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Six out of 10 ain't bad

Noel Whittaker
Noel Whittaker

THIS week a reader took me to task about some comments I made in late 2007. Apparently he had asked my opinion on a book that had forecast the "coming financial crisis of 2008".  According to him I had responded that those kinds of books were always popping up, and I had learned never to take much notice of them. 

The purpose of his latest email was to enquire if my views had changed and whether the dreaded double dip was finally on its way. 

He was asking the wrong person - I have been an investor for too long to even attempt to forecast where the market is heading. There has never been a year that a book or a newsletter or the latest guru does not predict that a great depression, or at least a share slump, is just around the corner. 

The world seems to be divided between those who think the glass is half full and those who think it is half empty.  There are optimists like myself who stay invested in the belief that the market, even when it falls, will eventually recover and exceed its previous high. Then there are the bears - the habitual pessimists who forecast bad times ahead year in year out. The good news for them is that they are right occasionally - the bad news is that they usually end up broke because they never find the right time to invest. 

After being an investor for more than 50 years I am convinced that shares are the easiest investments to manage and will produce the best returns long term. However, like every investment, they have their disadvantages - the main one is volatility. 

If we look at every decade since 1880 we find that shares have produced a negative return in up to four years out of 10. This means anyone who owns them can expect four negative years and six positive years. Those who think the glass is half empty will focus on the four negative years - those who think it is half full will rejoice in the knowledge that there are more good years than bad. Sadly nobody knows which ones they will be.

Noel Whittaker is a director of Whittaker Macnaught Pty Ltd. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. His email is noel.whittaker@whittakermacnaught.com.au.

Topics:  noel whittaker opinion shares stockmarket


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