Noel Whittaker
Noel Whittaker

The basics of investment

THE global financial crisis has hit the superannuation of most retirees, and consequently they are looking at ways to restore their finances.  Unfortunately as many of them have suffered heavy losses by forgetting investment fundamentals, I will today revisit some basic principles. 

Let’s start with our old favourite “the higher the return the higher the risk”.  A reasonable long term average for the stock market should be inflation plus a maximum of 6% - this puts 9-10% as a reasonable estimate of what the market might do in the long term.  Anybody who is promising returns higher than this should be treated with caution. 

The next one is “if it sounds too good to be true it probably is”.  ASIC are currently taking action against an American con-man who promised Gold Coast investors 12% a month.  Of course, it was never going to happen and a lot of people lost their money.  In another case, more than 600 people lost a total of $10 million in a sports betting scam based on the Gold Coast. 

Think about it, if a person had finally found a guaranteed way to make money betting on horses or trading shares, why would they share it with anybody else?

Be very wary of buying a business just to give yourself an income.  Most owner operated businesses don’t do well under a manager and, even if you run it yourself, there is always the danger that the books may be “cooked”.  A great way to test this is to look past the financial statements and ask for the tax returns.  If they show a different picture run a mile. 

Remember, the three main places to invest are cash, property and shares and a savvy investor will diversify their portfolio across all three asset classes.  If you stick with interest bearing accounts in the bank, well located property and blue chip shares you should do well over the long haul.

Noel Whittakeris 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

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