What is Cash?

Today's article needs little explanation but serves as a reminder that things are not always what they seem. 

To quote the opening quote from the 2nd article:
"The Australian Prudential Regulation Authority has written to Australia’s major superannuation funds telling them that “cash” investment options better be what they say they are – “cash”."

https://www.smh.com.au/business/banking-and-finance/super-funds-misrepresenting-cash-investments-apra-says-20180629-p4zolf.html

https://www.moneymanagement.com.au/news/superannuation/apra-confirms-cash-ain%E2%80%99t-cash-some-super-funds

Economic Disconnect

Today's article (and report) focusses on community feedback on Australia's strong economic track record.

The article argues that leaders in business and Government must listen so that in future any "economic disconnect" is better managed to ensure that economic growth delivers the appropriate levels of prosperity to the community.

https://johnmenadue.com/allan-patience-fragmenting-australia/

https://www.ceda.com.au/CEDA/media/General/Publication/PDFs/CEDA-Comm-Pulse-June-2018-Final_reduced.pdf

Making Decisions Based on Limited Information

Today's article talks about how we often make judgements based on how things appear, at the expense of more detailed and complex analysis.

When one makes investment decisions you need to gather and assess all available information.  The quality and/or completeness of the data will ultimately affect the reliability of the investment decision process.

https://www.fidelity.com.au/insights/investment-articles/behavioural-finance-when-what-you-see-is-all-there-is/

One Risk Aspect of Investing

Welcome to our new blog – PPCP Article a Day

Today's article tries to demonstrate one risk aspect of investing.

For example assuming;

• A Share Index has a long term return of say 10% pa

• with Standard Deviation of Returns of 20% pa, and

• Returns are normally distributed (to keep things simple).

Then there is over 15% chance that any month has a return lower than -5% and there is over 20% chance that any year has a return of less than -5%.

Whilst the yearly result may not be surprising the monthly result seems high.

The point here is that unexpected returns do occur, they can occur more frequently than you think and investors should be prepared for this to occur during the term of an investment.

These 2 attached articles relate to a recent LIC that has underperformed quite unexpectedly on the downside in the first 2 months of operations.  Whether this has been caused by the investment cycle, poor investment selection or a combination it doesn’t matter.   Events like this can and do happen.

https://www.afr.com/brand/rear-window/l1s-rafi-lamm-mark-landau-torched-134-million-in-nine-weeks-how-20180624-h11sbt

https://au.finance.yahoo.com/news/why-l1-capital-long-short-055344739.html