With the changes announced by the government’s recent budget in regard to superannuation, many investors are now looking to top up their super fund prior to the end of the financial year. But I would question whether this is really a wise move. For over 20 years, superannuation has been promoted by governments and the financial services industry as one of the best investment vehicles we can use to prepare for retirement. While it does have some merit, I have never been a big advocate of having my money tied up in an investment vehicle that is so restrictive and constantly changing. When I was in my 20’s I couldn’t be certain about what the superannuation landscape would be like in 20 years, and now 20 years later I could never have imagined what has occurred.
Given the constant changes, you have to wonder whether we should be putting so much emphasis on this investment vehicle. Obviously the tax benefits of superannuation make it attractive. But with the constant changes implemented by each respective government, retirees or those nearing retirement have less certainty and indeed security; therefore I believe there is a growing argument for investing less in superannuation. While an investor may pay more tax on investments outside of their super, it does provide more flexibility and the opportunity to achieve greater profits with certain investment options that are prohibited by super funds.
So what can we expect in the market?
The market has continued to trade up over the past week as expected; however, I am alarmed by the number of investors I have heard who are blindly buying shares without any real strategy simply because they think they are cheap. Many are also looking to borrow money to accelerate their returns or buying speculative small cap shares, which is even more alarming. While the market is currently bullish, I believe this will be short lived with it highly likely to return to being bearish by around September, which will catch out many unwary investors.
In the short term, I believe the market will rise over the next couple of weeks from its current level through to 4200 points and beyond before we experience a small pull back between 18 June and early July. Last year the market peaked at the end of May and then fell heavily, therefore right now I am preparing for the yearly high to occur any time from now onwards. That said my expectation is that the yearly high will occur sometime in late July or possibly the first week of August.
Dale Gillham
Chief Analyst
Wealth Within
