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Sunday, 26 September 2021
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Harry Markowitz is the 1990 Nobel Laureate and Pensions & Investments Magazine's 'Man of the Century'. For his 94th birthday, he explains the magic moment of his Modern Portfolio Theory and Efficient Frontier work.
The traditional 60/40 portfolio might deliver only 1.5% above inflation in future without diversification benefits. Knowing an asset’s attributes rather than arbitrary definitions is better for investors.
Global equities offer higher return opportunities, portfolio diversification and exposure to specific themes. A broad index is the primary building block but there are many ways to enhance global returns.
Powerful structural themes such as technology disruption and demographic changes may disguise what is driving company success. Watch these broad categories as they may not apply in ways you expect.
Long duration assets such as government bonds and property have benefitted from falling interest rates, but a turn is coming. It's time to find assets that may benefit from rising rates, such as private debt.
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.
During COVID-19 and the economic recession, we are seeing a surprising new entrant to the defensive sector grouping. Technology shares have been behaving a lot like defensive shares such as food and utilities.
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 tax cost of a ‘portfolio makeover’ from moving equities to a more efficient structure may now be minor compared with the benefits. The market fall is not just an opportunity to find bargains.
The companies that earn a place in an investment portfolio are like the players in a sporting team. They must perform strongly and complement each other, and not keep someone out who is better.
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.
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.
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.
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?