Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 440

Five ideas for 2022

2021 has been another record year for ETFs in Australia. It has also been an unpredictable one. We expect ETFs to continue to grow in 2022. Here are our top five ideas as we enter the new year.

1 – Accessing the broad Australian economy in recovery - MVW

The Australian share market faces a tricky period in 2022 as the world continues to navigate the COVID pandemic. For Australian equity investors, a core strategy should provide exposure to all sectors of the economy to diversify risk, and get exposure to companies that can maintain and grow their earnings through uncertain times. This would include cyclicals such as energy and materials without an over exposure to the banks, which face headwinds as interest rates rise (property lending could be hit). Concentration, always a problem in the S&P/ASX 200 Index, is about to get worse with BHP consolidating its Australian and UK listing to become the biggest company on ASX. Investors buying an Australian equity strategy that contains 200 companies would think it is unlikely one stock would be 10% of the portfolio, nor would two sectors represent over 50% of the portfolio, but that is what you will be getting from a portfolio linked to Australia’s largest 200 companies. The VanEck Australian Equal Weight ETF (MVW) equally weights the largest and most liquid stocks on the ASX. It is underweight the mega-cap resources and big banks relative to the S&P/ASX 200 Index. As at 30 November 2021, MVW’s portfolio is underweight financials by 12.58%, mega-caps by 18.47% and overweight large-cap (+12.07) and mid-cap (+6.62%) stocks.

2 - Positioning for slowing growth in the wake of new COVID variants - QUAL

With COVID lockdowns ongoing and new disease variants travelling through the globe now and potentially in 2022, big questions hang over the global economic recovery. If the global economy does falter in 2022, stock markets too could stall. In this scenario, we believe quality companies could outperform as they tend to offer investors protection during weaker economic environments and heightened uncertainty and market volatility. VanEck MSCI International Quality ETF (QUAL) offers exposure to a diversified portfolio of quality international companies listed on exchanges in developed economies. Top holdings include Microsoft, Apple, Google owner Alphabet, Meta Platforms (formerly Facebook) and Nvidia, whose share price has shot up in 2021 given the shortage of computer chips which is expected to continue through 2022.

3 – Access a global megatrend - CLNE

The transition to clean energy and focus on climate change is one of the world’s most important global megatrends and presents a long-term growth opportunity. We expect this to accelerate into 2022. The Paris Agreement and recent Glasgow Climate Change Conference is driving demand for green, renewable energy across the globe away from fossil fuels. This is a significant long-term trend offering huge investment potential and clean energy companies could rally in 2022 as demand for renewable energy rises. The VanEck Clean Energy ETF (CLNE) currently provides exposure to 30 of the largest, most liquid global companies involved in clean-energy production and related technologies and equipment.

4 – Access a technology megatrend - ESPO

The explosion of video gaming before and during the COVID-19 pandemic has created significant investment opportunities in global gaming companies. Research house Newzoo forecasts the global game market will reach US$218.7 billion in 2024, up from US$175.8 billion in 2021. Positive secular trends are driving the long-term growth of gaming and esports, including an increasing number of gamers who also are spending more time gaming, not surprising given continuing lockdowns. Video gaming related stocks that have benefited from metaverse include Nvidia, now one of the largest companies in the US, Advanced Micro Devices and Roblox, all held by VanEck’s Video Gaming and esports ETF (ESPO).

5 – Follow the smart money - GPEQ

Private equity is important for investors’ portfolios. As an alternative investment, it displays a low correlation with other asset classes and it offers attractive risk and return characteristics, which will be important in 2022 given stock markets are expected to remain volatile. In addition, we believe the opportunities are huge. The private equity asset class is significantly bigger than the publicly listed market; an estimated 98% of companies are private while a mere 2% of companies are listed. The VanEck Listed Private Equity ETF (GPEQ) is an Australian first and it will open up a huge market and enable retail investors to participate in private equity, which has added appeal in the current low interest-rate environment.

 

Russel Chesler is Director, Investments & Portfolio Strategy at VanEck, a sponsor of Firstlinks. This is general information only and does not take into account any person’s financial objectives, situation or needs. Any views expressed are opinions of the author at the time of writing and is not a recommendation to act.

 


 

Leave a Comment:

     
banner

Most viewed in recent weeks

Lessons when a fund manager of the year is down 25%

Every successful fund manager suffers periods of underperformance, and investors who jump from fund to fund chasing results are likely to do badly. Selecting a manager is a long-term decision but what else?

2022 election survey results: disillusion and disappointment

In almost 1,000 responses, our readers differ in voting intentions versus polling of the general population, but they have little doubt who will win and there is widespread disappointment with our politics.

Now you can earn 5% on bonds but stay with quality

Conservative investors who want the greater capital security of bonds can now lock in 5% but they should stay at the higher end of credit quality. Rises in rates and defaults mean it's not as easy as it looks.

30 ETFs in one ecosystem but is there a favourite?

In the last decade, ETFs have become a mainstay of many portfolios, with broad market access to most asset types, as well as a wide array of sectors and themes. Is there a favourite of a CEO who oversees 30 funds?

Betting markets as election predictors

Believe it or not, betting agencies are in the business of making money, not predicting outcomes. Is there anything we can learn from the current odds on the election results?

Welcome to Firstlinks Election Edition 458

At around 10.30pm on Saturday night, Scott Morrison called Anthony Albanese to concede defeat in the 2022 election. As voting continued the next day, it became likely that Labor would reach the magic number of 76 seats to form a majority government.   

  • 19 May 2022

Latest Updates

Superannuation

'It’s your money' schemes transfer super from young to old

With the Coalition losing the 2022 election, its policy to allow young people to access super goes back on the shelf. But lowering the downsizer age to 55 was supported by Labor. Check the merits of both policies.

Investment strategies

Rising recession risk and what it means for your portfolio

In this environment, safe-haven assets like Government bonds act as a diversifier given the uncorrelated nature to equities during periods of risk-off, while offering a yield above term deposit rates.

Investment strategies

‘Multidiscipline’: the secret of Bezos' and Buffett’s wild success

A key attribute of great investors is the ability to abstract away the specifics of a particular domain, leaving only the important underlying principles upon which great investments can be made.

Superannuation

Keep mandatory super pension drawdowns halved

The Transfer Balance Cap limits the tax concessions available in super pension funds, removing the need for large, compulsory drawdowns. Plus there are no requirements to draw money out of an accumulation fund.

Shares

Confession season is upon us: What’s next for equity markets

Companies tend to pre-position weak results ahead of 30 June, leading to earnings downgrades. The next two months will be critical for investors as a shift from ‘great expectations’ to ‘clear explanations’ gets underway.

Economy

Australia, the Lucky Country again?

We may have been extremely unlucky with the unforgiving weather plaguing the East Coast of Australia this year. However, on the economic front we are by many measures in a strong position relative to the rest of the world.

Exchange traded products

LIC discounts widening with the market sell-off

Discounts on LICs and LITs vary with market conditions, and many prominent managers have seen the value of their assets fall as well as discount widen. There may be opportunities for gains if discounts narrow.

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.

Website Development by Master Publisher.