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Monday, 20 September 2021
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Wealth accumulation has four main drivers. Evaluating long-term investment risk requires shifting the focus on shorter-term losses and volatility towards failure to achieve long-term objectives.
Savers are making small decision after small decision that leads them away from investing and closer to outright speculating. Time will tell if this ends in a bloody climax or we all live happily ever after.
Risk isn’t something to be avoided altogether. To achieve returns beyond the government bond rate, some level of risk must be accepted. Assessing which risks to take and calibrating them is the investor's challenge.
Investors often overlook the capital risk in high-yielding stocks. It's better to ensure capital grows and investors can sell a portion each year to make up for the shortfall in income from dividends.
Investing in a traditional index can be compared with taking the main road to a destination, but if you know the backroads and traffic conditions, you coud reach your goal quicker.
While franking credits attached to Australian equity dividends can be a meaningful source of extra returns, a deliberate tilt towards franking can also introduce significant unwanted risks into the portfolio.
To avoid retreating from making investment decisions during uncertainty, investors are compelled to rely on 'rules of thumb' to guide them in decision-making. Here are many of the more popular commonly-used rules.
The worldwide trend to populism loosens fiscal restraint, leading to asset price inflation and forcing investors to focus on a range of low probability but potentially material risks.
Many active managers are closet indexers. The real cost of forcing a skilled manager into a low tracking error is the limit to the upside.
It’s much easier to measure returns than the risk involved in generating those returns. Yet, it’s crucial to understand risk because in certain markets, higher returns may simply be coming from taking more risk.
ETFs have grown rapidly in popularity and diversity, but like managed funds, not all products will survive for the long term and there are consequences if a small-scale ETF is closed by its issuer.
What to do when you think a market correction is overdue? Instead of selling off everything, a viable option is to position yourself for an easier exit, although it's tougher to implement in equities than fixed interest.
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.
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.
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.