come and the income will sustain you.

For more information please call me on (07) 4771 4577.