It has been great news for investors over the last four years with 42 of the largest 100 companies in Australia’s sharemarket doubling its return for investors. Most investors can only dream of gains averaging out to 25% a year for over four years but for those investors in the market there is a good chance they have seen those kinds of gains. Big names like Commonwealth Bank and Westpac as well as Harvey Norman and Flight Centre have all risen 100% in the last four years leaving many to wonder how much higher it can go and where the next gems are to be had.
Australia’s rising sharemarket
Part of the reason for such big numbers is because the entire market had sunk so low during the Global Financial Crisis. Low interest rates have also played a huge part since the Australian public is not making nearly as much on it savings and pensions. Having them in traditional accounts and stocks seemed like a much better option. Dividends as well as share prices have performed exceptionally well and now most stocks are beginning to be priced above fair value. Those same stocks are not likely to have a repeat performance over the next four years and those stocks that have been left behind are not likely to catch up but there are still gains to be had in the market.
Investing in the sharemarket
It would have been possible to pick a few of those 42 companies that doubled but it would have been more likely that you would have spread your risk over many different companies. Eventually you would have received returns lower than 100% and that would have been expected even in such a great investing environment. If you are thinking of getting into stocks then you should take the same approach. The best thing to do is to spread your risk with the majority of your capital and buy companies in different sectors so that if one goes down then it is likely that the other sectors you have bought into have gone up. If you include dividends then it is reasonable to expect returns of around 9-10%.
The sharemarket has seen incredible gains and there are still some great gains to be had but you must be careful when spreading capital out into different companies in different sectors so that you are likely to have the best returns possible.
If you want to know more about the ins and outs of Australia’s sharemarket and how you can invest in one of the booming companies, the friendly team of financial experts at NSW Mortgage Corp is more than happy to help you with it. Just fill out the enquiry form for a free consultation today.