Good Afternoon All, 

Firstly, I hope I find you all in good health, doing well and your families and close ones are doing the same.

As you all know, my children are now spread out with the two daughters in Perth at University, the eldest boy is a trainee train driver and the youngest son now at TAFE doing a chef course. The only one left at school now is my happy 14-year-old daughter. I know most of you who have had a 14-year-old daughter are thinking sure and you would be totally correct, 14-year-old wow what an age to be. The age of death stares and total indifference - what an age. Now I know most of you will be thinking that my youngest son being a chef would be a good thing as he would do some cooking at home but alas, he is far too tired when he comes home after the grueling days at TAFE.

On a personal note, I must admit I got tricked into doing some renovations somehow by the boss at home. “I know right” I was minding my own business when boss lady decided to renovate the two kids’ rooms by getting the wall Gyproc and repainting the ceiling and walls plus removing the middle story carpets for some wooden floorboards. I was more than happy for her to do this but somehow, I was dragged into the deal. Have always said my skills at anything to do with trades is akin to Tim the toolman but here I am tearing out carpets and painting walls. Obviously, I have the short term memory of the psychological skill of a certain person. You let your guard down and relax and bam next minute you’re covered in dust and paint.

It has been a while since my last post, and I do apologize for the absence, but I have been either studying for my financial planning exam or busy with all the new policies and procedures that have been handed down by our friends at ASIC. This is due to the regulatory changes brought about by the royal commission. You would have been seeing all the paperwork and emails that have been coming through from us and this is only part of those changes. The new reporting responsibilities involve us having to get your permission to be your financial planner every year. This is called the Opt In where you simply opt in to allow us to invest, advise you and deduct our fees. We also need to give you a fee disclosure statement detailing what we are going to charge for the coming year and what we have charged you in the previous year. This does allow you to make an informed decision about whether to allow us to keep advising you. I hope that didn’t sound too complicated as this is a good thing because it allows you to compare us to other financial planning businesses and the industry funds that are out there.

There has been some confusion with regards to the fees and charges to put in simplistic terms we charge in general 1% for our ongoing annual fee that covers all your investing and advice for the year. The 1% is on the balance of your fund. We have had people ring us and say, “ why is this costing me more than last year” and the answer is simple, if we are doing our job right your funds will increase. If we are not, your funds have decreased which means your fees will decrease. We have been charging this way for the last 15 years, as I have said the good thing is all fees and charges are now sent to you to review and if you are happy, you continue and if not, you can seek alternate options. Yes, there are cheaper options out there, but I can say we do a very good job and have been outperforming the average returns in the last 2 years and equal to or better in the long run. On top of this we take care of a range of issues daily for our clients. It is true we often are not needed but when things get bad, we are here to help. As I have said before, at least you are more informed which is in your best interest. Just a foot note to this, I have closed my books to new clients at this time to ensure I can provide you all with my full attention.

On to the markets. If you are still with me “thank you” as we are coming up to some interesting times with all the big gains, we have been making. I know most of you have access to your fund via the website’s and CFS App, so you know the increases to your funds has been big. Last year it was a performance of roughly 28% for the middle ground and some as high as 40% after the route of 2020. I think the last time we spoke I was talking about a short-term recovery, but it did take a good 8 months to recover the losses of the initial Covid onset. But since then, the markets have been at full steam due to the stimulus package that was pumped into the USA economy and to a lesser extent the Australian. On top of the stimulus was the large increases in the Technology stocks such as the FANG stocks, Facebook, Amazon, Netflix, Google. Other stocks such as afterpay etc plus the upturn of the commodity markets, the Dow, and All ordinaries’ indexes (see attached), took off in an upward trajectory.

As we all know and most of you have been with me for many years including the GFC, these runs will only last until they run out of steam and then the markets start to cool down. At some point, we are going to get a pullback which in my estimation is very soon.

The main thing to remember when we have a pullback in the markets is that at some point this will also change and move forward again once the profit takers have finished, and investors think the right time to reinvest has come. Most of the fund managers I have talked to think we will have a pullback of about 10 to 15% but this will be short lived due mainly to the huge amount of cash sitting around that needs to be invested. Bond rates are increasing but very slowly, so this is not going to impact interest rates for some time so the rush back to Banking products is not going to happen anytime soon.

With having said that, the only place for a return is in the markets being Australian, International, or emerging markets and covering the range of products form shares to infrastructure, property and some fixed interest markets that have inflationary issues. So, the bottom line is we are going to have returns ebb and flow between different markets so selecting good managers is always the key to long term results which is what we are working to achieve. I have added some reading material to remind you that different sectors perform better from year to year and that some diversification is required to meet the movements and keep returns moving forward.

That is all from me for now, I will endeavor to be more consistent with my emails going forward and hope I don’t get writer’s block. Until next time happy investing and if you need us at any time, please feel free to call myself, Zoe or Shannon for your queries.

Kinds Regards

Allan Butson

Managing Director

E: allan@wealthmerchants.com.au

Wealth Merchants Australia Pty Ltd