Thursday, 16 August 2007

All Cashed Up and no where to Invest (yet)

The cheque for transferring $280,000 from my old retirement account into our Self-managed Superannuation Fund arrived in the post today. I'll deposit it at the bank tomorrow, and I expect the funds will clear by the middle of next week. As soon as that happens I can use our SMSF money to invest in the Vanguard High-growth fund, which is mainly invested in Australian and International stock indices. Only trouble will be deciding WHEN to make the investment. Today the Australian market was down 5%(!) by mid-afternoon, before bouncing back to be down "only" 1.3% at the close. I won't be surprised if the US market also drops further this evening, which will cause further drops tomorrow. Where the market will be heading by the middle of next week is anyone's guess. A "normal" correction during a bull market is around 10%-15%, and we're already down 11%. However, the Australian bull run had lasted over three years already, with gains of over 20% for three years in a row, so this could easily be a severe correction of 20% or more, or even the start of a small bear market if the global economy is affected by the incipient credit squeeze.

BTW - the Reserve Bank just raised interest rates another 0.25% last week in expectation of an overheating economy and accelerating inflation next year. If there is a global credit squeeze and economic slow-down caused by the US sub-prime fiasco spreading this may turn out to have been one rate rise too many.

Copyright Enough Wealth 2007


1 comment:

Evets said...

You're an arsey bugger to get your money in cash in the current environment, that's for sure!!!

Good luck with it!