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Sunday, 26 September 2021
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Former Treasurer Joe Hockey became Australia's Ambassador to the US and he now runs an office in Washington, giving him a unique perspective on geopolitical issues. They have never been so important for investors.
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Throughout time, transformative technology has changed the course of human history, but it is easy to be lulled into believing new technology will also transform investment returns. Where's the tipping point?
Equity investing pays off over long terms but comes with risks in the short term that many people cannot tolerate, especially retirees preserving capital. There are ways to invest in stocks with little downside.
Bonus options issued by Listed Investment Companies (LICs) deliver many advantages but there is a potential dilutionary impact if options are exercised well below the share price. This must be factored in.
The survey drew a fantastic 2,000 responses with over 1,000 comments and polar opposite views on what is good policy. Do most people believe the home should be in the age pension asset test, and what do they say?
Focussing on companies that will benefit from slow moving, long duration and highly predictable demographic trends can help investors predict future opportunities. Three main themes stand out.
High-yield bonds carry more risk than investment grade but they offer higher income returns. An allocation to high-yield bonds in a portfolio - alongside equities and other bonds – is worth considering.
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Welcome to Firstlinks Edition 426 with weekend update 4
Two conversations last week with people at opposite ends of their financial journeys confirmed that a vital part of the investment decision is often overlooked. Where should the assets be held? Placing money in a personal account, joint names, company, super fund or SMSF, family trust, spouse or child can have vastly different consequences for tax, capital gains, estate planning, social security and access.Read More.
The RBA Governor says rising house prices are due to "the design of our taxation and social security systems". The OECD says "the prolonged boom in house prices has inflated the wealth of many pensioners without impacting their pension eligibility." What's your view?
As Managed Accounts surge through $100 billion for the first time, the line between retail, wholesale and institutional capabilities and portfolios continues to blur. Lower costs help with best interest duties.
Read our article on the family home in the age pension test, with the RBA Governor putting the onus on social security to address house prices and the OECD calling out wealthy pensioners. What is your view?
Based on the latest data, men aged 45 now are expected to retire at age 65.2 and women were expected to retire almost one year earlier at 64.3. The expected retirement ages are moving out for men more than women.
Most of us try a version of tactical asset allocation. The good news is the range of investments available has improved significantly, and anyone can become a version of the Future Fund or Jerome Powell.
The YFYS annual performance test neither measures the return members achieve, nor adequately measures the risks a fund took in achieving the returns, yet it is likely to change the way funds behave.
The Intergenerational Report is an opportunity to talk about ways to a better future, but it is not the one outlined in the paper. It has too many generous assumptions while the budget will always be in deficit.
The pandemic has shown that the emerging market complex is more mature, with central bank discipline, strong demand for commodities and a positive outlook for currencies. Diversification into EM is worth a look.
There are many reasons why the market places too much emphasis on the short term, but taking a long view on growth, inflation, markets and sectors will lead to better policies and investments.
In the wake of persistent inflation, the Fed may jams down hard on the monetary brakes, leading to upward moves in bond yields. There may be a significant correction in equity markets, but what would the RBA do?
While REITs and some value stocks are considered 'inflation-sensitive' assets, the data provide little support that they are good inflation hedges, and energy stocks and commodities are too volatile. So what works?
They are six of the greatest businesses ever and should form part of the global portfolios of all investors. The market sees risk in inflation and valuations but the companies are positioned for outstanding growth.
Company results in FY21 were generally good with some standout results from those thriving in tough conditions. We highlight the companies that delivered some of the best results and our future expectations.
It used to be Down, Down for prices but the new status quo is Down Down for emissions. Until now, the realm of ESG has been mainly fund managers as 'responsible investors', but companies are now pushing credentials.
Dots and dashes have been part of the shape of financial markets for 100 years, and the 'dot plot' is more important than ever. But what are those tiny triangles in the newspaper and are there any lessons from them?
The long current positive run for the Australian stock market is unusual but not a warning of imminent demise. Previous long positive runs were not all followed by corrections but this one may end this month.
There are plenty of voices on both sides of the inflation argument, but the ultimate impact of COVID should be deflationary. Australia is one of the last places to expect worrying signs of inflation rising.
Financial repression is suddenly part of our lexicon, but what is it and how can a fixed income fund take advantage of it? And why it is better to manage smaller amounts than multi-billion portfolios.
The Design and Distribution Obligations (DDO) come into effect in two weeks. They will change the way banks promote products, force some small funds to close to new members and push issues into the listed space.
Do what you want with your estate but there can be challenges in a court. Older people are vulnerable and they can tell people what they want to hear, but carers can also be successful over family beneficiaries.
The Australian Taxation Office has issued a directive about the top five errors in SMSF annual returns. Although many leave these to an administrator, it's worth knowing what's happening behind the scenes.
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.
Is it more difficult to find stocks to short in a rising market? What impact has central bank dominance had over stock selection? How do you combine income and growth in a portfolio? Where are the opportunities?
Harry Markowitz is the 1990 Nobel Laureate and Pensions & Investments Magazine's 'Man of the Century'. For his 94th birthday, he explains the magic moment of his Modern Portfolio Theory and Efficient Frontier work.
Focus on what you're good at. If you have no insights on macro themes or market trends but can spot a great company, that should be your emphasis, while carefully watching entry and exit prices.
Loans to corporates were the traditional domain of banks, but as investors look for income alternatives to term deposits, funds have combined hundreds of loans into a single structure to create a diversified investment.
Jeremy Grantham has seen it all before, with bubbles every 15 years or so. The higher you go, the longer and greater the fall. You can have a high-priced asset or a high-yielding asset, but not both at the same time.
If you were on the board of a major bank and asked to write a wishlist of the things the government or central bank could fix to help your business, almost everything you could dream up has been delivered. For many years, I was Head of Balance Sheet Management at a large bank and we thought we were responsible for managing our own risks.
Wet streets cause rain. The Gell-Mann Amnesia Effect is a name created by writer Michael Crichton after he realised that everything he read or heard in the media was wrong when he had direct personal knowledge or expertise on the subject. He surmised that everything else is probably wrong as well, and financial markets are no exception.
We focus on asset allocation at a critical time when bonds offer limited income and stockmarkets are priced at all-time highs. On his 94th birthday, we reprise our interviews with Nobel Laureate, Harry Markowitz, the father of Modern Portfolio Theory, check how the head of the US Federal Reserve invests his personal wealth and review the Future Fund's assets. It's also the week when 13 super funds were named and shamed.
We recently published six stock picks which were all foreign companies and some people complained that they only wanted to read about Australian companies. Come on, folks. That's like the old days of living on meat and three veg. The world offers wonderful investment opportunities and Australia is only 2% of global markets and highly concentrated.
In the thousands of articles in the Firstlinks archive, there are millions of words. Investing comes with unlimited nuances and is as varied as the number of investors. But what if I were required to give one investment lesson in one sentence? Here it is.
Ben Graham, the father of value investing, said at times of extreme speculation, knowledge is superfluous, experience is a handicap and prices determine value standards. No wonder millions become billions become trillions as our eyes glaze over. Whither quadrillions? Plus surprising retirement income results and 10 franked dividend stocks.
COVID was a paradigm shift for thematic ETFs, satisfying investor sentiment toward disruptive trends and sustainable investing while covering almost any theme investors desire. Where do they sit in a portfolio?
Our next article on modern retirement income products looks at Magellan's FuturePay. It aims to provide predictable income without having to sell down capital, but at its heart, it's an equity fund with added support.
There is a small universe of companies on the ASX which are reliable dividend payers over five years, are fairly valued and are classified as ‘negligible’ or ‘low’ on both ESG risk and carbon risk.
There are few opportunities to buy tech heavyweights at attractive prices. In Morningstar’s view, four global leaders are trading at decent discounts to their fair values, indicating potential for upside.
Josh Frydenberg's third budget contained changes to superannuation and other rules but their effective date is expected to be 1 July 2022. Take care not to confuse them with changes due on 1 July 2021.
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.
Kate Howitt named in Citywire’s top 30 female fund managers for a fourth consecutive year.
and MUFG appoint head of First Sentier MUFG Sustainable Investment Institute.
Fortlake named top performing Asia Pacific fixed income strategy.
What happens when a superannuation expert sets up his own retirement portfolio using decades of knowledge? He finds he can afford much more investment risk in his portfolio than conventional thinking suggests.
The Listed Investment Company structure is under siege, but for the right type of asset and manager, it still carries strong appeal. Every LIC should review whether it has a genuine reason to exist in this form.
A comprehensive study of the impact of inflation on returns from different assets over the past 120 years. The high returns in recent years are due to low inflation and falling rates but this ‘sweet spot’ is ending.
Warren Buffett explained why he believes most investors should not pick stocks but simply own an S&P 500 index fund. "There's a lot more to picking stocks than figuring out what’s going to be a wonderful industry."
It is often said that female investors are more risk-averse than males, but a closer look at the data suggest that income - rather than gender alone - may be the real determinant of women's investing choices.