David & Libby Five hard lessons we learnt

Mistakes made in 2018 will affect this year’s financial decision making

THE financial environment is constantly changing.

Learning from those changes is a key part to successfully managing your money. And, gee, there were a lot of lessons to be learnt from 2018. Sometimes the changes are small evolutions and sometimes those changes reinforce old themes, while others mean new opportunities or threats emerged.

These are the five big money lessons we learnt as a couple from 2018:

Sharemarket psychology, and computer trading, can overshadow fundamentals

automatically selling on a downturn – not because of a change of fundamentals but because a trigger price is breached.

Property fundamentals simply never change

boom in major capital city values, lots of property promoters were saying the Australian market was different – that it would just keeping going up. It wasn’t, and it will never be different. The boom was caused by those fundamentals, and the bust sparked by those same fundamentals. The last boom was created by massive demand for property far exceeding supply. The demand came from a combination of easy access to finance, a big increase in overseas immigration and Chinese demand for investment property as money was shifted out of China.

The unexpected size of the demand caught property developers by surprise and it sparked a housing development boom. But the problem is, it takes years to ramp up supply – to buy the land, draw the plans, get council approvals and build the properties.

During that period, values skyrocketed while waiting for new supply. When it came, demand changed: finance was harder to get, immigration was slowing and the government made it harder for the Chinese to invest here. A huge increase in

supply came on to the market at a time when demand was falling.

Coping with an oldfashioned credit squeeze means new behaviours