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Saturday, 6 March 2021
Recently trending $100 billion! Five reasons investors are flocking to ETFsInvest in Australian value stocks before it is too lateA close look at retiree fears and expectationsMinister Jane Hume on SMSFs and superannuation reformWelcome to Firstlinks Edition 392
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The solutions to retirement problems are obvious. All we need are 'efficiency' and 'flexibility'. Learn what these two words mean and the future of superannuation policy is clear. Just don't tell Paul Keating.
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There are pockets of bubble pricing in some assets that can pop at any time, but overall, valuations are frothy but prices of most companies can be sustained if not hit by rising bond rates.
Australia’s economic recovery is expected to be strong in 2021. It may appear the local economy is lagging other countries as they recover but that is only because we are not starting from such a low base.
Equity valuations are lofty, but long bond rates have now returned to levels before the pandemic crisis. In a balanced portfolio, long bonds now provide more opportunity to cushion the volatility of equities.
After a strong rally since March 2020, markets are increasingly worrying about the threat of inflation and higher interest rates. Ironically, it might be at a time of strong economic growth which benefits companies.
The rise of the Bitcoin price coinciding with a pullback in the gold price is leading commentators to argue the precious metal is being usurped by its purported digital counterpart. There's a long way to go.
Bull markets tend to follow their own momentum until they hit a clear opposing force. The economy is like a spring about to be uncoiled with the most obvious restraint on the horizon is the return of inflation.
It has been three decades, and Japanese equities are still not back up to all-time highs reached at the end of one of the greatest bull markets in global history in 1989. Can we have lost decades in Australia too?
The outlook for emerging market debt in 2021 revolves around liquidity, uneven recoveries and debt sustainability. Damage has been done to many countries’ finances and watch for central banks withdrawing support.
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Welcome to Firstlinks Edition 397
Clichés such as 'unprecedented conditions' and 'we're all in this together' enjoyed prominence in 2020 but there are two new buzz words in Canberra for 2021. The 'polispeak' of innocent-sounding words are softening us up for major changes in the way we think about and manage superannuation.Read More.
What do stock analysts do in reporting season, faced with hundreds of company reports? Take a look inside the secret world of broking and the analysts burning the midnight oil for a month, hoping for a special insight.
FANMAG returns have been strong but not relative to their predecessors. Looking at a broader group of large tech companies, most have lagged the market. Fad-based investing is no substitute for broad diversification.
Banks are awash with cash and are turning away deposits while reducing rates. Retirees who rely on their savings for income should not expect a respite until at best 2024 and are encouraged to turn to risky assets.
Senator Jane Hume presented at the SMSFA conference this week, and we reproduce the full transcript as a guide to what the Government is thinking on superannuation reforms as we head into the next election.
As savers move from accumulation to decumulation, their views on risk will change. Retirees must take measured investment risk by balancing desired returns and protecting capital.
Managing a portfolio in retirement requires a plan for investing assets and drawing income. This research suggests ‘optimal’ drawdown and investment strategies with differing objectives, preferences and circumstances.
Key factors to watch in 2021 are coronavirus cases and deaths, global business conditions, unemployment, inflation, bond yields and the gap between earnings yields and the US dollar. Where are we now?
We need to think hard about how we work and live in the future. How do governments, health gurus, individuals, politicians, businesses and social groups need to act in 2021, both in dealing with COVID and thereafter?
Despite the wave of optimism currently sweeping markets, some negative factors demand caution. Extraordinarily low interest rates is pushing up equities as investors choose the 'lesser evil' in asset allocations.
The next phase of recovery depends on immunity to COVID and reduced consumer reluctance to engage in normal economic activities. What are the various scenarios and how do they influence a balanced portfolio?
The Retirement Income Review has received criticism for compromising future super balances and not supporting the SG increase. The same result as an increase could be achieved by changing two other policies.
Bonds have been strong performers over many decades and always play a role in defensively-positioned portfolios. There are some basic principles investors should understand such as the types of yield.
We tend to think of the 'stockmarket' as one beast, but it pays to know the drivers of the different parts, especially global versus Australian stocks. The outlook favours global due to better sector exposure.
By now, we know 'growth' stocks have outperformed 'value' for many years and investors look to the future, but there are good reasons why the switch is on, especially as value companies emerge from the pandemic.
Nobody knows how to pick the bottom of the market, but new investors did well in 2020. They captured most of the returns since the lows, and contrary to popular opinion, they are not punting away on tech stocks.
The 60/40 portfolio has been the mainstay of 'default' Australian investing, but large allocations to bonds compromise returns when rates are low. Strategies with exposures negatively-correlated to equities are needed.
A high level of spending capacity is left in consumers which will support consumer-related stocks for a longer period than is factored into current share prices. Savers have lots of money sitting in the bank.
It's not official, but Australian ETFs are clicking over $100 billion right now. It's a remarkable rise, leaving the traditional rivals, the Listed Investment Companies, in their dust. Why are they so popular?
Seeking financial advice can be a daunting task and over 80% of Australians do not have a financial adviser. Here are the steps involved in understanding the advice process to encourage more people to jump in.
The widespread use of 'millionaire' must stop. Inflation means that the basket of goods and services that cost $1 million in 1960 now requires $15 million. Today, millionaires are not wealthy.
Let compounding do its work. It starts slowly. This is why many of those who start an investment programme (or fitness programme, dietary change, sport, or business) give up in the early stages.
Don't make life difficult for the person trusted to manage your estate. Find the time to arrange your documents, contacts, online accounts and files in a convenient place, including giving them some cash.
Most people pay cursory attention to estate planning, limited to a will and maybe a chat with the children. Those who want to make their intentions clearer and easier for others should check these quick tips.
Financial advice has moved well beyond simply recommending investments, with five major components to quality advice. Helping clients avoid potentially disastrous mistakes is often underestimated.
Active managers need to know what factors are distorting asset prices. This interview with Ted Maloney, CIO of MFS, explores how much of 10 years of growth has been pulled forward and the impact of Reddit users.
The Interview Series has proved highly popular with our readers. This year’s collection of 20 interviews for 2020 covers most asset types and is a window into how diversification helps to manage risk.
ETFs have gone from bit player to major force in Australian investing in the space of a few years, and will top $100 billion soon. One of the major providers explains how they bring products to the market.
As people stayed home during the pandemic, a bearish view swept over most property sectors, but many have thrived and prices have recovered rapidly. The best opportunities are in long leases with quality tenants.
Paul Keating is the champion of compulsory superannuation as the central means of funding retirement. In the wake of the Retirement Income Review, he is at his passionate best defending the system, with Leigh Sales.
There's a favourite phrase that climate change sceptics like to use, that ‘the science is not settled’. It's powerful because it's easy to find a qualified scientist who disagrees with 95% of his or her colleagues. Investing is even worse, because it is open to personal interpretations and subject to behavioural biases. The science is certainly not settled.
The Reserve Bank of Australia puts borrowers ahead of depositors despite declining incomes for millions of savers and retirees being a drag on economic growth. The focus is on the cost of debt, even if low rates feed into strong residential property prices and do first-home buyers no favours. In fact, the RBA Board seems relaxed that retirees are taking on more risk to generate income.
At any time in the investing cycle, a strong case can be made for both buying and selling equities. There are no absolutes. Even as markets look overvalued at the end of a bull run, the optimism could play out for years to come. The added complication for investors at the moment is the unlimited liquidity the central banks are pumping into the system. The TINA trade is real.
Regardless of the many theories floating about on the impact of the extraordinary events around GameStop trading, there is one market fact: you never know who is on the other side of your trade. The Reddit tribe is portraying a victory against a few hedge funds as the little guy gaining revenge over Wall Street, but many 'suits' are enjoying the ride.
When we wrote about Robinhood and Reddit investors in June last year, it was not expected that their activities would ramp up to another extreme level. Fuelled by stimulus cheques and social media stories of instant wealth, thousands of new participants are speculating on stocks in a way the market rarely sees.
The 46th President of the United States, Joe Biden, was sworn in on Wednesday, and we all hope it heralds a new era in US politics. Equally important for markets is the appointment of Janet Yellen as Treasury Secretary and her reputation for spending and economic stimulus. And Australia will be a fascinated spectator as the US and China battle it out for economic supremacy for many years to come.
Retirees or those close to retirement are courting risk by standing pat with too-aggressive portfolios. In a volatile market, tune out the pundits and take a look in the mirror. Are you happy with your exposure?
Warren Buffett's investment portfolio gains attention because of his legendary status, but parts of his empire in insurance, railways, metalworking and aircraft suppliers have been damaged by the pandemic.
Growth was the place to be through the pandemic while value managers couldn't catch a break. It's the long run that matters but 2020 delivered pleasure or pain for many managers.
On the sidelines of the Morningstar Conference, the Magellan co-founder reflects on the pandemic and which sectors are set to gain and lose. He says we were lucky the pandemic hit when it did (videos and transcripts).
Interest in 'quality' factor ETFs has increased this year, helped by very attractive returns. However, not all ETFs are created alike and there are divergences in portfolio traits which investors can identify.
Investors with heavy allocations to a broad US index should check how much is exposed to tech stocks, especially when valuations look a bit steep. It might be time to reallocate to other sectors or styles.
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.
has two Small Caps Funds recommended by Zenith Investment Partners.
becomes one of the first groups globally to achieve a WELL Portfolio Score.
launches private debt fund for New Zealand investors.
Favourite quotations from famous people on markets, investing, processes, noise, pessimism, self perception and life balance. These lessons carry across investment cycles and lifetimes.
It's become common to claim there is no incentive to save more than $500,000 because of the loss of age pensions and possibly franking credits. But these arguments overlook the way super is supposed to operate.
Lower spending strategies and the right investment options are crucial to giving superannuation members the best chance of making their super last for an average 25 year retirement.
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.
The story of Mr Market originated with Ben Graham and was further popularised by Warren Buffett, but does it still hold true? Based on experience, the two-investor scheme looks hopelessly oversimplified.