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INTRODUCTION We continue to live in an ultra-low interest rate environment, with Central Banks in developed countries continuing to play an unprecedented role in stimulating economic growth through quantitative easing and monetary policy measures. This trend of Central Bank involvement has continued in Australia with the Reserve Bank of Australia (RBA) reducing the interest rate to the historically low rate of 2.0%. Therefore, investors who are still heavily overweight in cash or cash products are being forced to rebalance their portfolio to increase their exposure to risk assets, which generate a higher rate of income. By reviewing the current investment environment and examining how equities have performed against other asset classes, this report builds a compelling case as to why investors should be invested in equities. TABLE OF CONTENTS 1.0 WHAT’S GOING ON GLOBALLY 2.0 PERFORMANCE OVER TIME 3.0 THE CASE FOR EQUITIES 3.1 THE CASE FOR EQUITIES - GROWTH 3.2 THE CASE FOR EQUITIES - DIVIDENDS 3.3 THE CASE FOR EQUITIES - ANNUAL RETURNS 3.4 THE CASE FOR EQUITIES - ACCEPTABLE VOLATILITY 4.0 OPPORTUNITY KNOCKS 5.0 WHERE TO FROM HERE In this report we will demonstrate how maintaining a well-constructed, diversified equities portfolio can provide exceptional opportunities to generate growth and income through tax effective dividends. WE WILL SHOW YOU THAT OVER THE LONG TERM, SHARES <strong>GENERATE</strong> <strong>INCOME</strong>. 1
1.0 WHAT’S GOING ON GLOBALLY? Investors face the perpetual dilemma between risk and reward; between preserving capital and generating growth. Now however, they face this dilemma in an environment of modest global economic growth and very low interest rates. The level of volatility and uncertainty surrounding the financial markets has recently increased, reflecting mixed economic data notwithstanding the strong accommodative monetary policies adopted by Central Banks in the large advanced economies. The Greek sovereign crisis once again weighed on the markets recently but the strong austerity measures enforced by the Eurozone Ministers in conjunction with Greek reforms saw the threat of bankruptcy being avoided for the moment. In addition, after years of rapid expansion, the Chinese economy is now cooling off with lower economic growth. We expect the Chinese government to deploy further monetary easing and other growthsupporting measures in the coming months. There have also been concerns over increasing commodity supply, resulting in softening of commodity prices, particularly for gold, iron ore, copper, and oil. Perhaps the most encouraging sign of economic improvement is the US Federal Reserve’s upgraded assessment of the overall economy and its stated intention to increase the federal funds rate - the first time in almost a decade. Although the Australian dollar may now stabilise around US70 cents, it has fallen significantly from US95 cents in mid-2014. In Australia, the decline in commodity prices and the unwinding of resource investment is exerting downward pressure on economic activity, but stronger export volumes and the recovery in housing are sustaining some moderate growth. Low interest rates and the lower Australian dollar are also likely to support corporate earnings and the economy’s ‘rebalancing’. We are currently forecasting the Australian economy to grow by around 2.6% in 2015 and then 2.8% in 2016. Even with the interventionist policies of the developed world’s Central Banks, growth in most advanced economies has remained subdued, unemployment has remained elevated, and these economies are likely to continue to face headwinds for some time to come. 2
Page 1: SHARES GENERATE INCOME.
Page 5 and 6: CHART 2: ASSET CLASS INVESTMENT RET
Page 7 and 8: 3.1 THE CASE FOR EQUITIES - GROWTH
Page 9 and 10: 3.3 THE CASE FOR EQUITIES - ANNUAL
Page 11 and 12: 4.0 OPPORTUNITY KNOCKS As demonstra
Page 13: Bell Potter Securities is a leading

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