It’s time to act

This year has started with a whimper rather than a bang but in view of the headline events from last year, perhaps we should be grateful for that. But the grand themes that dominated last year are still obvious. The European crisis lingers on, with a recent ratings downgrade by Standard & Poor’s of a number of European countries. The rest of the developed world faces slow growth and the realisation is slowing dawning that China can’t be expected to carry the weight of global growth expectations.

But while the top stories seem the same this year as last year, readers shouldn’t think that nothing has changed. As our cover story alludes to this week, the slowly dripping fallout from the debt binge should have firmly altered our expectations on a range of issues. BRW’s beginning of year focus on investing tells investors that the old assumptions have to be tested.

After the bull market of the past 20 years, investors had become used to the mantra of “set and forget” that only required them to hand their money over to a financial adviser working on commissions and in return expect growth above inflation. In a bull market set and forget works, in fact, with hindsight, many of the investors that handed their money to advisers should now be questioning what role intermediaries such as financial planners should play in delivering positive results in a market that is only going up.

Investors that set and forget in effect are sleeping on the job. In a bear market, investors need to be assiduous about questioning everything. A basic assumption that needs to come under the microscope is the infatuation with equities. There are fundamental shifts that mean that this darling asset class may not be the performer in the future it has been in the past.

The risk appetite of investors – both institutional and retail – has been flayed by recent events. Combine this with the ageing demographic in developed worlds and the need for less risky products that inevitably brings, and companies may be forced to adjust their primary reliance on equity funding.

However, there is one old rule, BRW concludes, that investors should still take to heart: diversification. This is a rule investors have ignored at their peril. It is really the only true path to long-term wealth. If investors start living by this rule again, this will drive a re-allocation of assets away from equities.

Investment wasn’t the only sector to suffer last year, retail and manufacturing also felt the economic heat. For the former it has been an extremely tough market and the recent Christmas season has been disappointing. However, despite all the negative stories, retail is not dead yet. It is worth remembering that this is a huge sector that has always demonstrated the ability to innovate and with that in mind, AMP Capital Shopping Centres and BRW are proud to launch our annual search for the best retailers in the country through the Australian Retailer of the Year Awards 2012.

This year there are seven awards that retailers can win, including Best Customer Experience and Outstanding Retailer. For further details about the competition and how to enter please refer to www.brw.com.au/retail2012 and don’t hesitate to contact BRW with any queries.

Kate Mills

BRW

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