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Saturday, 18 September 2021
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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.
Citi research delves into how high net worth investors are feeling in the current market, and how they are investing during the drama of the pandemic. There is plenty of optimism and a willingness to stay invested.
Bank hybrids produced excellent returns in the last year and the biggest lesson from March 2020 is that many investors don’t understand the structures, and in a crisis, they panic first and think later.
Rules of thumb often oversimplify things. While it looks like an index or passive portfolio spreads risks across the market, it is surprising how concentrated indexes have become, leaving investors with sector bets.
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.
In investing, income and capital gains are akin to scoring goals, but successful teams must also stop the other side from scoring. Most portfolios need a manager preserving capital and reducing drawdowns.
Emerging market equities performed strongly up to the GFC but have gone sideways since. In this cyclical sector, there's an opportunity to catch up boosted by strong inflows, a lower US dollar and tech adoption.
SMSF trustees often cite ‘control of my investments’ as the number one motivation for setting up their own fund. But it still makes sense to outsource some parts of a well-diversified portfolio.
On the surface, a diversified fund looks the same as an SMSF with the same asset allocations. But to fund retirement, a member must sell units in the fund, whereas the cash balance is used in an SMSF.
For all its widespread use in investing, growth/defensive remains undefined with a large degree of subjectivity. A Working Group is seeking an industry standard with measures for each asset class.
Based on a long investing career, the author sets out his beliefs without attempting to justify them here. Readers can agree or disagree. It's his guide for friends and family with an actionable variation for risk appetite.
Going back to June 2019, investors would have questioned the logic of diversifying away from outperforming growth assets. But when markets feel at their best, it is paramount to keep a perspective on long-term goals.
Who knew? With some surprise results, the Government is on unexpected firm ground in asking people to draw on all their assets in retirement, although the comments show what feisty and informed readers we have.
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 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?
Some high-quality companies have emerged even stronger since the onset of COVID and are well placed for outperformance. We call these the ‘COVID Opportunists’ as they are now dominating their specific sectors.