Tag Archives: Investments
Financial scams target over 50s
By Robert Wright /June 28,2016/
Australians aged over 55 who may be looking for ramped up returns are most likely to fall prey to scams.
Over the last year 105,000 Australians have fallen victim to financial scams, collectively losing $85 million to fraudsters – an average of $26,408 per person. This represents a 15% rise in the incidence of scams over the previous year. But these figures are believed to be the tip of the iceberg because many people are too embarrassed to report being stung by fraudsters.
Sadly, Australians aged over 55 who may be looking for ramped up returns ahead of, or during, retirement are most likely to fall prey to scams. Two-fifths (40%) of scam victims are aged 55-plus.
It can be easy to blame the internet for the growth of scams. However a recent report by the Australian Competition and Consumer Commission (ACCC) found two out of five scam victims were contacted by fraudsters over the phone. This compares to 27% by email and 11% via the internet and social media.
In fact, over the last year one of the main types of scams reported to our investment watchdog ASIC, involved overseas cold calls about bogus investment opportunities.
You may think you’d easily recognise a scam. But make no mistake, today’s fraudsters employ sophisticated techniques that include call scripts, false paperwork and fake websites to convince their victims of a genuine opportunity.
The bottom line is that none of us are immune, so it pays to know the warning signs.
Typically, investment and financial scams promise high, quick returns and even tax-free benefits. Expect offers of big rewards for a small upfront payment coupled with discounts for early bird investors that create a sense of urgency.
Adding to the credibility of the scam, you may be given phone numbers for referees. Disregard these. The so-called referees are likely to be part of the scam network.
ASIC is warning Australians not to send money overseas for an investment offer that has come out of the blue. If you are cold called about an investment the best thing to do is hang up.
If you’re not sure about the legitimacy of the person or company making the call, ask if the company or scheme has an Australian Financial Services Licence (ASFL) or an Australian Credit Licence (ACL). In particular, ask what the licence number is. You can check this against the Professional Registers on ASIC’s website (www.asic.gov.au).
Scams are ever-evolving and it pays to stay up to date by regularly checking the government’s Scamwatch website (www.scamwatch.gov.au). If you think you’ve been scammed, contact your financial institution immediately.
Source: AMP
Dollar Cost Averaging – An investment strategy for volatile times
By Robert Wright /September 18,2015/
Trading on the share market is widely regarded as being motivated by two powerful human emotions; fear and greed. In recent weeks, share market volatility has many investors fearful and compelled some to sell off their investments. More often than not, basing investment decisions on emotions and following the herd tends to be a poor course of action. It’s a poor move because it crystallises what may be just a temporary loss and runs the risk that you could miss out on any rebound or recovery in share prices.
Attempting to time the market in this way is rarely successful. An alternative approach to investing is a practice known as dollar cost averaging. Dollar cost averaging can remove the fear and emotion from investing as it works like a regular savings plan, the difference being that rather than making a regular cash deposit into a bank account, make a regular contribution into investments held in the share market.
Dollar cost averaging can be an attractive investment strategy for those who are new to investing on the share market as it can help to reduce the overall volatility risk of your portfolio and maximise its long term growth by smoothing out the market’s ups and downs.
How does it work?
Dollar cost averaging involves investing a set amount of money on a regular basis over a long period of time. This could be an investment in a specific stock, managed fund or an index fund. Consider the following example. Say you put $100 per month into a managed investment that had an initial unit price of $10. Over the next few months, the market falls (causing the unit price to drop) before recovering to its original value.
| Month | Investment | Unit Price | Units Purchased |
| 1 | $100 | $10 | 10.0 |
| 2 | $100 | $8 | 12.5 |
| 3 | $100 | $5 | 20.0 |
| 4 | $100 | $8 | 12.5 |
| 5 | $100 | $10 | 10.0 |
| Total | $500 | 65 |
At the end of 5 months, you have 65 units each worth $10, so you have $650. You only invested $500, so your profit is $150 even though the unit price is the same as when you first invested.
Had you invested a lump sum of $500 at the beginning of month 1, you would still only have $500 at the end of month 5. So even though the market declined during the 5 month period, you were better off investing small amounts over regular intervals rather than attempting to time the market by investing a lump sum when things looked rosy.
Of course, dollar cost averaging doesn’t guarantee a profit. But with a sensible and long term investment approach, dollar cost averaging can smooth out the market’s ups and downs and reduce the risk of investing in volatile markets.
Getting started with a Dollar Cost Averaging Strategy
The first step in planning a dollar cost averaging strategy is to decide how much you can realistically afford to invest over an extended period of time. The next step is to establish an appropriate investment vehicle as it’s important to consider how diversification may further reduce risk. By combining a dollar cost averaging strategy with a diversified a portfolio, an investor can maximise the profit potential and minimise risk. Remember that you need to stay with this investment strategy for many years in order for it to be effective. The aim is to remain committed to this investment strategy over the medium to long term and to not allow short term fluctuations in price to influence your buying strategy.
As always, before making any decisions about an investment strategy for your needs, it’s important to seek professional advice. Please contact your financial adviser for further information.
What should you do during market volatility?
By Robert Wright /September 18,2015/
When markets are volatile, many investors become anxious about their investments and begin to question whether their investment strategy is really working for them. Anxiety is a normal reaction when markets are falling but making investment decisions based on emotions is more often than not an unwise course of action. It can be tempting for inexperienced investors to pull out of the market altogether and wait on the sidelines until it seems safe to return. The risk here is that you could risk selling at the bottom of the market and buying when prices are high. And that’s a recipe for disaster.
It’s important to realise that share market volatility is inevitable. It’s the nature of the market to move upwards as well as downwards and while dramatic swings can be unsettling it’s wise to remain calm. Often, the most sensible thing to do during periods of extreme market volatility is to stick with the investment plan you already have in place.
A ‘do nothing’ approach might seem tough to swallow if you’ve been caught off-guard by recent volatility but remaining calm while others are losing their heads could be the most prudent course of action in the long term. In fact it’s a good time to remember Warren Buffett’s classic mantra: “Be fearful when others are greedy, and be greedy when others are fearful.”
Warren Buffet is widely regarded as one of the world’s most successful investors. What he means by this statement is that when people are rushing to invest in a particular stock or asset class then it is wise to remain cautious. In other words when something looks too good to be true, it probably is. And conversely when the majority of people are reluctant to buy into the market then it may just be the right time to consider investing. The rationale behind this approach is that most retail investors base their investment decisions on their emotions, which is precisely the wrong thing to do.
The key to surviving turbulent times is to accept that volatility is a natural occurrence in the share market. Investors who get spooked by sharp market shifts and decide to sell when share prices dip effectively crystallise the loss – which up until the point of the transaction – was really a loss on paper only. Investors who panic and dump stocks when markets dip, forego the opportunity to participate in the rebound when markets recover. And this is where most inexperienced investors fail. They attempt to ‘time’ the market.
The most effective way to protect your investments is to ensure that your portfolio is broadly diversified and has the appropriate balance for your financial goals, time horizon, and tolerance towards risk.
Seasoned investors recognise that investing in the share market is a medium to long term proposition. They understand the importance of resisting the urge to modify their long term investment strategies when short term swings occur.
While many economists and share market commentators make a comfortable living from providing a day to day analysis of market movements and short term predictions, no one really knows what the future holds. Experienced investors learn to ignore the ‘noise’ of market commentary in the media and to approach market swings when they do occur with a cautious eye.
Providing your investment strategy remains consistent with your long term goals and objectives, you may find that ignoring short term swings is the best course of action. However should you have any issues or concerns, please contact your adviser.
Source: Capstone