Two major lies that are hurting your investing


We all want to have more money so we can live a comfortable life in retirement, yet the vast majority of those who retire rely on some form of government pension. Why is this the case when we all have the ability to generate extra cash flow to create more financial security for ourselves?

Unfortunately, when it comes to building wealth, there are two major lies we tell ourselves that stop us from investing or finding ways to generate additional cash flow. The first is that we tell ourselves we need to be right but when it comes to making an investment decision, yet we fail to pull the trigger because we don't want to be wrong. Historically, the most successful people in the world are so because they failed or made mistakes more than anyone else.

The second lie we tell ourselves is that we must not lose. As an educator and stock market commentator, I see this at play every day as individuals buy stocks that are falling in value only to watch them fall further. They tend to ignore the fact they are losing money and hold on to the stock in the hope of it recovering, rather than admitting their error in judgement and exiting quickly to realise a small loss.

market wrap two lies we tell ourselves

The Australian stock market has changed significantly over the past 20 years and the previous ways of investing are being challenged. As such, those who learn to deal with this will benefit, while those who hold onto the big lies will continue to struggle.

The best and worst performing sectors this week

The best performing sectors include Utilities as it is just in the green followed by Industrials just in the red and Consumer Discretionary, which is down just more than 1%. The worst performing sectors include Information Technology down more than 3%, followed by Consumer Staples and Energy, which are both down more than 2%.

The best performers in the S&P/ASX top 100 stocks include AMP up more than 9% followed by Amcor up more than 4% and Orora up more than 3%. The worst performing stocks include Northern Star Resources down more than 9% followed by Allken Limited down more than 7% and Bluescope Steel down more than 6%.

What's next for the Australian stock market

In the last few weeks, I have stated that given how our market has traded over the past couple of years, we need to expect the unexpected and this week has proven just that. While in prior week's the market traded higher earlier in the week only to exhibit weakness and fall away towards the end of the week, this week the opposite occurred.

By market close on Wednesday, the Australian stock market was down almost 3% with many investors becoming concerned and talk of the market crashing reared its ugly head again. Then on Thursday, the market rose strongly to erase almost half of the fall over the prior two trading days. The question most investors are now asking is whether we should be bracing for further falls or consider the current weakness as an opportunity.

Earlier this month, I indicated that the All Ordinaries Index could fall to as low as 7600 points before rising again. While the market did fall to 7514 points on Wednesday, where it closes today will tell us what we can expect moving forward. If it rises to close higher at around 7700 points, this indicates that the bulls are not done and the current weakness may not continue.

For now, I recommend continuing to play the wait and see game until the Australian stock market confirms a direction. If it trades lower, then investors may need to sell to protect capital, however, if it trades up as I suspect it will, there will be some great buying opportunities.

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Dale Gillham is chief investment analyst at Wealth Within Limited (AFSL 226347). He also serves as the head trainer at the Wealth Within Institute (RTO 21917). He has more than three decades of experience in the investment industry, and is the author of How to Beat the Managed Funds by 20%, Dale's qualifications include an Advanced Diploma and a Diploma of Share Trading and Investment. He co-hosts the Talking Wealth Podcast, and his work has appeared in The Australian Financial Review, New York Business Journal, Wall Street Select and more.