We have just entered the new financial year and with it comes a mass of analyst reports highlighting what happened last year and predicting what is expected in the coming year. While these reports are meant to be informative for investors, in my experience I find it really overwhelms people because of the significant diversity in opinions. And unless the investor knows how to use the information in the context of their investments, it tends to add little value.

The reality is that most investors just want to own shares that rise in price, which is why I always recommend keeping things simple. If we just look at the top 20 shares on our market last financial year, they rose 19.67% excluding dividends, which averaged around 4.0%. So if all an investor did was buy and hold the top 20 shares, their portfolio would have achieved a return of around 23%, which I am sure many investors would be happy with.

So what is happening on the market?

In previous reports I indicated that the market would present a number of false triggers given the increased volatility, which has certainly been the case over the past three weeks as the market traded up for 5 days before falling for 5 days and then rose again for 6 days. As a consequence, the market has really only traded sideways as it has done for the last 3 months within a 4% band.

As regular readers of this report, you will be aware that I have been expecting the market to fall into its yearly low, and without trying to sound like a broken record we are still waiting to confirm that the market is heading down. This will occur when the market falls below the low of 6200.10 achieved on 13 June, which again I expect will happen in the next week. Once this happens I believe the market will continue to trade down to between 6000 and 5900 points before it finds support around-mid July after which the market will trade up strongly once again. That said, given that the market has not behaved as expected over the last few weeks, it is possible for the fall to extend beyond mid-July.