Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 262

Cuffelinks Newsletter Edition 262

  •   13 July 2018
  •      
  •   

There are many theories about why most active fund managers fail to consistently outperform their benchmarks. It takes many years of study and market experience to become a portfolio manager, but good results are often elusive. One theory is that there are so many skillful managers pricing shares that the market is relatively efficient and tough to beat.

Research by Hendrik Bessembinder of Arizona State University shows active management and stock selection is really difficult. He found that most stocks listed in the US since 1926 delivered lifetime negative returns relative to one-month US Treasury bills. Only 4% of companies (represented by the blue box below), or about 1,000 out of a total data base of over 25,000, produced half the returns of the entire market.




The grey space of the outer box represents the vast majority of companies that generated no returns, with 12% delisting at an average of 2.5% of their listing price. It's more common to invest in losers than winners, especially when competing against other talented analysts.

It's even more difficult to value a loss-making startup that has a good idea gaining traction. We take a close look at Raiz Invest, the former Acorns Australia, both as a micro investing platform and a company recently listed on the ASX. What's it worth? Take a guess.

Banks compete aggressively in many products, such as housing loans, but bank retail FX rates have always been pathetic. As I write this, the wholesale AUD/USD is 0.7419 and the retail rate from a major bank is 0.71. So A$100 buys US$71 at a branch instead of US$74, a difference of over 4% and a costly start to a holiday. Matthew Hayja uncovers the choices for a better deal.

The $1.6 million pension cap opens a number of financial planning choices, and Graeme Colleyand Emma Partenza explain how to contribute for a spouse with lower balances. Julie Steedalso shows how disability insurance works, something we all hope we don't need but might.

Longevity? 120 years is just the start

Few retirees know how long their money needs to last, and the doubt causes many to live frugally. Adam Curtis examines the dilemma that sequencing and longevity risks create. 
   
In the King James Bible, 2 Kings 25:27, the King of Babylon releases the King of Judah ...

"And set his throne above the throne of the kings that were with him in Babylon;
And changed his prison garments:
And he did eat bread continually before him all the days of his life.
And his allowance was a continual allowance given him of the king, a daily rate for every day, all the days of his life."


Average life expectancy in biblical times was less than 40 years, so the cost of this promise was probably not great. But in a presentation last year, Hamish Douglass of Magellan said that medical advances would allow people to live to 500. What about 1,000 years? While scientists do not unanimously support the claims of Ori Eyal, it's thought-provoking for how long retirement may last some time in the future.

Also looking into the future, the White Paper from MFS Investment Management is 'Dawn of the Urban Epoch', with the consequences for investing in an increasingly urbanised world.

ASIC on property spruikers for SMSFs

ASIC is watching SMSF service providers closely. The regulator recently found 90% of advice given to SMSFs was non-compliant and 30% risked disadvantaging the client. There was also a focus on 'one-stop shops' for the purchase of geared property through SMSFs, with groups of agents, lenders, brokers, developers and financial advisers all working together, even when a property was not suitable. So we reprise my article published in 2013 where I attended one of these spruiking seminars, when I was shocked by what happened. It's taken five years to 'crack down'.

A reminder that some new super regulations came in last week, including topping up unused $25,000 concessional limits over the following five years for super balances less than $500,000, and the new downsizing rules for people over 65 to make a non-concessional contribution.

Mark your diaries for 6 August 2018. The Financial Services Royal Commission has asked 30 superannuation funds to make a director available to give evidence. More sweaty palms.

Graham Hand, Managing Editor

 

Edition 262 | 13 Jul 2018 | Editorial | Newsletter

 

  •   13 July 2018
  •      
  •   

 

Leave a Comment:

banner

Most viewed in recent weeks

Want your loved ones to inherit your super? You can’t afford to skip this one step

One in five Australians die before retirement and most have not set up their super properly so their loved ones can benefit from all their hard work and savings. 

Indexation implications – key changes to 2026/27 super thresholds

Stay on top of the latest changes to superannuation rates and thresholds for 2026, including increases to transfer balance cap, concessional contributions cap, and non-concessional contributions cap.

Super is catching up, but ageing is a triple-threat

An ageing Australia is shifting the superannuation system’s focus from accumulation to the lifecycle of retirement. While these pressures have been anticipated for decades, they are now converging at scale and driving widespread industry change.

Has Australia wasted the last 30 years?

The 20 years after Peter Costello left Treasury have been deemed wasted...by Peter Costello. The missed opportunities for Australia began long before.  

The refinery problem: A different kind of energy crisis in 2026

The Strait of Hormuz closure due to US-Iran conflict severely disrupted global energy supply chains. While various emergency measures mitigated the crude impact, the refined product market faces unprecedented stress.

3 ways to defuse intergenerational anger

With the upcoming budget increasingly likely to include bold proposals to alter the tax code I’ve outlined three incremental steps with fewer unintended consequences.

Latest Updates

Investment strategies

War can’t be good, can it?

War brings immense human suffering and geopolitical chaos, but historically, equity markets have shown a certain detachment and resilience amid conflict, leading to increased profitability despite initial panic.

Property

Origins of the mislabeled capital gains tax ‘discount’

Debate over the CGT discount is intensifying amid concerns about intergenerational equity and housing affordability. This analysis shows that the 'discount' does not necessarily favor property investors.

Superannuation

Div 296 may mean your estate pays tax on assets your beneficiaries never receive

The new super tax, applying from 1 July, introduces more than just a higher rate on large balances. It brings into focus a misalignment between where wealth sits and where the tax on that wealth ultimately falls.

Investment strategies

There’s more to software than just code

AI-driven fears of collapsing software moats has triggered indiscriminate sell-offs. This has created mispricing opportunities as markets overreact to uncertainty and rising discount rates.

Economics

Europe: A new growth trajectory powered by reform and investment

Europe is undergoing a major transformation driven by security threats, US pressure, and a shift from austerity to growth. EU member states are taking proactive measures to enhance competitiveness and resilience.

Investment strategies

Orbital AI data centers prepare for launch

The new space race is driven by AI as data centers in space offer continuous solar power and reduced environmental impact. Orbital AI aims to speed data processing and ease Earth's resource strains.

Retirement

Little‑known government scheme can help retirees tap into $3 trillion of housing wealth

The Home Equity Access Scheme in Australia allows older homeowners to tap into their home equity for retirement income, yet remains underused due to lack of awareness and its perceived complexity.

Sponsors

Alliances

© 2026 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.