Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 288

Cuffelinks Newsletter, Edition 288

  •   11 January 2019
  •      
  •   

The New Year resolutions to get fit, eat healthier and tidy the attic should also come with an asset allocation review. It's not that frequent changes to a strategic allocation are essential, but checks on how a portfolio has moved due to market changes, and an audit of the risks and market conditions, are warranted at least once a year. The SMSF Association reports that 65% of SMSFs do not adjust their asset allocation each year, which means rebalancing is often ignored.

Correlation between asset classes should also be watched, as it's not much of a diversification strategy if everything moves together. As Warren Buffett wrote in 2003:

"When things go bad, all kinds of things correlate that no one ever dreamed correlated ... And there’s nothing more deadly than unrecognized concentrations of risk, but it happens all the time."

For those who consider the stock market fall may build a new floor, check Robert Shiller's Total Return Cyclically Adjusted Price to Earnings (TR CAPE) data for the US. The black line is the long-term trend since 1860, and the green line shows the current market (at about 36) is well above trend even after the recent fall. To what extent do lower interest rates warrant this? The CAPE is a warning that future returns from equities will be less than delivered in the bull run since 2008.

 

Source: Robert Shiller's online database at http://www.econ.yale.edu/~shiller/data.htm

 
To see what its largest clients are doing, BlackRock surveyed 230 institutions (one quarter of them in the Asia Pacific) in November and December 2018, with the following results. The major trends are lower allocations to listed equities, more to fixed income and significant increases in private equity and real assets such as property.
 

Source: BlackRock global survey of 230 institutions managing US$7 trillion.


In this edition, Ashley Owen checks four factors he has identified as warnings for a major correction. He shows how 2018 shattered a wonderful time for investing and he gives his views on portfolio construction in 2019.

And via The Australian Financial ReviewCarrie LaFrenz interviews Gail Kelly, Chris Cuffe, Antonia Ruffell and Graham Hand on tax-effective gifting to charities.
 

Summer Series with Guest Editor, Tim Keegan

"AMP Capital’s goal is simple: secure the financial future of as many investors as possible. As part of that I am always looking for new ideas, trends, conversation starters and stories that make me think. Contemplating the future is what Cuffelinks and its array of authors does best. Here are five of my favourites.

1. Let’s start at the beginning, with the basics of investing. The holiday season is a time for reflection and a couple of years ago, Cuffelinks put together a comprehensive guide to investing by asking more than 30 investment professionals to provide advice to their 20-year-old selves. From the power of compound interest to the exhortation to 'start now!', from playing to your strengths to learning to manage your emotions, it’s full of gems, and is linked here. As this was also selected by a previous Guest Editor, I've chosen another ebook on investment lessons from making a mistake.

What is an enduring investment lesson you learned from making a mistake?

2. Noel Whittaker’s 20 Commandments of Wealth is a classic. He tells us to ignore the prophets of doom that fill our media and make sure we take professional advice before investing, not after. The list is full of wisdom.

The 20 Commandments of Wealth for Retirees

3. Focusing more closely on share market investment, the eloquent Roger Montgomery offered a timeless primer back in 2015 that holds true. He says first, identify superior businesses, and second, estimate their true value. And then laments how hard it is for investors to follow these simple rules.

How to think rationally about shares

4. In a similar vein is David Bell’s argument against get rich quick schemes. There’s no easy way to make money, he says. And that really is a truism of investing.

No easy way to make money

5. And finally, this time of the year is a time of thanks – thanks for the life we’re living, the society that allows us to live so well and the people with whom we spend our time.

No article contemplates this better than Chris Cuffe’s own thoughts on life, family and death – and his frustration at the still true fact that 45% of Australians do not have a valid will. What could be more important than ensuring your loved ones are safe and cared for after you’ve gone? Chris contemplates the basics and benefits of leaving an enduring legacy for your children and grandchildren.

But also, perhaps more importantly, he considers how we can also leave an enduring gift for society at large – the very society that has enabled us to live so well in the first place.

Planning to make your money live forever"


Tim Keegan is Global Head of Marketing, Digital, Innovation and Direct at AMP Capital.

 

For a PDF version of this week’s newsletter articles, click here.

 


 

Leave a Comment:

     
banner

Most viewed in recent weeks

How to enjoy your retirement

Amid thousands of comments, tips include developing interests to keep occupied, planning in advance to have enough money, staying connected with friends and communities ... should you defer retirement or just do it?

Results from our retirement experiences survey

Retirement is a good experience if you plan for it and manage your time, but freedom from money worries is key. Many retirees enjoy managing their money but SMSFs are not for everyone. Each retirement is different.

A tonic for turbulent times: my nine tips for investing

Investing is often portrayed as unapproachably complex. Can it be distilled into nine tips? An economist with 35 years of experience through numerous market cycles and events has given it a shot.

Rival standard for savings and incomes in retirement

A new standard argues the majority of Australians will never achieve the ASFA 'comfortable' level of retirement savings and it amounts to 'fearmongering' by vested interests. If comfortable is aspirational, so be it.

Dalio v Marks is common sense v uncommon sense

Billionaire fund manager standoff: Ray Dalio thinks investing is common sense and markets are simple, while Howard Marks says complex and convoluted 'second-level' thinking is needed for superior returns.

Fear is good if you are not part of the herd

If you feel fear when the market loses its head, you become part of the herd. Develop habits to embrace the fear. Identify the cause, decide if you need to take action and own the result without looking back. 

Latest Updates

Economy

The paradox of investment cycles

Now we're captivated by inflation and higher rates but only a year ago, investors were certain of the supremacy of US companies, the benign nature of inflation and the remoteness of tighter monetary policy.

Shares

Reporting Season will show cost control and pricing power

Companies have been slow to update guidance and we have yet to see the impact of inflation expectations in earnings and outlooks. Companies need to insulate costs from inflation while enjoying an uptick in revenue.

Shares

The early signals for August company earnings

Weaker share prices may have already discounted some bad news, but cost inflation is creating wide divergences inside and across sectors. Early results show some companies are strong enough to resist sector falls.

Property

The compelling 20-year flight of SYD into private hands

In 2002, the share price of the company that became Sydney Airport (SYD) hit 80 cents from the $2 IPO price. After 20 years of astute investment driving revenue increases, it sold to private hands for $8.75 in 2022.

Investment strategies

Ethical investing responding to some short-term challenges

There are significant differences in the sector weightings of an ethical fund versus an index, and while this has caused some short-term headwinds recently, the tailwinds are expected to blow over the long term.

Investment strategies

If you are new to investing, avoid these 10 common mistakes

Many new investors make common mistakes while learning about markets. Losses are inevitable. Newbies should read more and develop a long-term focus while avoiding big mistakes and not aiming to be brilliant.

Investment strategies

RMBS today: rising rate-linked income with capital preservation

Lenders use Residential Mortgage-Backed Securities to finance mortgages and RMBS are available to retail investors through fund structures. They come with many layers of protection beyond movements in house prices. 

Sponsors

Alliances

© 2022 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.