A disgruntled bear but loyal viewer, Jon, thinks I won’t show some figures because I presume it would embarrass me, as someone who has been bullish on stocks even before 9 March 2009 when stocks turned up after the GFC crash.
Let’s look at the numbers and Jon’s point:
“Today the ASX is down 25 points. We’re up 48 points in 40 months but today lost 52.08% of our 40-month period in one day. The ASX 200 index on 15 October 2009 was 4859 and today it’s 4882.”
He goaded me with: “These figures are correct so why not show them?”
But then he got personal with this:
“You’re telling your viewers the best case scenario, not the truth. You are in the same boat as ‘Juliar’ Gillard.”
That hurt, and he is the one who spelt Julia as ‘Juliar’.
A lesson
OK Jon, you’ve had your say and now it’s time for my reply, and this is a lesson I want to share with everyone because I not only want to teach you something, but also others.
The Switzer TV programme started after the market crashed and let’s assume that a lot of fully invested people lost 50%, and so they needed a 100% gain just to break even.
By late 2008, after Lehman Brothers was allowed to fail, everyone was running to cash — they were scared and ignored Warren Buffet’s maxim to be “greedy when everyone is fearful”.
Challenger was flogging annuities to the frightened, and the over zealous, like Clifford Bennett, were telling people by early March 2009 that the worst was over. He rang the bell on my show and I was an accessory before the fact!
My goal for the Switzer Super Report
My goal on my TV show was always to encourage a full understanding about investing, be it in stocks, bonds, property, or whatever. The same goal applies to the Switzer Super Report for self-managed super fund trustees. I get the best minds on the subject. I decode them and make them entertaining so my viewers or subscribers can invest more successfully.
Since 9 March, stocks are up about 60%. Add in dividends of around 20% and anyone who stuck with stocks could have made up 80% of what was lost in the GFC crash.
If I’d played Jon’s more negative game, like most media commentators and market gurus, I would have recommended term deposits, and the best return over four years would have been about 25%!
So someone who ignored my bullish inclinations would be down 75% on the GFC!
Last year I worked out where the stock market should be if it had risen 10% a year instead of the 20% plus rises we saw in 2004, ‘05, ‘06 and 07.
It took us to around 4,400, which was where the market was at the time. You see, we get carried away with the boom and gloom, but my message is to buy quality companies, chase dividends primarily, enjoy the capital gain, but don’t stress out too much when there’s capital loss. As Buffett points out, it is time to buy good stocks at great prices.
With good companies, they will come good.
Jon, I’m not afraid of the truth, but I don’t like people bagging me after they selectively choose numbers to suit their argument.
In it for the long term
The numbers I believe in are that stocks will return around 10% per annum over a decade. In slight contrast, the likes of Jack Bogle, the founder of Vanguard, works off the idea of a 7% return from shares per annum over a decade, but either way that’s the approach I think wealth builders have to take when it comes to shares.
There will be a return of around 7-10% over a decade where possibly three of the years could be shockers.
I argue if you have a consistent investment strategy based on the above expectations, you should do well out of stocks. As Bogle points out, “you should double your money over 10 years”.
And that’s not a bad return and certainly nothing worth whinging about!
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