Global Equities Spotlight - Scouring The World For Opportunities In An Aging Bull MarketJody Jonsson, portfolio manager at Capital Group and Jacob Mitchell, Chief Investment Officer and portfolio manager at Antipodes Partners shared their thoughts on global opportunities in the “Scouring the World for Opportunities in an Aging Bull Market” session at the recent 2018 Morningstar Investment Conference.
Fixed Interest Spotlight - Seeking Value Without Jeopardising Its Role In PortfoliosHear from Brad Boyd, Senior Vice President at Payden & Rygel and Brett Lewthwaite, Co-Head of Fixed Income at Macquarie Investment Management, who shared their thoughts at our recent Morningstar Investment Conference on the impending economic and financial risks impacting the global fixed income market.
Australian Equities Spotlight - The Case For Active ManagementKate Howitt, portfolio manager at Fidelity International, and Vince Pezzullo, Perpetual’s deputy head of equities, discuss the expensiveness of the Australian market, potential value traps, and the difficulty in defensively positioning portfolios - outlining the case for active management in the current market environment.
How long will my retirement savings last?The Retirement Income Review (RIR) noted that many retirees leave large bequests and they would have enjoyed a higher standard of living in retirement if only they had spent some of their capital, not just the income from their investments. Planning cash flow in retirement is extremely difficult because of the uncertainties about expenditure, doubts about investment returns and unpredictability about how long we are going to live.
Balancing the Performance Test Guidelines With Best Interest DutyYour Future, Your Super and its performance test is set to be applied from July 2022 to some multisector choice products. Some of these choice products are available on retail super platforms, and there will almost certainly be a barrage of questions when the next round of “underperforming” letters reaches members. There will also be implications for the advice sector. Advisors need to prepare themselves and work out how to balance best interest duty with the guidance from the regulator.
Picking Fund Managers: Focus on the Data, Ignore the NoiseThe recent stock market sell-off sees the shares of all of the listed ANZ asset managers we cover trading at substantial discounts. With such fertile hunting ground, we think the market is underestimating the key investment strategies of these asset managers, and their ability to deliver positive alpha and attract money. We think the outlook for asset managers is better than what's currently being priced in. Recent market declines suggest future investment returns will likely improve. Their strong fundamentals, such as having solid operating cash flows and relatively low capital intensity support our conviction.
The risks lurking in your 60/40 portfolioMost Australians hold their superannuation in a balanced fund, often 60 per cent growth/40 per cent defensive or 70 per cent/30 per cent. Lifecycle funds are also popular, where the amount in defensive assets increases with age. Employees who are not engaged with their super (and that’s most people when they start full-time work) simply tick a box for the default fund selected on their behalf by the employer.
What's Really Behind the Growth of Exchange-Traded Funds?ETFs are undoubtedly one of the fastest-growing sectors in financial markets today. To learn what's really behind this trend, Morningstar's Alex Prineas chaired a riveting Investment Conference panel with Jonathan Howie, head of ETF product and strategy for iShares, and Alex Vynokur, CEO of BetaShares, one of Australia’s fastest-growing ETF managers.
How IFAs Can Appeal to MillennialsFinancial advisers must adapt their business if they want to appeal to the younger generations, says Kind Wealth's David O'Leary. In this interview, O'Leary touches on his experience with dealing with the younger generation, 30 to 50-year-olds; in his financial planning business. We discuss the challenges in serving the young clientele as well as some interesting findings.
Can you still bank on the banks?Last week the future for banks looked bright. Rising interest rates would nourish emaciated margins. A red-hot economy would keep new borrowers coming through the door and credit growth strong. The $200 billion Australians had squirreled away in savings and offset accounts would ward off defaults or an economic slowdown.
User Guide: Model Portfolio downloads from Morningstar Direct into Morningstar Portfolio X-ray tool.The following user guide is for Morningstar Direct users to be able to download their model portfolios that can be easily imported into Morningstar’s Portfolio X-ray tool on Adviser Research Centre and AdviserLogic.
How to Understand What Investors Value in a Financial Adviser
Since meeting investors’ needs is essential to attracting and retaining clients, this level of discordance between the expectations of advisors and their clients can drastically impact the success of an advisor’s practice.
Here, we discuss what advisors can do to help bridge the gap.
This is your brain on uncertaintyIt’s been a long slog to get this far in 2020 and unncertainty is stressful. In fact, humans have been shown to prefer even physical pain to the stress of uncertainty, but we have to be careful right now to avoid making rash investment decisions that we might soon regret. In this article, Sarah Newcomb provides some healthy food for thought to help you keep your head while others are losing theirs.
10 franked income-stock ideas for Australian investorsWe've identified 10 franked income stock ideas from our Australian and New Zealand coverage list of 189 stocks. The additional income from franking credits highlights several companies with 3-star ratings which appear more valuable when the value of franking credits is incorporated into our analysis.
Retirement income promise relies on spending capitalEveryone needs to rethink what income means in retirement. That's the message from the Government, and it will soon impose obligations on all super funds, including SMSFs, to provide a plan to maximise this form of income.
No moat, no bargain: nine overvalued stocksNetwealth, Afterpay and Fortescue Metals Group are among the most overvalued no-moat names under Morningstar coverage. A Morningstar stock screener that filtered for no-moat stocks that are significantly overvalued according to their price/fair value ratios revealed nine names. More than half the list comprises names from the Consumer Cyclical sector.
ETFs are the Marvel of listed galaxies, even with star WARETFs had a slow start, making little progress by the time the GFC came in 2008. LICs flourished while they had the support of financial advisers and handsome stamping fees paid by issuers. It was not until the end of 2018 that ETFs finally took over LICs. ETFs have since become the avengers, sweeping LICs aside with the inclusion of a wide range of indexes, sectors and niche products, and a big boost from the Magellan active funds.
What if you missed the dip? Chart of the weekThe mantra “buy the dip” started as a chorus to the gyrations of Bitcoin’s price. Since then, it has cemented a place in the investor’s glossary thanks to an age-old fear: trying to time the market. Investors can be especially prone to this kind of fear and regret. Whether buying Bitcoin in 2015 or mortgaging the house to buy stocks in late March 2020, it’s easy to lose sleep over market timing.
Stock market selloffs present opportunities to buyThe selloff in Facebook stock and other big technology companies earlier this month highlights an important lesson for investors – prices are volatile, and the ups and downs are all part of the investment journey. Selloffs represent an opportunity to buy shares at lower prices, but caution is warranted.
100 Aussies: five charts on who earns, pays and ownsEach year, the Australian Taxation Office (ATO) publishes a snapshot of the 14.7 million individuals who lodge tax returns. Many returns are not lodged on time, so the latest data is for FY2019, but it reveals some surprises. The ATO also summarises some of the demographics of taxpayers (and non-taxpayers).
The power of compound interestAlbert Einstein is reputed to have said: “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” As an investor, making your money work for you is the best way to increase your wealth. And the wealth you will accumulate is the result of 2 things: how long you invest and the rate of return on your investment.
Five stock recoveries not hanging on COVID predictionsWith or without COVID, investors want businesses with predictable earnings and recurring revenues, especially disruptive businesses benefitting from change in the global economy, with a large addressable market. Here are some examples of what happened during COVID.
The creator of the 4% rule and his own retirementThis is an interview with Bill Bengen, who is widely known as the father of the 4% 'safe withdrawal rate' that he put into practice. Bill discusses how he first developed the safe withdrawal rate research, the retirement problem in the early 1990s that he was trying to solve, how Bill integrated his 4% rule into his financial planning business, and why he didn’t actually use the 4% safe withdrawal rate with his clients.
Australian Energy Stocks Are CheapThe COVID-19 outbreak has created a large dent in near-term oil demand and triggered spiralling energy prices. However, local oil & gas producers are some of the best placed to weather the COVID-19 meltdown and emerge comparatively stronger. In this article, we dive deeply and explore the four major Australian E&P companies which have 5-star recommendations.
Investing basics: raising a portfolio you don’t have to babysitAccording to Morningstar research, portfolios that assumed no further adjustments tended to beat the returns of the actual portfolios, which reflected the fund managers’ trading activity. Read as Tim Murphy explores the many reasons to take a 'hands-off' approach.
Rising Volatility: How Concerned Should Investors Be?
Volatility returned in October, sending the equity market spiralling downward for a second time in 2018. When this happens, investors naturally look for explanations for the downturn and wonder whether they’re in the right investments. So how can you respond?
Principles of InvestingInvestors in shares must expect market shocks as part of the long-term benefits of owning part of a company, and on average over time, stock markets fall one year in every five. We have put together some graphs which show some fundamental principles of investing, and how markets have recovered from previous shocks, with supporting commentary.
What Is Financial Health?Financial advisers often find themselves playing the role of counselor, and they are confronted with clients whose emotional health is wreaking havoc on their finances. It’s time to redefine the term “financial health” so it includes both a person’s economic stability and emotional wellbeing around his finances.
How the Reserve Bank scuppers retail depositorsThe Reserve Bank of Australia (RBA) and Amazon have a lot in common in 2021. They have both positioned themselves as the premier high volume, low price, low margin product provider. They are redefining logistics in their distribution channels. Their current market position on price competition and sheer scale of influence unleashes factors of productivity improvement and makes it difficult for others to compete on traditional business models.
Will this be the year active ETFs succeed?A perfect storm is brewing for active managers. Magellan's transformation of its three global equity funds into a single unit structure, accessible on and off the ASX, simplified the process of bringing an unlisted fund to the exchange.
Does your portfolio need bitcoin?The cryptocurrency has soared, so it’s no wonder investors want a piece of the action. Should you invest? Maybe—but keep it to a minimum. Bitcoin investors have been on a wild ride lately. After dropping about 74 per cent in 2018, the digital currency nearly doubled in price in 2019, and then nearly quadrupled during 2020. Trading volumes have also skyrocketed as individual investors have embraced cryptocurrencies through commission-free trading platforms such as Robinhood.
Australia and New Zealand Best Stock Ideas for August 2020Morningstar's monthly Best Stock Ideas highlights high-quality Australian and New Zealand companies, which are currently trading at discounts to our assessed fair values. The ideas, chosen from our coverage of nearly 200 companies, are intended to have broad application in a variety of equity strategies.
Top 10 most popular Investments in 2020We’re looking at the most frequently viewed securities – equities, funds, and ETFs – on Adviser Research Centre over 2020. Based on previous years there were no real surprises, the pandemic didn’t alter the way Advisers thought about Investments, continually looking at quality and value for their clients.
Keating versus Hume: where willy-nilly meets obsceneJane Hume and Paul Keating are kicking around a favourite political football, superannuation, but what's the score at half time? Treasury initially estimated that $29 billion would be withdrawn from super when the early release was announced in response to COVID-19. With the scheme now extended until the end of 2020, the estimate has been revised to $42 billion.
Why rebalancing (almost always) pays offThis year’s turbulent market was yet another reminder of the power of portfolio rebalancing for risk reduction. In this article, I’ll look at how different rebalancing frequencies have paid off in 2020’s turbulent market, as well as during other market drawdowns. In a nutshell, any rebalancing strategy works far better than none at all, especially when it comes to risk control.
Markets Rebound, but May Not Be Sustainable: A Quarterly Market Update in 6 ChartsEvery quarter, Morningstar’s quantitative research team reviews the most recent global market trends in finance and evaluates the performance of individual asset classes. The findings are then shared in the Morningstar Markets Observer, a publication that draws on quantitative analysts’ careful research and market insights.
A Fireside Chat with Magellan's Hamish DouglassHamish Douglass looks back on the rocky route to Magellan, his exasperation at trying to predict the Fed’s rate moves, and the regulatory risks assailing the US tech stocks that form a pillar of Magellan’s global equity strategy.
Portfolio Concentration Doesn't Necessarily Lead to a Significant Difference in ReturnsInvesting with a high-conviction manager may sound prudent, as it can help increase investors’ exposure to managers’ strong ideas, which could potentially lead to better performance. But higher portfolio concentration may also increase the risk of missing out on some of the market’s other big winners.
How to Help Clients Choose Between Funding Retirement and a Child’s College EducationWhen it comes to tuition costs, many advisers see their clients face a common problem. They want to pay for their children's tuition even if it means putting their own future financial security in jeopardy. Doing otherwise may make clients feel like a bad parent or provider.
Ten Tips for More Effective ETF InvestingInvestors want more information and further education to help them effectively use ETFs. It’s worthwhile revisiting the 10 rules of thumb for ETF transactions that we published in 2015. Every rule remains just as relevant in 2019, and we wouldn’t be surprised if these rules remain relevant for years to come.
Retirees: Are you Spending Too Much?At a bare minimum, anyone embarking on retirement should understand the basics of spending rates: how to calculate them, how to make sure their spending passes the sniff test of sustainability given their time horizon and asset allocation, and why it can be valuable to adjust spending rates over time. Here are the key steps to take.
Our Plans to Acquire AdviserLogic, a Leading Australian Financial Planning SoftwareOn 3 November, we announced our plans to acquire AdviserLogic, an Australian financial planning software platform that will broaden our product suite and expand our set of capabilities for independent financial advisers.
Sorry, there’s no real place to hideInvesting was once relatively straightforward for highly-conservative investors. Fast forward to 2020, there is nowhere to hide that gives capital security, a return greater than inflation and avoids a continual drawdown on a pension.
The Big Five and Behavioral FinanceContributor Michael Pompian introduces a new series that examines the relationship between the "Big Five" personality traits and the behavioral biases of investors. The "Big Five" model is a classification scheme that attempts to cover the major aspects of one's personality.
Why Financial Advisers Should Operate as Financial Coaches — And How to Do ItBetween social media, financial news outlets, stock apps, and word of mouth, today’s investors have no lack of information. In this environment, financial advisers can no longer view access to data or investment options as the biggest service they provide, as investors are now craving holistic advice that will effectively help them achieve their personal goals. To meet this demand, financial advisers need to increasingly think of themselves not only as investment advisers, but also as financial coaches.
The Fruits of ESG - Advisers find that sustainable investing is good for businessJust a few years ago, advisers would only discuss ESG investing with clients and prospects after they were asked about it. Today, these advisers incorporate ESG strategies into their practice just as they would any other kind of investment strategy, and they’re asking most, or even all, clients about their interest in ESG investing. This shift, which advisers say has built momentum over the past three years, has coincided with a change in the ESG investment landscape.
How Does the Timing of Fund Selection and Sale Impact Investor Returns?
Bad timing can undermine good fund selection and substantially impact investor returns. To understand how much of a difference timing can make, and the factors that contribute to this discrepancy, we took a closer look at our investor-return data.
7 Elements of Great Investing AdviceThere’s a huge need for great investing advice, and great advice begins with us. Not just with Morningstar, but with the institutions building investment products; with the plan sponsors trying to help a workforce unlock the power of their retirement plans; and with the advisers who face the push and pull between serving clients and building successful practices.
The World in Transition
The world is changing, the levers of central banks no longer have the same power to contain the global economy, and China’s growing presence on the world stage is reshaping geopolitics and markets. These are just some of the observations of Capital Group, Michael Thawley.
Labor’s election loss a welcome reprieve for health insurersThe shock defeat of the Bill Shorten-led Labor Party has reversed negative sentiment and boosted the share prices at private health insurers NIB Holdings (ASX:NHF) and Medibank Private (ASX:MPL). The Coalition's upset win scuttled several policies that would have likely increased member outflows and slashed margins.
5 Reasons to Use a Holdings-Based Style Analysis for Risk AssessmentIt’s important to understand that risk-factor models are at their most powerful when you use them to look into the future, rather than seek to explain the past. The past track record of returns for a fund or manager will not help you identify the current exposure of a fund’s holdings.
Small-Cap Investing: Volatility Shouldn't Be a SurpriseWhile the return of volatility in 2018 might provide some short-term discomfort, history has shown it is a fundamental feature of small-cap investing that investors should be prepared for. Indeed, it is within a more volatile environment that good active managers are given the opportunities to add significant value over the long term.
Is it time to recession-proof your portfolio?Hi, I'm Susan Dziubinski for Morningstar. Inflation and rising interest rates have rocked the stock and bond markets this year, and lately, another risk factor has emerged, recession. Joining me to discuss why the R word is coming up and how to protect your portfolio against it is Christine Benz. She is director of personal finance and retirement planning for Morningstar.
Slowing growth in China and a brewing supply chain crisis in Eastern Europe will give inflation-rattled markets more to worry aboutOil and gas, and to a lesser extent wheat, have dominated the headlines and financial markets since the invasion in February.
Fixed Income Advisory and Research | Monthly Review: March 2022The first quarter of calendar year 2022 represented the worst quarter on record for the AusBond Composite Index, returning -5.88%. It was also the worst month on record, returning -3.75%. Commodities continued to benefit from de-globalisation, while interest rate expectations hammered fixed-rate investors.
Scenario Analysis Examples: 3 Ways to Skin a ScenarioScenario analysis and stress testing are essential tools for managing long-term expectations and exploring shorter-term volatility. They can help tackle ‘what if’ scenarios that could derail a client’s plans. But what is the best approach to modelling future returns of your portfolios?
Using Flexible Funds in Your PortfoliosOpportunities often appear in markets. With sufficient scale and research resources, flexible mutli-asset funds should in theory be able to make the most of these opportunities by tactically tilting their portfolios at opportune moments.
Fossil fuels, ESG and investing opportunities post COP26In the wake of the United Nations-sponsored Conference of the Parties (COP26)—now you know what it stands for—in Glasgow it is time to air some thoughtful disagreement again. Today the discussion revolves around environmental, social, and governance (ESG), green energy, decarbonisation and fossil fuels. You may ask, why go there? Because I sniff an opportunity.
Your year-end portfolio review - In six easy stepsAs 2021 winds down, investors can look back on yet another excellent year. While investors have had plenty to worry about - especially inflation and the delta and omicron variants of the coronavirus - that hasn't stopped US stocks from posting a tremendous rally. Australian stocks are poised to end the year with respectable gains.
Bracing for Labor's Franking Credit OverhaulThe federal leadership spill in August has shortened the odds of Labor gaining office next year. And that prospect has sparked concern with Labor's vow to axe cash refunds for excess franking credits. But what action, if any, should you take to prepare for the possible impact to your clients' portfolios?
How Should Investors Prepare for Rising Rates?We believe bond yields will eventually trend higher and revert to our estimate of fair value, but no one can predict the path or timing. The danger here is trying to time the market by exiting bonds in an attempt to re-enter when interest rates normalise. Find out how we’re currently thinking about bonds and positioning our portfolios accordingly.
A tale of two marketsWell, that was quick. Despite bleak global economic outlook and the continued uncertainty brought on by the coronavirus pandemic, as of August 6, 2020, the US market recovered to its pre-pandemic high. The covid-19 bear market goes down in history as one of the least painful on record, lasting a total of about 120 trading days with a maximum drawdown of about 34 per cent.
A Framework for Evaluating Strategic-Beta Bond FundsStrategic-beta fixed-income funds attempt to deliver better performance than traditional market-capitalisation-weighted index funds, or a specific outcome like a constant duration. These strategies often seem more intuitively appealing than the alternative of owning a broad market-cap weighted portfolio but there are 6 key factors that advisers need to consider before deciding whether to include these strategies into a client's portfolio.
Who's next? Discounts on LICs force managers to pivotHistory will record that the few years until 2019 were halcyon days for Listed Investment Companies (LICs) and Listed Investment Trusts (LITs). The main listed competitor for the LIC/LIT structure is Exchange Traded Funds (ETFs). While LICs/LITs have failed to launch any primary transactions in 2020, ETFs have gone from strength to strength, reaching a record $70 billion in August, a lead of $25 billion over their rivals.
The lingering fear of a post-pandemic worldCOVID-19 has turned many lives upside down. For some, avoiding the daily commute is a joy, while for others, isolation is a struggle. Are the impacts permanent or will we move on? We ranked a few behavioural changes induced by covid-19 containment measures, finding that working from home, online shopping and exercising from home may be best positioned to persist after the crisis in the form of habits.
Investing basics: reasons NOT to invest in goldGold has hit a record high and investors have poured billions into gold tracker funds. But should you invest? Despite its allure and popularity, some experts say that holding gold is not a sensible investment move - particularly after its recent climb. Here are just some of the reasons not to invest in gold.
How Social Comparisons Affect Our Financial Well-BeingMany of your clients may be financially stable or very well-off but are still tormented by their finances. As advisers, how can you help these clients reduce their financial anxiety and even improve their financial well-being? To answer this question, we explored the power of social comparisons and identified a few ways that you can use this natural tendency to help clients.
Are Active ETFs the Future of Investing?Active ETFs are the latest phase of a passive revolution in the Australian investment market. Last year assets under management in Aussie-listed ETFs grew by more than 30 per cent; proving low cost options are gaining popularity fast. Australia's ETF sector broke through the $40 billion barrier in August to reach another new record of $41.5 billion.
Magellan Leads Managed Funds in Feeling the Meta Stock PainWe looked at the funds that had significant exposure to Meta within their portfolios, and those whose positions held the highest market value. Below is a list of actively managed funds where managers have opted to hold a hefty stake in the social-media company.
“Dose of reality”: Interest rates tipped to rise as inflation picks upAustralian investors need to brace for higher rates after consumer prices soared past market forecasts to hit their highest level in eight years, ratcheting up pressure on the Reserve Bank to begin winding back its pandemic-era easy-money policies.
What I learned from my faux-retirementI'm not ready to retire any time soon, but my recent sabbatical from Morningstar--a six-week break totally free from work obligations, available to Morningstar's US employees every four years--gave me a chance to noodle on what retirement would feel like for me.
Seeking a vaccine for that other virus going around: investor complacencyFinancially, more serious than the outbreak of coronavirus would be an outbreak of investor complacency. Unknowns like the coronavirus are a compelling reason for investors to always be prepared and vigilant, even more so with markets near record levels.
Three steps to planning your spending in retirementHow to make your retirement savings last is an age-old conundrum. Bill Sharpe, the US economist and Nobel Prize winner, called it “the hardest, nastiest problem in finance”. How much can you sustainably withdraw from your pension pot? And what’s a sensible way to allocate assets in it?
Grantham interview on the coming day of reckoningJeremy Grantham co-founded GMO in 1997 and is a member of its Asset Allocation team, serving as the long-term investment strategist. He was interviewed by Kunal Kapoor, CEO of Morningstar, at the Morningstar Investor Conference Australia on 2 June 2021.
Why We Need to Embrace Full TransparencyAt the heart of the challenge facing the industry today is rebuilding trust. Trust is the foundation of every relationship. None more so than between financial adviser and client. And in the wake of the Royal Commission's Interim Report, Morningstar is playing a key role in helping the industry and advisers regain trust through full transparency.
Forecast 2021: Vaccines, Vaccinations, Volatility and V-shaped recoveries?It was a year of trials and tribulations, where patience was tested but those in for the long haul were ultimately relieved and rewarded. Late March provided some rare opportunities for those with cash. 2021 is unlikely to be a repeat. Markets could begin the year with an extension of the current upswing, but as it unfolds several questions will undoubtedly be asked about the progress of the economic recovery and the relationship to risk asset valuations.
Can Warren Buffett forecast the stock market?To answer the headline’s rhetorical question, Mr. Buffett can indeed predict the future of the stock market, just as Glendower can call spirits from the vasty deep. However, Hotspur’s response to Glendower remains salient: “Why, so can I, or so can any man. But will they come when you do call for them?”
Worksheet: 3 Steps to Helping Your Clients Set Financial GoalsWhen was the last time you checked in on your clients' top financial goals? This steps on this worksheet can set advisers on the right path for showing investors how to avoid behavioral biases, establish strong financial goals, and implement behaviors to help meet these goals.
Have Flexible-Bond Strategies Hit Their Mark?Relatively flexible, or unconstrained, fixed-interest strategies have touted their capacity to handle higher-bond yields better than more-traditional options. Our prior research has found some validity to these claims, albeit in a limited sample size. There were more opportunities to test this in 2018. We consequently investigate whether this has remained true and discuss the implications for using these vehicles in portfolios.
Vanguard Investments Australia Wins Morningstar Australian Fund Manager of the Year AwardThe 2019 Australian Morningstar Awards took place last Friday evening at the Establishment in Sydney. Congratulations to Vanguard for taking out the overall Fund Manager of the Year, and all our category winners. All winners in the Morningstar Awards have demonstrated themselves to be good stewards of investors’ capital.
How to Avoid ‘Terminator’ Exchange Traded FundsDid you know 25 Australian ETFs have been terminated since 2013? That’s a big number and it means about 12% of Australia's ETFs have shuttered in that time. In this article, we examine what a termination really means for investors and how to avoid getting caught by ‘Terminator' ETFs.
Three all-time best tables for every adviser and investorI have read countless books on investing, met an enormous number of financial experts and fund managers, and made pretty much every investing mistake possible! If I could distil my learnings into one statement, it would be this: the short term is unknowable, but the long term is inevitable. Let me share my three all-time favourite tables from 30 years of investing.
Evaluating Carbon Risk in Managed FundsThe impacts of the coronavirus pandemic have reverberated aggressively across the globe. Immediate term societal priorities are on protecting public health and stabilising financial and employment markets. This period also serves as a reminder of global interconnectedness, systemic risk, and the vulnerabilities and tensions between economic, social, environmental, and governance considerations.
Best global equity ETFs for Australian investorsInternational equity is one of the most popular categories for ETF investors as they seek global opportunities and diversification. As of 31 July 2021, almost $60 billion is invested in ETFs tracking global shares, up from $28 billion a year before.
6 charts on rising US tech stocksMarkets have been hitting record highs. But over the past few months, the value stocks that led the US equity market since late 2020 have been losing steam. Here’s a look at the monthly returns of the Morningstar US Growth and Value indexes, which helps to visualize the trend.
The vibe of future returns: tell ‘em they’re dreamin’Retirement planning should start decades before the end of full-time work. In a wonderful world of returns well in excess of inflation rates, driven by compounding over long periods, bond and equity markets will provide the financial resources for a comfortable retirement far quicker than if returns struggle to beat inflation. But is all that in the past? Super balance calculations default to earnings rates of 7.5%, but that's in the past. Planning needs a more realistic view.
Six simple charts on what to expect from sharesIn our recent Reader Survey, about 40% of respondents reported portfolio losses of over 20% between January and March 2020, although the market rise since the lows has pared back some of the pain. We opened the Morningstar Direct data base for the Australian All Ordinaries Accumulation Index to measure the total returns (including dividends) over one year, three years and five years since 1983. There are good reasons to take comfort from the charts, and the pictures 'tell a thousand words'. Of course, Covid-19 is a unique threat, and only time will tell whether 'this time is different'.
Coronavirus: Market Temperature CheckIt has been difficult to keep on top of the rapidly shifting environment, but collectively we find more opportunities to buy than sell shares at the current level. There are a number of moaty names that investors should consider adding to their portfolios as well as heavily sold-down stocks that could see a good post-virus bounce.
3 Key Conversations to Have With Clients to Prove Your Financial Adviser ValueAdvisers face many obstacles, but when we asked them what their biggest challenge was, we quickly found that many related to one overarching theme: financial adviser value. In this article, we discuss these challenges and how advisers can overcome them.
Aged Care to Survive, Ryman to ThriveShares in Ryman Healthcare are 40% below our NZD 15.20 fair value estimate, with shareholders penalised for transient issues, or industry problems not shared by Ryman. Rivals struggle with old facilities and declining occupancy, and one third of Australia's care homes lose money. The industry is consolidating and Australian providers exiting, despite demographic tailwinds. Meanwhile, Ryman's demand is underpinned by the ageing population, its brand, and track record of care.
Easy money: download Robinhood, buy stonks, bro downCall it Robinhood traders, the corona generation, YOLO (You Only Live Once), TINA (There is No Alternative) or simply retail investors, but trading by individuals has hit global equity markets in massive numbers. Some daily moves are called a battle between the smart professional sellers and the dumb retail buyers, but since the 23 March bottom, the dumb money has been right. So far.
Is the stock market rebound overdone?We’ve heard questions from many clients about why the market is doing so well right now given how bad the economy is, and whether we will see the lows of March 2020 retested. They’re good questions, but there might not be clear-cut answers for those who want certainty. We’ll discuss three points embedded in investors’ questions.
5 charts on crypto’s past and futureOver the past seven years, cryptocurrencies have rocketed from about $5.2 billion in market capitalization for the top 100 coins to nearly $1.7 trillion as of January 2022. Cryptocurrencies now represent the fourth-most popular type of investment among investors, behind only stocks, mutual funds, and bonds. Bitcoin alone has a market cap that would rank in the top 10 largest companies in the S&P 500.
How to Think About Managing Style Within a PortfolioIn our recent article, "Australian Equity Performance: What’s Driving Markets," we looked at return drivers in the domestic market that had begun to soften following a strong pandemic-rebound period. We decided to see how variability in return profiles between styles and sectors can be managed within a portfolio’s Australian equity allocation. One key observation lately has been the variance in fortunes between value and growth investment styles driven by divergent sector performance.
Cost-of-living payments could come back to bite if they add to inflationThe 2022/23 federal budget has delivered the third round of significant fiscal stimulus in as many years. While most of the stimulus was necessary, at some point the piper must be paid. Would the budget have been any different if it wasn’t an election year?
Post-covid economy calls for humility, patience and preservation of capitalOne should never say never, but I have never nor will I probably ever again experience the level of uncertainty that currently exists. Everywhere one looks, uncertainty abounds. How can anyone predict the outcome of something that has never been experienced? Risk escalates. No one knows what the future holds and personal biases only muddy the waters. Objectivity should be key, intellectual humility its companion.
Why it’s time to update your SMSF investment strategyHaving a future-proof investment strategy is not only legally compulsory, but also one of the best ways to enhance retirement savings. Amid volatile markets, how can self-managed super funds get the right settings in place? Recent market volatility suggests a review of investment strategy is advisable, particularly ahead of the approaching new financial year. The Australian Taxation Office says the strategy must be reviewed at least annually, and when “significant events” occur including a market correction.
Australian Listed Managed Investment Landscape. Exploring an evolving market.Of the roughly 100 LICs currently listed on the Australian Security Exchange, a small handful have seen a half century or more of market activity, with the five oldest companies boasting an inception date prior to 1972.
Australia Blows Opportunity to Improve Portfolio Holdings Disclosures to Retail Fund InvestorsAs an otherwise sophisticated market, it is remarkable that Australia has consistently ranked bottom of all major global markets for managed funds disclosures. This has been a consistent finding from Morningstar’s Global Investor Experience studies, which assess the retail investor experience across 26 markets.
3 investment mistakes to avoidThis is not the first time that I have written about these three investment blunders. Fortunately, they are becoming less common. But, until they disappear altogether, admonitions are still warranted.
Hume and Frydenberg reset super with two buzz wordsAdding to the jargon that fills the superannuation industry and confuses most people, two common words have taken on new meanings. They sound innocent, but when a Morrison Government minister uses the words ‘efficiency’ and ‘flexibility’ in the super debate, they now have particular definitions. And in neither case is it the way we previously understood superannuation.
The Bond Market Rout Exposes an Assortment of RiskThe actions of central banks around the world are well known—they are undertaking substantial quantitative-easing programs to support their economies. While they have control of cash rates and their bond purchases at the shorter end have been more effective at keeping rates low, further out the curve, they have not. And even in the face of central bank purchases, investors have sold longer-dated bonds and quickly driven up rates in early 2021. Unsurprisingly, this has had flow-on effects in other markets, too, particularly equities. This article explores what is going on in the bond markets now, how our fixed-interest managers have fared, and what it means for equity markets.
What Prior Market Crashes Can Teach Us About Navigating the Current OneThe circumstances of the current market crash might be unique to the coronavirus pandemic, but they lead investors to wonder: Are such drops normal for equity markets, or is this different? The regularity of market crashes is a reminder that patience is key to investing in equity markets.
Coronavirus: An Investment PerspectivePublic health outbreaks can quickly scare investors and, eventually, affect economies and businesses. The recent coronavirus outbreak has shut down airports, halted trade, and led to the rapid construction of new hospitals in China. The effects of the outbreak may push China's economy into a period of slower growth, with stocks trading lower as investors seek protection.
Debt-ridden companies face contamination as virus saps supply chains, cash flows
From an economic viewpoint, the coronavirus is and will have far reaching global implications. The market should be focused on the extent of the disruption to the global supply chain and the impact on cash flows of companies, rather than deaths or making comparisons with earlier viral outbreaks.