John Cameron's personal blog

Serious discussion about your financial position now - and in the future.

Black Swan Events and Investment Waves - What do they Mean for you?

Black swan events are unexpected happenings in financial markets that have a big impact.

During my working life I have been “fortunate” to witness two of the biggest black swan events of the past 50 years – the decision of President Nixon in 1971 to cancel the convertibility of US dollars into gold at a fixed price, and the GFC.

Both had a profound effect on investment markets, with big implications on the best way to invest your savings. 

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Was The Change In The Budget Limiting The Amount In Account Based Pensions A Black Swan Event?

In the financial world, “Black Swan Events” are unforeseen changes that have a profound impact.

The term ‘black swan event” has come into regular play in the world of finance since Nazim Taleb’s 2007 book, “The Black Swan; the impact of the highly improbable.”

Recognising the existence of “Black Swan Events” is profoundly important, and has significant implications on how we all should manage financial matters. In some ways, the lessons of Black Swan Events challenges much of the conventional wisdom of financial planning.

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Pension Caps

Okay, at the risk of being beaten up by well-heeled senior citizens (It’s OK, I’m one myself) wielding folded budget papers, I will say it:

     “I support the Government’s action to limit the amount held in an allocated pension to $1.6million.”

There, I have said it.

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Superannuation Changes Are Not Retrospective!

There. I’ve said it.

There are many reasons to criticise the superannuation changes announced in the budget (more on that next time), but retrospectivity is not one of them. Why? Because they are not retrospective.

Much of the considerable amount of criticism has been around the changes being “retrospective”. However, there is confusion between “retrospectivity” and “grandfathering”.

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Is It Time To Reconsider What We Mean By “Risk”?

Traditionally investments such as government bonds have been considered “safe”, whereas shares are considered “risky”.

So pervasive has this been, that, in the jargon of financial markets, when somebody talks about “taking on more risk”, what they are really saying is that they are selling bonds and buying shares (or using cash to buy shares). Conversely, if they are selling shares and moving to bonds or cash, they are “reducing risk”.

Now, it seems, the jargon is moving mainstream. I recently saw a retiree being interviewed on television. In order to make ends meet, he said he was “taking on more risk” with his investments.

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