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Wednesday, 28 October 2020
Recently trending Have the rules of retirement investing changed?18 Aussie names for your watchlistHamish Douglass on what really mattersKate Howitt: investing lessons and avoiding the PIPO tradeBuffett and his warning about 'virtually certain' earnings
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Kate Howitt identifies the stocks she likes and the disappointments, gives context to the increasing role of retail investors, and explains why the market is more of a 'voting not weighing' machine than ever before.
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Questions on the stock market/economy disconnect, how to focus long term, technology's growing role, income in a low-rate world, Modern Monetary Theory and endless debt and the tooth fairy.
While many investors are happy to invest in any online companies, Warren Buffett focusses more on the quality of future growth, buying companies whose earnings are 'virtually certain' in 10 or 20 years from now.
The impact of the pandemic on Australia's debt and deficit has forced the government into borrowing on a scale unimaginable at the start of 2020. What are the implications, and what is even more important?
A Morningstar stock screener reveals a cross-section of companies with competitive advantages that are trading at material discounts to estimated value. This is a list of 18 highly-rated names worth watching.
Many investors ask why fund managers do not protect the portfolio downside by using options. All insurance has a cost, and achieving full protection is expensive, but there are other ways to use options.
Many listed property stocks were hard hit by COVID, especially in retail, but foot traffic outside Victoria has held up relatively well. Some sectors are now good value for the recovery and less working from home.
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Welcome to Firstlinks Edition 380
Former US Vice President Al Gore once told me he needed to raise only US$70,000 when he first ran for politics. Now Biden and Trump spend billions just on television advertising. Little wonder so many favours are owed after each election, and this time, it really matters. Plus investing insights from Kate Howitt, Hamish Douglass, Roger Montgomery, Phil Ruthven and Morningstar's top stock picks.Read More.
In retirement, we still want to reduce stock volatility while generating cash flows. The two needs have not changed, but the reward expected in the old days from interest payments has gone. What should we do?
During COVID-19 and the economic recession, we are seeing a surprising new entrant to the defensive sector grouping. Technology shares have been behaving a lot like defensive shares such as food and utilities.
Although the Aged Care Royal Commission (with Paul Keating) and Budget announcements gave the aged care sector high profile, the welcome 'granny flat' changes came with inadequate extra Home Care Packages.
As more Australians invest overseas, currency exposure represents a new risk. 50% hedged, 50% unhedged was once a popular ‘least regret’ approach, but there's a move to currency as a return source.
The timing of lodging a notice of intent to claim a tax deduction on super contributions and making partial rollovers or withdrawals can make a big difference to the amount allowed to be claimed.
Such is the concern among unions and Labor about Government plans to undermine superannuation that an 'Emergency Summit' was called this week, and pioneer Bill Kelty evoked a social commitment.
Ultra low interest rates could be counterproductive for economic growth. Policymakers need to rely less on monetary stimulus and be mindful of the side effects they are creating, especially for retirees and savers.
In Budget 2020, Josh Frydenberg announced a performance comparison tool and fund stapling to save Australians $17.9 billion over 10 years. But too many moving parts make results highly cyclical.
With a pandemic, a recession and high unemployment, there's every reason to expect residential property and retail sales to be collapsing. But data shows both are resilient, so what is happening?
The recovery from COVID-19 is looking more like a K-shape, with some companies doing well while others struggle. The pandemic seems more akin to a black swan, exogenous shock than a structural downturn.
Trump or Biden? Our readers make a nailbiting call, while your predictions for the ASX300 over the long term show optimism while flat over the short term. The best insights come from the hundreds of revealing comments.
The second wave of COVID-19 sweeping Victoria and the resulting lockdown have taken a huge toll on the state's economy and its population. Was the government's reaction heavy-handed or necessary?
The global tech run paused in September but the boom is driven by rising prices rather than actual profits. It will end when global confidence in the prospect of endless monetary and fiscal stimulus runs out.
The unrealistic value creation through lowering discount rates while assuming high growth shows a sensible link is critical. Interest rate assumptions need as much valuation focus as the cash flows of the business.
The 60/40 diversified portfolio has been the mainstay of the superannuation industry for decades. But it is built on a fundamental principle of defensive bond returns, and its time is nigh.
Fixed income opportunities beyond term deposits and hybrids remain scarce for retail investors, but active bond funds can access other securities where value is still available. Here are examples.
As fewer professionals actively research the merits of a company’s prospects, stocks become disproportionately driven by capital flows. Prices disconnect from fundamentals and there's no better example than Tesla.
As more Australians tilt their investments to global equities, they often overlook the exchange rate risk and fees. The move from US57 cents to US73 cents in six months shows the unhedged impact.
Reductions in loan repayments, either deferrals or failing to opt out of lower payments, seem like a good idea. But they are expensive and should only be adopted if the borrower needs the money.
Aged care should not be narrowly defined, as opportunities include home care, granny flats, retirement villages, land lease communities and residential aged care. Take advice and don't rush it.
Simpler tax arrangements for investments are a key benefit of separately managed accounts, where after-tax outcomes vary from other vehicles such as managed funds and direct equities.
The use of discounted pricing by insurers to attract new business is unsustainable and leaves existing policyholders on higher premiums for what is essentially the same product.
The best way to preserve your SMSF’s favoured status is to make sure the fund’s annual return reaches the ATO on time. There are new rules this year that every SMSF trustee should know.
Both equity and fixed interest markets now have far greater understanding of which companies will struggle during COVID. Supported by central banks, the markets have bailed out companies facing zero revenues.
As she retires after 47 years as a portfolio manager, Claudia Huntington explains the art rather than the science of investing, the value of a great leader and culture, and the insights she gives to new colleagues.
For many global tech companies, COVID has boosted their revenues and pushed share prices to all-time highs. We are on the cusp of amazing technical advances and there are plenty of new opportunities.
With gold now on the radar of individual investors, SMSFs and institutions, here's what you need to know about the choices between gold bars, gold ETFs and even gold miners, with Jordan Eliseo.
It's now well established that ethical and sustainable investing enhances returns, but as fund managers jump aboard, what is required to build principles firmly into all portfolios?
A diversified share portfolio should deliver 6% with franking, versus 1% on a term deposit. Should an investor accept the risk of shares during a recession and pandemic when interest rates are so low?
It is trite and obvious to say the future is uncertain, and while COVID-19 brings extra risks, markets are always unpredictable. However, investing conditions are now more difficult than ever, mainly because the defensive options for portfolios produce little income. We explore whether investing rules have changed with new input from Howard Marks.
Budgets are forecasts, and more than most, Josh Frydenberg and Treasury waved a wet finger in the air in compiling the 2020 version. How many companies will now employ a new apprentice for $100 a week subsidy? Which back-of-the-envelope showed 3.5 million businesses would use the instant asset write off? And the $17.9 billion for super savings based on the YourSuper proposal is wishful thinking.
The most significant change in asset allocation by Australian investors in recent years has been the move into global equities. It's been a canny trade for those who focussed on the US, especially great companies such as Apple, Microsoft, Amazon and Google. International equities experienced net inflows into ETFs of $722 million in August 2020 versus only $181 million for Australian equities.
The US tech index, the NASDAQ, peaked on 2 September 2020 at 12,058 and three weeks later closed at 10,632. On the same days, Apple hit US$137.98 and then fell to US$107.12. These falls of over 10% and 20% seem high but both were simply returning to their early August levels. It's hardly a rout when a month's gains are given back. The bigger issue is whether such stock corrections will scare off the retail 'Robinhood' traders.
There are many ways to value a company, but the most popular is to estimate the future cash flows and discount them to a present value using a chosen interest rate. Does it follow that when interest rates fall, companies become more valuable? Perhaps, but only if the cash flows remain unchanged, and in a recession, future earnings are more difficult to sustain. What do Buffett and Douglass and 150 years of data say?
Suddenly, it's the middle of September and we don't hear much about 'snap back' anymore. Now we have 'wind backs' and 'road maps'. Six months ago, I was flying back from Antarctica after two weeks aboard the ill-fated Greg Mortimer cruise ship, and then the world changed. So it's time to take your temperature again. Our survey checks your reaction to recent policies and your COVID-19 responses.
Not every retiree needs to gun for higher returns, but a conservative portfolio can court its own risks, especially with bond rates so low. But some retirees prefer to settle for a lower income.
Markets have recovered in the last six months but most investors remain nervous about the economic outlook. Morningstar analysts provide four quick tips on how to navigate this uncertainty.
COVID-19 pushed many SMSF trustees to change their asset allocation, but some of the adjustments are surprising. In the GFC, there was a surge of new SMSFs as investors lost confidence in fund managers to protect them.
The traditional 4% rule was designed to ensure retirees do not run out of money, but low interest rates and expensive equity markets question the sustainability of the level. What are the alternatives?
Many people were financially unprepared for a pandemic, but it is women who are suffering most because they earn less, have interrupted careers and have less risk-taking capacity.
Investors who stick with the same asset allocations as in the past will likely fall short of their goals. The 'right' allocation is personal and holding more equities depends on risk capacity.
Chris has many years of experience in building successful wealth management practices.
Noel Whittaker is one of the world's foremost authorities on personal finance.
Phil Ruthven is the founder and director of IBISWorld, Australia's best-known business information, forecasting and strategic services corporation
Paul John Keating is a former Australian politician who served as the 24th Prime Minister of Australia, in office from 1991 to 1996 as leader of the Labor Party.
Equity Income Fund receives Morningstar upgrade.
More diversity in ETF flows as investors move off the cash sidelines.
podcast: SMSF Adventures with Garry - Ep10 Top 6 advantages of having an SMSF.
Understanding demographics is vital for successful planning and investing for the future. What is happening on population growth, ageing, natural increases, immigration and our role in Asia?
As he prepares for retirement, a Chief Investment Strategist from a major global fund manager summarises what he has learned working through five full business cycles. He says it's time to take risk off the table.
The transfer balance cap has required some large SMSFs to transfer pension money back to accumulation, and the two pools must be treated carefully to maintain the full benefits from superannuation.
Make sure you're not focussing on minor investment problems while giving short shrift to the game-changers. This pyramid describes the important decisions and it might surprise what comes last.
State Street Global Advisors is a pioneer in the Australian ETF market, but aggressive pricing from new rivals has eroded its competitive edge.