End of Financial Year Commentary – 30th June 2015

As another financial year comes to a close, we have taken the opportunity to provide you with information and comments that should be of interest to you.  Please note that the information and comments provided should be considered general in nature and should not be taken as advice.  Your circumstance and investment requirements are specific to you and before making any investment related decisions, we strongly recommend that you discuss your ongoing requirements with your adviser.

Sunshine, rain and wind – just like the weather 2014/2015 financial year provided variable investment and financial conditions.  The Australian cash rate ended at 2%, the Australian share market All Ordinaries Index excluding dividends provided a negative return of 1%.  (The ASX All Ordinaries Index opened at 5,511 points on the 1st July 2014 and ended on 5,451 points on the 30th June 2015) and the Dow Jones American share market Index excluding dividends and not allowing for currency changes grew by 5% (The Dow Jones opened at 16,700 points on the 1st July 2014 and ended  on 17,600 points on the 30th June 2015).  In addition the Australian property market – inner city Sydney and Melbourneexcluded grew by inflation rates only on average over the financial year.  Both the Australian and American share market indexes reached far higher levels during the financial year only to give up gains in June 2015 with global financial instability associated with Greek debt issues continuing.

The average investment return achieved from a balanced investment portfolio for the 2014/2015 financial year will end up being around 7% – 8% with the majority of this return derived from overseas investments boosted by a decline in the Australian dollar, as well as benefiting from higher dividend returns from the Australian share market.  Whilst the final average investment return will be lower than the previous 2 financial years, it remains 4%-5% above inflation which historically has been the standard rate of return from a diversified portfolio of growth investments.

As always the upcoming financial year will hold both challenges and rewards.  The ongoing review of your investments and financial planning objectives remains as important as ever.  Worldwide equity markets are more fully priced than they had been over the last 3 financial years.  While the Greek economic situation has received a lot of press, it is nothing new.  It is likely during the upcoming financial year, that worldwide interest rates (not necessarily Australian) will start to increase and Government stimulus spending will start to reduce.  Overall we expect interest rates to stay below growth rates and for equity and property investments to out-perform cash.  Investment returns are likely to remain compressed but remain above inflation and prevailing cash rates.

Making investment choices that match your risk profile and are reflective of your circumstances over the short and longer term will remain critically important.

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