A global approach is key to higher returns
Investors have seen the Australian dollar move, over a decade, from around 60 cents against the US dollar to $1.10 and back to 78 cents. We hope it does not go lower.
Over that time the iron ore price has moved from around US$30 to US$190 a tonne and back to US$47. It is to be hoped that iron ore does not go lower, especially if we own iron ore stocks.
In a decade the oil price has risen from $40 a barrel to $140 and back to $45. Again, we hope the price does not fall further, especially if we own oil or energy stocks.
The three most dangerous emotions for investing are hope, fear and greed. This means our hopes for the Australian dollar and iron ore and oil prices, while based on “wishful thinking”, should not influence investment decisions. Investments based on hope alone most often prove to be poor choices.
The fact is, the Australian dollar, interest rates, the iron ore price and the oil price are currently in downward trends.
Click here to read the full article
Frequently Asked Questions about this Article…
A global approach is crucial for higher investment returns because it allows investors to diversify their portfolios beyond local markets. This diversification can help mitigate risks associated with local economic downturns and currency fluctuations, providing a more balanced and potentially more profitable investment strategy.
Falling interest rates can impact investments by potentially increasing the value of existing bonds and reducing borrowing costs for companies, which can lead to higher stock prices. However, they can also signal economic challenges, so it's important to consider the broader economic context when making investment decisions.
When investing in companies like Cadence Capital Limited, consider their investment strategy, track record, and how they manage risks related to currency fluctuations and commodity prices. Understanding their approach to navigating economic trends can provide insights into their potential for delivering returns.
Currency fluctuations can significantly affect your investment portfolio by impacting the value of foreign investments. A weaker Australian dollar, for example, can increase the value of overseas investments when converted back to AUD, but it can also increase the cost of importing goods and services.
Emotions like hope, fear, and greed can heavily influence investment decisions, often leading to poor choices. It's important to base investment decisions on research and analysis rather than emotions to avoid making impulsive decisions that could negatively impact your portfolio.
Basing investments on hope alone is risky because it lacks a foundation in solid financial analysis and market research. Hope-driven decisions can lead to investments in declining markets or overvalued assets, which may result in financial losses.
To protect your investments from declining commodity prices, consider diversifying your portfolio across different sectors and asset classes. This can help reduce the impact of any single commodity's price drop on your overall investment returns.
To mitigate the risks of a falling Australian dollar, consider investing in international assets or companies with significant overseas revenue. This can help balance the impact of currency depreciation on your portfolio and potentially enhance returns through foreign currency gains.
Call 1300 880 160
Start a chat
Schedule a call
