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Posted January 15, 2019 by MoneyLink

Few Profits in 2018

Calendar year 2018 finished badly as far as most investors are concerned. Whether you were trying to boost your savings, grow your superannuation or keep your retirement income plan above water it was hard to make money, unlike the profitable 2017.

If you owned individual shares you needed to be a smart stock picker to finish in front. The All Ordinaries Total Return Index (includes dividends) lost 3.5 per cent for the year. Things were going reasonably well until the end of September.

The last quarter saw a loss of 9 per cent. The Christmas rally didn’t materialise last year and in fact turned into a Christmas rout. The recent low point was on the Friday before Christmas with a modest pickup since.

A couple of market sectors did finish ahead. It wasn’t small company shares, big gainers in 2017. They lost 8.7 per cent last year. If you invested in health care stocks last year you made a whopping 18.3 per cent on average. Mining and IT company shares also made profits.

Commercial property did well

Looking beyond shares the asset class that led the field was commercial property. Stock market listed property funds and companies made 3.3 per cent but unlisted (not market traded) commercial property earned 12.9 per cent on average according to analysts Mercer.

Around the globe

Almost all the problems for our share market affected global financial markets too: the US – China trade war, fears of rising interest rates and of a possible global economic slowdown, and the US Government shutdown.

So international shares provided little relief. The world share market average made 1.4 per cent in Aussie dollars due to currency weakness. British, French, German, Japanese and Hong Kong shares all made double digit losses in local currency. US shares (S&P500) fell 6.2 per cent.

By comparison bank term deposits earned around 2.3 per cent. Government and corporate bonds traded in financial markets did relatively well with 4 to 5 per cent returns.

How did your superannuation go?

How did the typical superannuation fund perform given these poor results? Most funds have a mix of all asset classes. The default funds used for people who do not select their own super funds usually have about two thirds growth assets like shares and property and one third defensive.

Some may have kept their heads above water, just. Non-taxed diversified funds of that type returned 0.7 per cent on average. After deducting superannuation earnings tax that is likely to give a net return of around zero.

Think long term

Long term returns are still good however. The five-year average is 7.1 per cent per annum and the ten year 8.5 per cent. Deduct say one per cent for tax and the result is still healthy.

This is general advice and should not be treated as personal advice. Russell Tym is an authorised representative of MoneyLink Financial Planning Pty Ltd ASFL No: 247360.

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