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Wednesday, 29 September 2021
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It used to be Down, Down for prices but the new status quo is Down Down for emissions. Until now, the realm of ESG has been mainly fund managers as 'responsible investors', but companies are now pushing credentials.
There are plenty of voices on both sides of the inflation argument, but the ultimate impact of COVID should be deflationary. Australia is one of the last places to expect worrying signs of inflation rising.
There's an assumption that bond yields and share prices have a predictable relationship. The positive correlation means that when yields rise due to a strong economy, so should stocks. That's not what happens.
The collapse of Virgin Australia not only hit shareholders, but their bond investors received between 9 and 13 cents in the $1. A widely-diversified portfolio can tolerate losses better than a concentrated one.
Most Australians place their superannuation into a balanced fund, making the relationship between bonds and equities a vital part of performance. Does the traditional correlation between shares and bonds still hold?
Warren Buffett's annual letter has a simple focus on long-term investing: "All that’s required is the passage of time, an inner calm, ample diversification and a minimisation of transactions and fees."
Equity valuations are lofty, but long bond rates have now returned to levels before the pandemic crisis. In a balanced portfolio, long bonds now provide more opportunity to cushion the volatility of equities.
Although Australian investors are among the most ESG-aware in the world, with the vast majority wanting responsible and ethical investments, there are still some misconceptions to dispel.
The 60/40 diversified portfolio has been the mainstay of the superannuation industry for decades. But it is built on a fundamental principle of defensive bond returns, and its time is nigh.
Fixed income opportunities beyond term deposits and hybrids remain scarce for retail investors, but active bond funds can access other securities where value is still available. Here are examples.
Government bond yields are so close to their lower bounds that they are unlikely to provide the returns of the past, nor act as a counter to falling equity markets. What are the investment choices?
The signs are that bond yields could stay low for a long time. This has important implications for future returns, but are we heading for the Big Bang, the Big Crunch or the Steady State?
The RBA Governor says rising house prices are due to "the design of our taxation and social security systems". The OECD says "the prolonged boom in house prices has inflated the wealth of many pensioners without impacting their pension eligibility." What's your view?
It's a remarkable statistic. In any year since 1875, if you had invested in the Australian stock index, turned away and come back eight years later, your average return would be 120% with no negative periods.
Never stand between Australian households and an uncapped government programme with $3 billion in ‘free money’ to build or renovate their homes. But excess supply is coming with an absence of net migration.
Picking macro trends is difficult. What may seem logical and compelling one minute may completely change a few months later. There are better rewards from focussing on identifying the best companies at good prices.
The survey drew a fantastic 2,000 responses with over 1,000 comments and polar opposite views on what is good policy. Do most people believe the home should be in the age pension asset test, and what do they say?
Critics of franking credits are missing the main point. The taxable income of shareholders/taxpayers must also include the company tax previously paid to the ATO before the dividend was distributed. It is fair.