Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 341

Welcome to Firstlinks Edition 341

  •   22 January 2020
  • 1
  •      
  •   

The majority of investors hold a diversified portfolio no more than half invested in equities. The share exposure often declines with age as retirees seek capital preservation, and even young people place their super in balanced funds. Delight in the noisy 'all-time highs' is far from universal, with millions of Australians missing the big gains. Stockmarket analysts live in a blinkered world of screens focussed on share investments, as one told AAP this week:

"The local bourse is on fire and then some! It's a thing of beauty and local investors are pleased as punch. Australia is historically a bit of a laggard compared to our US counterparts but we're mixing it up with the big boys at the moment."

Better to ignore the bluster and consider the words of Howard Marks in 2013:

"Another mistake that people often make is that they compare themselves with others who are making more money than they are and conclude that they should emulate the others’ actions ... after they’ve worked. This is the source of the herd behaviour that so often gets them into trouble. We're all human and so we’re subject to these influences, but we mustn’t succumb. This is why the best investors are quite cold-blooded in their professional activities ...

Too little scepticism and too much eagerness in an up-market – just like too much resistance and pessimism in a down-market – can be very bad for investment results."

The biggest investment news last week was the world's largest investor, BlackRock, moving away from thermal coal and making sustainable investing a new priority. As a major index provider under the iShares banner, it's a massive issue because the Big 3 index providers (BlackRock, Vanguard and State Street) now own on average 22% of a typical S&P500 company. The table below shows they own 18% of Apple, around 20% of US banks and up to 35% of some companies. Their actions will influence hundreds of companies, often behind closed doors.


Data compiled by Bloomberg.

Social trends guide investment results, and David James provides a detailed review of Australian demographics. The ageing and composition of our population point to both opportunities and traps. He explores our role in Asia, and on the same tack, Glenn Freeman reports on three large Australian companies whose fortunes depend on China.

Ashley Owen's amazing database demonstrates how much Australian shares have delivered in a diversified portfolio, and he reveals the four components that make up sharemarket returns. What drives your portfolio's performance? Then Richard Dinham shows why investing during retirement differs from saving in the earlier accumulation phase.

The selling fee debate on LICs and LITs shows no signs of abating, with Christopher Joye writing in The Australian Financial Review, " ...conflicted selling fees could determine the fate of the advice industry and the Treasurer's political future." Wow, there are 25,000 financial advisers out there that millions of Australians rely on. In a more sober assessment, Jonathan Rochford identifies three vital points everyone is missing, and I agree with him.

Olivia Long then provides guidance on early access to super for victims of the bushfires and other emergencies, and Dubravka Cecez-Kecmanovic explains that despite enthusiasm for the use of algorithms and AI, they will not lead to the impartial and efficient outcomes most are expecting.

And while the popular press frothed that Labor leader Anthony Albanese has dropped the previous franking credit proposal, all he actually said was: “We won’t be taking the same policy to the next election.” Which means that like the euthanasia laws, it could come back from the dead. 

Graham Hand, Managing Editor

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

 

banner

Most viewed in recent weeks

Maybe it’s time to consider taxing the family home

Australia could unlock smarter investment and greater equity by reforming housing tax concessions. Rethinking exemptions on the family home could benefit most Australians, especially renters and owners of modest homes.

Supercharging the ‘4% rule’ to ensure a richer retirement

The creator of the 4% rule for retirement withdrawals, Bill Bengen, has written a new book outlining fresh strategies to outlive your money, including holding fewer stocks in early retirement before increasing allocations.

Simple maths says the AI investment boom ends badly

This AI cycle feels less like a revolution and more like a rerun. Just like fibre in 2000, shale in 2014, and cannabis in 2019, the technology or product is real but the capital cycle will be brutal. Investors beware.

Why we should follow Canada and cut migration

An explosion in low-skilled migration to Australia has depressed wages, killed productivity, and cut rental vacancy rates to near decades-lows. It’s time both sides of politics addressed the issue.

Are franking credits worth pursuing?

Are franking credits factored into share prices? The data suggests they're probably not, and there are certain types of stocks that offer higher franking credits as well as the prospect for higher returns.

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Latest Updates

A nation of landlords and fund managers

Super and housing dwarf every other asset class in Australia, and they’ve both become too big to fail. Can they continue to grow at current rates, and if so, what are the implications for the economy, work and markets?

Economy

The hidden property empire of Australia’s politicians

With rising home prices and falling affordability, political leaders preach reform. But asset disclosures show many are heavily invested in property - raising doubts about whose interests housing policy really protects.

Retirement

Retiring debt-free may not be the best strategy

Retiring with debt may have advantages. Maintaining a mortgage on the family home can provide a line of credit in retirement for flexibility, extra income, and a DIY reverse mortgage strategy.

Shares

Why the ASX is losing Its best companies

The ASX is shrinking not by accident, but by design. A governance model that rewards detachment over ownership is driving capital into private hands and weakening public markets.

Investment strategies

3 reasons the party in big tech stocks may be over

The AI boom has sparked investor euphoria, but under the surface, US big tech is showing cracks - slowing growth, surging capex, and fading dominance signal it's time to question conventional tech optimism.

Investment strategies

Resilience is the new alpha

Trade is now a strategic weapon, reshaping the investment landscape. In this environment, resilient companies - those capable of absorbing shocks and defending margins - are best positioned to outperform.

Shares

The DNA of long-term compounding machines

The next generation of wealth creation is likely to emerge from founder influenced firms that combine scalable models with long-term alignment. Four signs can alert investors to these companies before the crowds.

Sponsors

Alliances

© 2025 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. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. 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.