A former head of the Reserve Bank made a comment recently that Australians get too much economic data and ‘news’ and this actually worsens the decisions that they make about their investments. Although this comment sounds strange, he is probably right. Particularly over the last decade or two, the public has been bombarded with economic data. From tabloid breakfast news to newspapers and magazines devoted to it, it seems to be continually at the forefront.

Surely this is the same around the world? Actually it is far more pronounced in Australia. The Reserve compared the coverage of bank policy decisions in three countries, Australia, the US and England. It looked at the number of articles in the three days surrounding two successive monthly meetings. There were 35 in the US, 46 in the UK and 131 in Australia. Just looking at “front page news” there was one article for each the US and UK, with 14 in Australia.
 
With this level of media competition, there is likely to be some sensationalism and also the opportunity for the ‘star commentators’ to make editorial remarks and observations on each miscellaneous news piece, usually well beyond the actual content.
 
This constant discussion and commentary fuels any client’s uncertainty and increases the likelihood of reacting to noise.
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If worries are widely shared, then the prices will be fully reflected in the markets (we can’t do anything). If there is an overreaction and an opportunity to buy undervalued shares, the fund manager can buy (but we can’t do anything). If there is an earthquake and tsunami or a terrorist attack – we can’t do anything.

What we can do however, is to be well diversified across countries, asset classes and fund managers to ensure that we have minimised, as far as possible, the level of risk we are taking. We also need to ensure that we are comfortable with this trade off between risk and return.
Everyone is different – we cannot avoid risk, we can only accept and manage it.
 
And then don’t lose sleep!
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Don’t forget that if you are eligible for the government co-contribution, spouse contribution or wish to make a contribution into your superannuation, this needs to be in the account by 30th June. Any EFT or BPayments should be made by 5 pm next Monday (27th June) to allow for any bank delays. Please call me or your accountant if you are unsure if you qualify.

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While BD Financial Planning can assist with personal insurances, we refer clients to a specialist General Insurer for business insurance matters, such as Public Liability, workers compensation, Professional Indemnity, Directors cover, etc.
 
Murray Christian of Shortland Insurance Brokers has kindly offered all BD Financial Planning clients a free Business Insurance Review. All forms of business insurance can be discussed so please call our office and we can arrange for a quote or have them call you in person to discuss your individual business needs.
 
Best regards,
Brett
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