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Saturday, 22 January 2022
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There have been few times in the past 140 years when investors were willing to pay for more than 30 years’ worth of earnings, yet here we are around 40. This starting point does not augur well for future returns.
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.
Most people entering retirement do not see a financial adviser, mainly due to cost. It's a major problem because there are small mistakes a retiree can make which are expensive and avoidable if a few tips were known.
Eligibility for the Commonwealth Seniors Health Card has no asset test and a relatively high income test. It's worth checking eligibility and the benefits of qualifying to save on the cost of medications.
The focus is on Magellan for its investment performance and departure of the CEO, but Douglass says the pandemic, inflation, rising rates and Middle East tensions have not played out. Vindication is always long term.
This is our annual checklist of what retirees need to be aware of in 2022. It is a long list of 25 items and not everything will apply to your situation. Run your eye over the benefits and entitlements.
The Warren Buffett/Charlie Munger partnership is the stuff of legends, but even Charlie admits it is coming to an end ("I'm nearly dead"). He is one of the few people in investing prepared to say what he thinks.
Depending on personal circumstances, it may be time to rethink the bias to paying down housing debt over wealth accumulation in super. Do the sums and ask these four questions to plan for your future.