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									Do less, make more
The perils of trying to time the market




When it comes to investing,                                                                               Trading too frequently leads to high                                                             Day trading on the sharemarket can
                                                                                                          transaction costs, and reacting too                                                              be highly risky and is not for everyone.
many people are their own                                                                                 quickly to new information may be                                                                However, when looked at over longer
worst enemy. Fuelled by a                                                                                 fraught with danger. Alternatively,                                                              periods of time (five years or more),
desire for short-term gains                                                                               implementing a considered and                                                                    sharemarkets have proven to be one of
                                                                                                                                                                                                           the strongest ways to build wealth.
                                                                                                          consistent investment strategy allows
or the fear of losing money,                                                                              you to grow your wealth steadily, but
                                                                                                                                                                                                           This is highlighted in the graph below
they buy and sell frequently                                                                              surely, over the long term.
                                                                                                                                                                                                           which follows the fortunes of the
trying to exploit market                                                                                                                                                                                   Australian sharemarket over the last
fluctuations. Unfortunately                                                                               A different perspective                                                                          22+ years. There have been rises and
                                                                                                                                                                                                           falls along the way, but overall the trend
this type of speculative                                                                                  The investments with the highest long-                                                           shows increased returns.
trading is often driven by                                                                                term potential returns are generally the
                                                                                                          most volatile.
rumours and expectations
rather than fundamentals –
and often does more harm
than good.

AUSTRALIAN SHAREMARKET PERFORMANCE

 $180,000                                                                                                                                                                                                                                                              AU$10.4 billion stimulus
                                                                                                                                                                                                                                                                       package 14 October 2008
 $170,000                                      S&P/ASX200 Accumulation Index*

 $160,000

 $150,000

 $140,000

 $130,000

                                                                                                                        Bond market crash                                                                 Attack on New York
 $120,000
                                                                                                                        4 February 1994                                                                   World Trade Centre –
                                                                                                                                                                                                          11 September 2001
 $110,000

 $100,000

  $90,000                                                                                                                                                                                                             Iraq invasion
                                                                                                                                                                                                                      20 March 2003
  $80,000

  $70,000

  $60,000              World sharemarket
                       crash (“Black Monday”)
  $50,000              19 October 1987

  $40,000

  $30,000
                                                                                                                                                                                                                                                          Global Credit Crunch
                                                                                                                                                                                                                                                          begins – 10 August 2007
  $20,000

  $10,000

      $0
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Source: Investment Solutions BT Financial Group, Bloomberg
*
  The S&P/ASX 200 Accumulation Index was introduced in March 2000, prior to this the ASX All Ordinaries Accumulation Index
  was used. This chart is based on an initial investment of $10,000 in each index as at 1 December 1985.




Do less, make more | 1
For the average investor,                                    Time in, not timing                                            However the point to remember is
                                                                                                                            that even the most highly trained
market timing is similar                                     There are countless investors who almost                       professionals, with all the data available
                                                             made a killing on the sharemarket. Ever
to going to the casino.                                      wondered why? It’s often because the
                                                                                                                            to them, cannot consistently pick market
                                                                                                                            turning points.
Rather than punting your                                     largest spikes and falls tend to happen
                                                                                                                            The risk you take on by trying to time
                                                             suddenly, over short periods of time.
hard earned savings, talk                                                                                                   the market will often outweigh the extra
                                                             What’s more, strong gains often occur                          return you might generate. Instead, you
to your financial adviser                                    after periods of weak performance                              may find that by simply staying in the
about having a disciplined                                   and large falls tend to happen after                           market you could generate a superior
                                                             returns have been very strong. So                              long-term return. The statistics below
and consistent approach to                                   mistiming an investment may not only                           prove how effective this strategy can be.
investing.                                                   reduce your profits but also result in
                                                             significant losses.
                                                             The table below illustrates how missing
                                                             just a few good days can influence your
                                                             overall return – even over the long term.
                                                             Naturally by missing a few bad days you
                                                             would increase your returns.


                                                             AVERAGE ANNUALISED RETURNS OVER 15 YEARS
                                                             – EFFECT MISSING BEST DAYS
                                                               Market                Index                      Stayed                Best 10       Best 20           Best 30
                                                                                                                  fully                 days          days              days
                                                                                                              invested                missed        missed            missed
                                                               Australian            S&P/ASX 200                    5.0%                 1.8%           -0.6%             -2.5%
                                                                                     Accumulation
                                                                                     Index*

                                                               USA                   S&P 500                        4.3%                -0.1%           -3.0%             -5.4%
                                                                                     Index
                                                               Source: Investment Solutions BT Financial Group and Datastream, as at 30 June 2009.
                                                               *S&P/ASX 200 Accumulation Index was introduced in March 2000, prior to this the ASX All Ordinaries
                                                               Accumulation Index was used.




   Contact Centre: 1800 819 935                                              Adviser Services: 1300 361 864                                             advance.com.au
Issued by Advance Asset Management Limited ABN 98 002 538 329 AFSL No.240902. The information in this document has been prepared without taking into account the
objectives, financial situation or needs of any particular person. It does not constitute investment advice and should not be relied upon as such. Before acting on the information,
a person should consider its appropriateness having regard to their objectives, financial situation and needs. Investment advice should be sought in respect of individual
circumstances. Past performance is not a reliable indicator of future performance. Information from third parties is believed to be reliable however it has not been independently
verified. Investment Solutions, BT Financial Group operates under the financial services licence of St.George Bank Limited ABN
92 055 513 070, AFSL No. 240997 (St.George). Advance and St.George are members of the Westpac Group. An investment in a
managed fund (Fund) issued by Advance does not represent a deposit with, or liability of, Westpac Banking Corporation ABN
33 007 457 141 or St.George. It is subject to investment risk, including possible delays in the payment of withdrawals and loss
of income or capital invested. No member of the Westpac Group stands behind or otherwise guarantees the capital value or
performance of a Fund. Subject to any terms implied by statute which cannot be excluded, no member of the Westpac Group
nor its directors, employees and associates accept any responsibility for errors in, or omissions from the information.
                                                                                                                     AD9927A-0709aj

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