A Time to Celebrate

We human beings are a funny lot. Give us a reason, any flimsy reason, and we want to throw a party. Once the reason has been established, the party giver follows a very standard recipe. Lashings of delicious fat and sugar-laden food, liberal doses of alcohol (of course depending on the age of the partygoers) to aid and abet party dynamics and some age-appropriate music to supply background noise and encourage aforementioned partygoers to bust a move on the dance floor.

Nicky and I are having a party this week to celebrate a year since our inaugural education course and also, the launch of our advisory business, wiseadvisory. It got me thinking about celebrations, why we have them and what they represent. I came to the conclusion that they fall into two categories. The first category commemorates the past, and the second, the promise of the future. In the first I would put birthdays, anniversaries and graduations and in the second, christenings, weddings, divorce parties and of course, launch parties.

With the fast approaching end of financial year (another great reason for many in the financial services industry to throw a bash) I decided we should all, in our own way, use this time to look back at how far we have come and look forward to what the next year holds.

It sometimes feels, for me, as if I am never making any headway into what I need to do or accomplish, my inbox and to-do list are always full and I spend my life spinning my wheels and not getting to where I want to be. Yet, when I think back to what I have done over the past year I do shake my head in wonder and give myself a metaphorical pat on the back at what I have manifested through my personal efforts. With that done and the accompanying sense of satisfaction still glowing, I can then turn my head to where I would like to be when June 2012 rolls around.

We need to give ourselves permission to rejoice in what we have done so we gain a sense of pride and self-respect. Why? Because this is what drives us to keep going. At a financial level (and yes, here is the inevitable segue to our finances) we can be very pleased with ourselves when we pay off our mortgage or credit card balance, cheer ourselves on when we reach a savings goal and be delighted about our ability to keep to our budget. They don’t need to be major achievements – changing behaviour is a hard won battle – but take the time to appreciate what you have done to improve the management of your finances. It makes the planning for next year that much easier.

On that note, I am off to the bottle shop to pick up the champagne for friends, family and clients to enjoy at our small celebration of the wisewomen journey. We’ll be back online in a couple of weeks after the winter break... Happy holidays!

Dutch Disease Down Under

When the dollar hit parity we declared a celebration. Now it appears the par(i)ty has gone on too long and a mind numbing headache has taken its place. We’ve fallen ill, and its called Dutch Disease. Pray please tell me what does this mean? Why, with such fun to be had with affordable overseas travel and cheap online shopping, is a strong Aussie dollar such a bad thing?

First things first – what is Dutch Disease, and how did we catch it down under? It could be reminiscent of so many things…but no, it’s not related to clogs, dykes or the legal use of marijuana. When I first heard the term I wondered if it had anything to do with the historic Dutch economic event know as “Tulipmania” which unfolded in the seventeenth century. Huge interest in the beautiful tulip bulb led to prices becoming stratospheric – at their peak, more expensive than a house in Amsterdam. Locals, terrified at missing out, sold their business, homes, livelihoods to participate, only to lose it all when the inevitable happened – the bubble burst: ‘Tulip Crash”! And we thought bubbles’ bursting was a modern phenomenon.

So, not related to tulips, but Dutch Disease is an economic term, and was coined by The Economist in 1977, well within living memory. The concept attempts to describe the relationship between the rising exploitation of natural resources in a country, and a falling significance of its manufacturing sector. When the Netherlands was experiencing a natural gas boom following the discovery of natural gas in 1959, its currency soared in tandem, which negatively affected the attractiveness of Dutch exports. Sound familiar? Australia has fallen victim to Dutch Disease.

You may also have heard talk of Australia’s two-speed economy - maximum revs on the autobahn for mining versus country roads for other industries. As for tourism – more like the breakdown lane it appears, as the strong dollar keeps overseas visitors at bay, and we all head offshore for exotic breaks. But as we can now see, whilst fun for us, a high dollar is not good for our export industries.

Some argue that now is a chance for those industries in the slow lane to carve niches as truly competitive businesses, to focus on innovation, to seize opportunities provided by free trade agreements and create new growth areas that are less reliant on the resource sector. Achievable perhaps if we divert portion of the mining riches to invest in non-boom areas of the economy (sorry, did someone mention a Mining Tax?). Investing in innovation to build internationally competitive industries will diversify Australia’s economy and reduce risk – if and when the resource boom slows, there will be a healthy manufacturing sector to fall back on.

Who’s to know how it will eventually play out, but with a bit of imagination and political vision it seems recovery is possible. We may even emerge with a stronger disposition, a more robust immune system. No sympathy flowers required yet thanks!

In Search Of....The Ideal

It seems like we are all in search of the Ideal. Whether it is a relationship, our bodies, friends, houses or jobs it feels like if we just keep looking and tweaking things here and there, we will finally reach a place where we can sigh, sit back and think everything is in place how we want it.

Not surprisingly, life isn’t that simple. And nor are our investment portfolios.

The array of choice we have in Australia with respect to investments is mind-boggling. And as “consumers” of investment products we tend to become more confused when we have too many choices rather than benefitting from this huge selection.

We torment ourselves with the idea that there is a perfect set of investments or an asset allocation unique for each of us that will perform to expectations year after year. We sometimes look over the fence and think perhaps our neighbour is on to a good thing and question our approach.

We need to get back to basics and remember first principles to combat this anxiety. Although determining appropriate asset allocation levels and investment selection is important we have to remember that there is no ONE right way to build wealth.

Some people are extremely uncomfortable and unfamiliar with shares and concentrate entirely on direct property acquisitions like investment units and houses. Although this might imply a lack of diversification, this can be (and has been for many) a very valid and successful manner of growing your asset base.

Others can’t bear the thought of the work involved in investment property and maintain solely share portfolios, happy to collect their dividends and distributions and rely on themselves and others for research and strategies.

The cornerstone of wealth creation is living within your means and having a manageable debt level as well as protecting your downside through appropriate insurances. Agonising over what investments to make doesn’t really add value. Starting somewhere, anywhere, does.

It’s never a good moment to realise your fund has not performed above the benchmark or see your 1-bedroom investment property stagnate in value for long periods. If you do look back, recognising or appreciating that at the time you made the decision to the best of your knowledge and ability helps alleviate the constant “whys” and “what ifs”. Learning from the experience rather than berating yourself over less than positive outcomes is always a better approach.

There are no guarantees in this life with so many things. Investment performance is certainly one of them. Developing a strategy, putting it into place and giving it time to perform is all any of us can do, no matter whether the dollars are large or small.

Let’s leave “ideal” out of the equation for now and focus on what’s important. Making a start!