Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 345

Welcome to Firstlinks Edition 345

  •   20 February 2020
  • 1
  •      
  •   

Investment returns in major asset classes in 2019 were wonderful, except for cash and term deposits. With growth super funds delivering around 10% a year for a decade, it's tempting to expect similar good returns in future. The Morningstar Gameboard below shows only two negative results across all asset classes in any year over the last five years.

It's as good as it gets. RBA Governor Philip Lowe delivered a warning for those who hope their retirement savings will enjoy a similar tailwind in the next five years. As well as saying the economic effect of climate change would be 'profound', he said the coronavirus will have a major impact on education, tourism and business generally. But the statement that really stood out was this on low interest rates:

“We’re going to be in this world for a long period of time,” and low interest rates could be aroundfor years, possibly decades”.

The big question is, how much will investors fleeing these low rates continue to support the equity market, even as it looks expensive on historical earnings measures?

Which leads to another question. Do you want your equity manager allocating your money to cash? In my case, I want fund managers to invest in the asset class of the fund selected, not make allocation decisions to go into another asset class. Our one question survey checks your opinion.

It's also timely to deep dive into where the strong share returns of 2019 came from. Ashley Owen shows that price rises were not matched by profit growth. The market is simply far more willing to pay more for each $1 of profit.

Faced with these doubts about shares and interest rates, both retail and institutional investors are turning more to alternatives. Simon Scott surveys the landscape and shows which diversified funds are allocating to alternatives, and the significant difference in results.

There's no doubt the big US technology companies are fantastic businesses and deserve a place in most portfolios. The table below shows the weight of the Top 5 in the S&P500, now at a record 16.5% of the entire S&P500.

But as Charles Dalziell explains, most of what we call 'disruption' is simply a variation on a long-term development, and few of the so-called disruptive companies have a genuinely innovative technology that will create a great business. Of course, all companies must move with the times, and it's only 15 years ago when Holden was selling over 150,000 vehicles a year. In 2019, it was only 40,000, none assembled in Australia.

Rob Prugue has spent decades in senior positions around Australian wealth management, and he believes the push for a mega national super fund accepting default contributions will not end well if implemented.

The arguments between industry fund, retail fund and SMSF peak lobby groups sometimes undermines confidence in super, so it's good to hear John Maroney say SMSFs are not for everyone. And still on SMSFs, Graeme Colley shows new reporting requirements facing all SMSF trustees, and why they matter.

 

Graham Hand, Managing Editor

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

 

banner

Most viewed in recent weeks

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.

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

5 charts every retiree must see…

Retirement can be daunting for Australians facing financial uncertainty. Understand your goals, longevity challenges, inflation impacts, market risks, and components of retirement income with these crucial charts.

Why super returns may be heading lower

Five mega trends point to risks of a more inflation prone and lower growth environment. This, along with rich market valuations, should constrain medium term superannuation returns to around 5% per annum.

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.

Preparing for aged care

Whether for yourself or a family member, it’s never too early to start thinking about aged care. This looks at the best ways to plan ahead, as well as the changes coming to aged care from November 1 this year.

Latest Updates

Shares

Four best-ever charts for every adviser and investor

In any year since 1875, if you'd invested in the ASX, turned away and come back eight years later, your average return would be 120% with no negative periods. It's just one of the must-have stats that all investors should know.

Our experts on Jim Chalmers' super tax backdown

Labor has caved to pressure on key parts of the Division 296 tax, though also added some important nuances. Here are six experts’ views on the changes and what they mean for you.        

Superannuation

When you can withdraw your super

You can’t freely withdraw your super before 65. You need to meet certain legal conditions tied to your age, whether you’ve retired, or if you're using a transition to retirement option. 

Retirement

A national guide to concession entitlements

Navigating retirement concessions is unnecessarily complex. This outlines a new project to help older Australians find what they’re entitled to - quickly, clearly, and with less stress. 

Property

The psychology of REIT investing

Market shocks and rallies test every investor’s resolve. This explores practical strategies to stay grounded - resisting panic in downturns and FOMO in booms - while focusing on long-term returns. 

Fixed interest

Bonds are copping a bad rap

Bonds have had a tough few years and many investors are turning to other assets to diversify their portfolios. However, bonds can still play a valuable role as a source of income and risk mitigation.

Strategy

Is it time to fire the consultants?

The NSW government is cutting the use of consultants. Universities have also been criticized for relying on consultants as cover for restructuring plans. But are consultants really the problem they're made out to be?

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.