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Putting local and international financial markets into context Prepared by BT Financial Group for the adviser market Updated to 31 July 2009.

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Presentation on theme: "Putting local and international financial markets into context Prepared by BT Financial Group for the adviser market Updated to 31 July 2009."— Presentation transcript:

1 Putting local and international financial markets into context Prepared by BT Financial Group for the adviser market Updated to 31 July 2009

2 4.A quick look at the different asset classes 1.Australian share markets – the 1, 10 and 50 year view 3.Have we seen the bottom in share markets? 5. Simple super strategies 2.How have international markets fared?

3 3 Source: BT Financial Group, Premium Data S&P/ASX 300 Accumulation Index – 12 months to 31 July 2009 The Australian share market has fallen 10.3% in the past 12 months… Series Rebased: 31 July 2008 = Jul Sep Nov Jan Mar 0931 May Jul 09

4 4 Source: BT Financial Group, Premium Data S&P/ASX 300 Accumulation Index – 10 years to 31 July 2009 …but is still up 117% over the past 10 years Series Rebased: 31 July 1999 = 100 Jul-99 Jul-01 Jul-03 Jul-05 Jul-07 Jul-09

5 Annual returns of Australian shares (%) – All Ords / S&P ASX 300 Accumulation Index (since 1956) Volatility can hurt returns in the short-term… 5 Source: Standard & Poor’s

6 Rolling 5-year returns of Australian shares (% annualised) – All Ords / S&P ASX 300 Accumulation Index (since 1960) …but it’s a different picture over the longer term... 6 Source: Standard & Poor’s

7 Rolling 10-year returns of Australian shares (% annualised) – All Ords / S&P ASX 300 Accumulation Index (since 1966) Source: Standard & Poor’s...and the longer the better!

8 2008 was a ‘1 in 50’ year event for the Australian share market... Source: Standard & Poor’s All Ords / ASX 300 Accumulation Index – 50 years to to to to to 00 to 1010 to 2020 to 3030 to 4040 to 5050 to 6060 to 70

9 ...but every period of negative returns is often followed by increased gains Source: Standard & Poor’s All Ords / ASX 300 Accumulation Index – 50 years to to to to to 00 to 1010 to 2020 to 3030 to 4040 to 5050 to 6060 to YTD +19.7%

10 4.A quick look at the different asset classes 1.Australian share markets – the 1, 10 and 50 year view 3.Have we seen the bottom in share markets? 5. Simple super strategies 2.How have international markets fared?

11 11 Source: BT Financial Group, Premium Data The major international markets have also fallen considerably in the past 12 months Series Rebased: 31 July 2008 = 100 FTSE 100 (UK) -14.8%, Nikkei 225 (Japan) -22.6%, S&P500 (US) -22.1%, DJ Euro Stoxx 50 (Europe) -21.7% 31 Jul Sep Nov 0831 Jan Mar 0931 May Jul 09

12 And it’s no wonder why – the linchpin of the global economy had its worst year in more than 50 years Source: Value Square Asset Management, Yale University The US S&P 500 Index – 50 years to to to to to 00 to 1010 to 2020 to 3030 to 4040 to 50

13 4.A quick look at the different asset classes 1.Australian share markets – the 1, 10 and 50 year view 3.Have we seen the bottom in share markets? 5. Simple super strategies 2.How have international markets fared?

14 14 Source: BT Financial Group, Premium Data S&P/ASX 300 Accumulation Index – 2 years to 31 July 2009 We believe we’ve seen the bottom of the ‘bear market’ that started back in 2007 Series Rebased: 31 July 2007 = 100 High point: 1 November 2007 Low point: 6 March 2009 Jul-07 Oct-07 Jan-08 Apr-08 Jan-09 Apr-09 Jul-09 Jul-08 Oct-08

15 15 Source: BT Financial Group, Australian Securities Exchange History shows us that bear markets are generally followed by a lengthy rally DateMarket fall Length of bear market Market rise Length of market rally May 1992 – November %6 mths73%15 mths February 1994 – October %10 mths28%15 mths September 1997 – October %1 mth31%6 mths March 2002 – March %12 mths55%24 mths November 2007 – March %16 mths?? Last five Australian bear markets (S&P/ASX All Ordinaries Index)

16 16 Source: BT Financial Group, Premium Data The major international markets are also showing signs of a turnaround Series Rebased: 31 July 2008 = 100 FTSE 100 (UK), Nikkei 225 (Japan), S&P500 (US), DJ Euro Stoxx 50 (Europe) 31 Jul Sep Nov 0831 Jan Mar 0931 May Jul 09 Low point: 6 March 2009

17 4.A quick look at the different asset classes 1.Australian share markets – the 1, 10 and 50 year view 3.Have we seen the bottom in share markets? 5. Simple super strategies 2.How have international markets fared?

18 Growth assets have been the most affected by the rise in market volatility in the past year Source: BT Financial Group Cash International listed property – hedged Australian bonds International shares - hedged Australian shares International bonds - hedged Australian listed property International shares 12 months to 31 July months to 31 July 2008

19 19 While cash saw stronger returns this past year, Aussie shares still outperform over the long-term Note: Accumulated returns based on $1,000 invested in December 1984 Source: S&P/ASX 300 Accumulation Index, MSCI World ex-Australia (net dividends) Index in A$, S&P/ASX 300 Property Index, UBS Composite 0+ years index, UBS Bank Bill 0+ years 31 July 2009 Australian bonds Listed property Australian shares Cash Global shares

20 20 Source: BT Financial Group, Premium Data Australian dollar vs US dollar – 12 months to 31 July 2009 The Australian dollar has continued to make strong gains against the US dollar since last October 31 Jul Sep Nov Jan Mar May Jul 09 Low point: 27 October 2008

21 4.A quick look at the different asset classes 1.Australian share markets – the 1, 10 and 50 year view 3.Have we seen the bottom in share markets? 5. Simple super strategies 2.How have international markets fared?

22 You and your super Simple strategies for the new financial year

23 Which super investment is right for you? “… Over the long term, experts agree that higher risk assets – like shares – should generate a higher return than low risk assets, like cash …” “…. If you’re young, you have different requirements to someone approaching retirement, so it may be a balanced fund isn’t the best option…” Melanie Evans, Head of Super, BT Financial Group “ … Investing in the safety of a conservative fund can be a smart strategy if you’re older and want to protect your super as you approach retirement. If you still have a substantial amount of time before you retire, moving to a conservative fund may not be a suitable choice...” Patrick Farrell, Head of Investment Solutions, BT Financial Group BT Super Investor newsletter, July 2009

24 You have a big choice in who manages your super You Choose how your super is invested based on the different investment options offered within your super fund. Investment professionals Invest your super across different types of asset classes - like shares, property, cash and bonds - depending on your investment choices.

25 The upside of being young: time is on your side The 10-year savings plan At the age of 31 you decide to make a personal contribution of $5,000 into your super and then add to it at the rate of $1,000 each year – until you turn 40. Then you stop making contributions and leave your super alone until you retire at 65. Let’s assume that you earn and average of 8% pa after fees and taxes. The 25-year savings plan At the age of 41, you decide to put aside $5,000 and add $1,000 each year until you turn 65 in belief that you will make up for lost time by saving harder over 25 years rather than 10 years. Which is the better strategy?

26 The upside of being young: time is on your side The 10-year savings plan The 10-year saving plan, in which you will have invested a mere $14,000 – a $5,000 initial contribution then $1,000 a year for nine years – will earn you an additional $153,972 in your super. The 25-year savings plan The 25-year plan, in which you will have invested $29,000 more than twice as much, earns you considerably less: $98,471. The moral here is simple. If you start building your super balance sooner, it has the potential to grow bigger – often with less effort. But if you start later, you may need to contribute a lot more, just to reach the same level. Assumptions: i_Assumes an initial investment of $5,000 into superannuation and then ongoing $1,000 contributions made at the end of each year. ii_Assumes 0% inflation and 8% per annum average return after fees and taxes. This scenario has been developed for illustrative purposes only and cannot be relied on as an indication or prediction of future results. Which is the better strategy?

27 The upside of being young: time is on your side Here are some of ways that you can take advantage of compounding to grow your super:  Consolidate your super into one account: the money you save in multiple fees could stay invested and really help grow your overall super balance.  Add more to your super (if you can): By adding more money to your account each year - above the 9% you normally receive from your employer – you’ll give your super the opportunity to grow faster and bigger.  Hold your investment over time: if you sell or switch your investments, you’ll lose the effect of compounding and may crystallise losses. Get compounding working harder for your super

28 28 This presentation has been prepared by BT Financial Group Limited (ABN ) ‘BT’ and is for general information only. Every effort has been made to ensure that it is accurate, however it is not intended to be a complete description of the matters described. The presentation has been prepared without taking into account any personal objectives, financial situation or needs. It does not contain and is not to be taken as containing any securities advice or securities recommendation. Furthermore, it is not intended that it be relied on by recipients for the purpose of making investment decisions and is not a replacement of the requirement for individual research or professional tax advice. BT does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this presentation. Except insofar as liability under any statute cannot be excluded, BT and its directors, employees and consultants do not accept any liability for any error or omission in this presentation or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise noted, BT is the source of all charts; and all performance figures are calculated using exit to exit prices and assume reinvestment of income, take into account all fees and charges but exclude the entry fee. It is important to note that past performance is not a reliable indicator of future performance. This document was accompanied by an oral presentation, and is not a complete record of the discussion held. No part of this presentation should be used elsewhere without prior consent from the author. For more information, please call BT Customer Relations on :00am to 6:30pm (Sydney time)


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