Repeating past investing mistakes and market outlook

This week it was announced that Chartwell Enterprises had joined the list of investment companies that have gone into administration in the past year. While it appears that corporate greed is a major contributor to the company’s downfall, whether there is any legal action taken against Chartwell either by ASIC or clients is yet to be determined.

What concerns me is that investors are failing to learn from the past given that we hear the same stories every decade. Any company promoting returns of 70% p.a. needs serious investigation by prospective investors simply because high returns normally means high risk. As with any good investment strategy however, it is important to diversify your assets and to never place all your eggs in one basket. While every asset carries risk, it is important that investors educate themselves to ensure they understand the level of risk they are taking before they invest.

So what can we expect in the market?

Last week I indicated that for the market to be bullish, it needed to rise above 5697 in the next one to two weeks, which it did yesterday (23 April) rising to 5712 points to confirm the market is bullish in the short term.

While this is a positive sign, investors need to be careful in selecting the right shares if they decide to enter the market because even though many of the top shares are starting to look good, just as many are still looking quite weak. Furthermore, many of the stocks that are rising right now are trading on lower volumes, which suggest that the institutional investors, who contribute to around 80% of our markets liquidity, are still being conservative.

Given this, it is possible that the current rise is a false move and that the market could fall away if more bad news arises. Right now it still pays to be patient and any decision to enter the market should be taken in small increments.

This report was by Dale Gillham , chief analyst of share investment company Wealth Within.

On another note, my recent article titled "3 Free sources to get your Australian dividend and tax information online " appeared in the Carnival of Money Stories #56—Once Upon A Time hosted at Can I Get Rich On A Salary. Thanks to gblogger for including this article on his popular blog.