This post is about forecasting. It looks at some very recent returns from both Australian shares and Australian listed property investments. Returns that I did not hear anyone forecast.
In the last three weeks Australian shares have increased in price by about 7%. A fairly impressive run. Given that shares are paying dividends of about 4% a year, combine the 7% growth with 4% income and it will give an 11% annual return. Basically a whole years expected sharemarket growth has come in three weeks.
The problem is for those people trying to pick and time the market. Those people who said after July 1 that after 3 years of good returns there were no more strong returns to be had and sold out of the market. By trying to time the market that will have missed out on another run of very good returns.
In the quarter to the end of September listed property trusts were a strongly performing asset class. The return on the ASX300 Listed Property index was 10.6% - in a quarter! That is a strong result by any standard. I do not remember anyone forecasting it. Once again, if you missed it you have missed a great period of investment returns.
The moral of the story is this: don't try to pick and choose asset classes. You can so easily miss great periods of returns if you are wrong - significant returns can come in the matter of weeks. Instead, expose yourself to growth assets, diversify, accept the ups and down of investing - and keep a long term focus.