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Friday, 17 September 2021
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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.
There are many reasons why the market places too much emphasis on the short term, but taking a long view on growth, inflation, markets and sectors will lead to better policies and investments.
The shift in dynamics from growth to value can be seen in the rotation of tech and communications names out of the top 20 performers to be replaced by value-style industrials, energy and financials. Will it continue?
The Australian stock market is skewed towards mining and financial services which account for a whopping 55% of market capitalisation. In the US, these two account for only 17%. But there's more to our underperformance.
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.
A review of the Listed Investment Company landscape, including where value lies in LICs trading at a discount, but also the healthy premiums where caution is needed in case the popularity of the manager wanes.
Investors in share markets should benefit from letting patience and time do the work for their overall returns. The longer the time periods for rolling returns, the less volatile the market appears.
Contrary to popular belief, there are significant variations in equity returns over long periods such as 20 years. Whether you will earn the 'equity risk premium' is far from certain.
The beginning of 2016 has not been kind to investors holding Australian shares in their portfolios, but that's not necessarily a bad thing. If you take the recommended long-term view, the poor start is history.
Choosing a fund manager who outperforms the market on a pre-tax basis is good, but if you also consider the tax effect on that performance, you really start to identify who the best managers are.
Many people have been quoting the Australian shares return for FY2015 as 2.4%, but that is only the price index. The accumulation index is up a healthy 7.1%. All asset classes generated returns well above inflation and cash rates.
A study recently published by Towers Watson claims that many in the investment industry focus on looking after intermediaries at the expense of clients. And we're obsessed by short-termism and chasing alpha.
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.
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.
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.