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Thursday, 23 September 2021
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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.
The role of a portfolio manager changes when normal opportunities become constrained. Flexibility and diversification in seeking alternatives in new markets is vital to adapting.
The wholesale market, accessible for retail investors via managed funds (including ETFs and LICs) offers better cash yields than bank term deposits but at a higher risk. This risk can be managed via a diversified portfolio .
Hybrids are complex instruments but they can be viewed as a bond with an embedded option, and they convert to equity in certain circumstances. Investors should consider the risk of this happening.
The yield quoted for a bond can be calculated in many different ways, depending on its characteristics or the investment horizon of the bond holder. Which yield are you buying?
With the cash rate now at 1.5%, the margin between dividend yields and interest rates is at historical highs. However, payout ratios are high and forward earnings growth is subdued.
It has always been an anomaly of the Australian financial system that retail investors have not had ready access to high quality corporate bonds. Listed XTBs address this, with floating rate notes also coming soon.
Diversifying your portfolio into global equities can have its advantages, but how do you choose? Dividend growth can be an indication of a company's ability to generate long-term value.
Investment conditions across all asset classes are especially challenging at the moment, with investors struggling to find attractive yields or capital appreciation while managing risk.
Many people would place ‘capturing the illiquidity premium’ on a list of benefits from long-term investing, but achieving additional returns is not as simple as just buying and holding an illiquid asset.
With cash investments providing such poor returns, the search for yield has driven up share and property prices, some to unrealistic levels. It has also corrupted our sense of risk which is a dangerous combination.
Whilst the latest cut in the target cash rate to 2.25% is a positive move for equity investors, it's a negative for savers, especially retirees living off the income generated by their term deposits.
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.
Wet streets cause rain. The Gell-Mann Amnesia Effect is a name created by writer Michael Crichton after he realised that everything he read or heard in the media was wrong when he had direct personal knowledge or expertise on the subject. He surmised that everything else is probably wrong as well, and financial markets are no exception.