Friday fundamentals webinar: Getting the most from investing in LICs

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<p><strong>Lex Hall:</strong> You probably remember that we spoke about exchange-traded funds or ETFs. There are some similarities that a lot of people will know about. There are also some differences and that's what we're going to go over today. We've had a lot of inquiries from you guys already. Please send us your questions, your comments, anything you want to know about LICs, exchange-traded funds. We'll answer them. And if we don't today, we'll get to your questions offline. So, we want to keep the conversation going.</p> <p>Tony, for example, has written in and he wants to know about the pros and cons of LICs. We'll talk about that. Barbara is interested in LICs and franking credits. Barb, you don't need to worry about franking credits anymore because the election has been run and won and I think franking credits will be on the backburner for probably about six years or so. And if Labor do get in, they are maybe hesitant about touching them again. So, don't worry about that. John wants to know if LICs have better place than banks to park your money. That's a good question. We've also got a question from Basil in WA, which is an interesting one. So, stay with us over the next 15 minutes. We'll try to answer all your questions. But send them through, as we said, and your comments and we will try and respond to them.</p> <p>We're going to discuss today LICs, what they are, what they invest in, how they work, more importantly, how you can buy them and of course, we're going to talk about the risk, because it is investing, so there's always risks involved. But I'd like to introduce you to Andrew Miles first of all.</p> <p>Andrew, good day.</p> <p><strong>Andrew Miles:</strong> Good day, Lex.</p> <p><strong>Hall:</strong> Now, LICs, what are they? My understanding is they are &ndash; a company is created, and they invest in another bunch of companies and you can buy into that company, if you like? Is that a fair summation?</p> <p><strong>Miles:</strong> Yeah, that's a pretty good summation. So, at its most basic level, a LIC or a Listed Investment Company is a collective investment. So, you take your $100 and you go and give it to a manager and then they are going to invest that $100 across a portfolio of assets on your behalf, and they have full discretion over what they invest in.</p> <p>The point you bring up about the IPO, that's originally how a LIC is going to raise its money.</p> <p><strong>Hall:</strong> Initial public offering?</p> <p>Miles: Initial public offering, exactly. So, the manager would go to the market and they would enlist the help of brokers and other market participants, very similar to an equity and all they would do is, they would offer investors the opportunity to invest at this IPO and raise capital that way. And then, after that point, investors can buy and sell units in the fund on the secondary market, so on the ASX.</p> <p><strong>Hall:</strong> Okay. So, there are some similarities, as I said, between ETFs which we'll get to. What the LICs invest in? What sort of things are people buying into?</p> <p><strong>Miles:</strong> It's a really good question. So, typically, in the Australian market, it's very biased towards equities and traditionally domestic equities. But we are seeing a bit of a renaissance in Listed Investment Companies and we are seeing global equity managers launch in some listed investment trusts and companies and there's a smattering of other asset classes, but also there's some fixed income, ones that have come to market and then some private debt. But I would say predominantly it's equities.</p> <p><strong>Hall:</strong> All right. So, again, similarity to ETFs and you get &ndash; people may use LICs for diversification purposes?</p> <p><strong>Miles:</strong> Yeah, absolutely. Yeah, there's some global equity listed investment companies that we think are a really good way to diversify from maybe away from for your core Aussie equity holdings, investing overseas.</p> <p><strong>Hall:</strong> We'll talk about some names a little later. Let's get into sort of the mechanics. How do LICs work, if I could put it so simply?</p> <p><strong>Miles:</strong> Yeah. So, after that sort of initial raising &ndash; so, you would invest &ndash; and maybe let's pick a number. They raise $100 million for example. After that point, those assets &ndash; the reason it's called a closed-end fund is because those assets are closed-in and for the manager, that's captive capital.</p> <p><strong>Hall:</strong> Yeah. I should have probably specified there and jumped in, because there's this term closed-end. An ETF is open, but a LIC is closed-end. That's probably what I should have said. What do we mean by closed-end exactly?</p> <p><strong>Miles:</strong> Yeah. So, this is really important distinction for you to understand. So, with that closed-end structure, you raise that money at the initial public offering. And say, you've got $100 million. And then if, you or I want to invest in that LIC after that initial public offering if we haven't participated, we're going to buy shares on the ASX of each other or of other market participants. Whereas with an ETF, again, it's still listed, it's still listed on the ASX. But what happens is, you would purchase, and they would create a unit for you. And so, the assets under management will grow in that circumstance.</p> <p><strong>Hall:</strong> And there's a bit of &ndash; you explained to me off camera &ndash; there's a bit more "volatility" in that there's a difference between how the assets in the listed company are performing in relation to the share price?</p> <p><strong>Miles:</strong> Yeah, absolutely. So, one of the really important things to consider if you are looking to invest in it, in a LIC, given its closed-end structure, is that the price that you're going to pay on the market, so if we call that the market price, can diverge and often quite meaningfully from what we call the net asset value and viewers may have heard it called NTA. And really, the best way to think about an asset value is just the value of those securities. So, if it's Aussie equities, what's the value of that basket of securities versus the price you are paying. And because market supply and demand dynamics, that can sometimes push that price to a premium if it's above NAV or at discount if it's below. And that's really important because you don't really want to be paying $1.20 for a dollar's worth of assets. So, that's something to really consider when you are investing in these things.</p> <p><strong>Hall:</strong> Okay. And in terms of how people can access them, is that similar to an ETF, how people just buy them as they would?</p> <p><strong>Miles:</strong> Yeah. So, they are trading on the ASX. So, if you have a brokerage account, you can do it that way and I think a lot of investors have found it quite convenient that they can &ndash; similar to their listed securities, their listed shares, they can transact in much the same way.</p> <p><strong>Hall:</strong> Okay. That's sort of all leading me to again repeat that they resemble exchange-traded funds in that way. What would you say to someone who said what's the key distinction between a LIC and an ETF, why should I bother looking at a LIC when I've got an ETF which seems to do the same thing?</p> <p><strong>Miles:</strong> Yeah. So, as we just talked about, the premium and discount is a big difference. So, when you buy into &ndash; or when you invest in an ETF, generally, they are issuing you that unit very close to the net asset value. So, typically, ETFs aren't going to be trading at these large premiums or discounts relative to the value of the assets whereas LICs are. So, for viewers, that's really important with the closed-end LICs. They need to consider that.</p> <p>Other thing is that there can be some advantages to listed investment companies. Because the assets are closed, the portfolio manager doesn't have to worry about outflows so much. So, in an open-end structure, you can redeem your money probably every day. Most of the strategies that we look at, you can take your money out every day. So, that can create difficulties for an investment manager. If they take a very long-term time horizon on their investments, actually being in a closed-end structure can be helpful because they've got &ndash; they've locked that captive capital in and they don't have to worry about exiting a position at an inopportune time because a bunch of investors are looking to redeem. So, there are some advantages there.</p> <p>Another one &ndash; and we won't get too deep into the tax side &ndash; but listed investment companies are incorporated as companies. So, they receive dividends and realized capital gains from the investments that they make, and they will be taxed at the company tax rate, which I think at the moment is 30% and then have a board similar to a company that can decide how much of those profits are distributed to shareholders. So, LICs can often &ndash; and some LICs have been very successful at delivering a really nice smooth income stream for investors which for some people at a particular point in their life is fantastic for them.</p> <p><strong>Hall:</strong> All right. Barbara touched on franking credits and dividends. Obviously, they are intertwined. We'll touch on that again. But I just want to pick you up &ndash; you mentioned managers. My understanding about an ETF is that &ndash; correct me if I'm wrong &ndash; there's less of an input from a manager. Is there someone pulling the levers every day on an ETF like a LIC or is that ETF more passive or how does that&hellip;?</p> <p><strong>Miles:</strong> It's kind of evolving actually. So, traditionally, lots of ETFs have been passively-managed.</p> <p><strong>Hall:</strong> By that you mean, you pick a bunch of stocks and then just leave them?</p> <p><strong>Miles:</strong> Yeah. Or you invest alongside an index. So, say, you take the ASX 200 and the ETF is going to do its best to replicate that as best as it can. But actually, there are some actively-managed ETFs coming to market as well. So, it's less of an active/passive debate anymore. And there's some LICs, some very old LICs that are quite inexpensive, and they take a very sort of long-term view and they don't trade that actively. But again, also there's some newer LICs that are far more active and are less cheap.</p> <p><strong>Hall:</strong> So, is it a generalization to say that LIC is being more actively-managed than an ETF?</p> <p><strong>Miles:</strong> Yeah, it's probably a little bit of a generalization. I think these structures are kind of evolving and the types of products coming to market are changing that.</p> <p><strong>Hall:</strong> All right. Let's talk about a little bit about risks. And I suppose a lot of people would be thinking, what about fees, how do they differ in terms of fees? Is more expensive than the other or&hellip;?</p> <p><strong>Miles:</strong> I mean, it really vary. So, there are some very, very inexpensive LICs. So, I think, AFIC, which is a very old LIC&hellip;</p> <p><strong>Hall:</strong> Yeah, Australian Foundation Investment Company.</p> <p><strong>Miles:</strong> That's it. So, I think, that was launched in 1930 &ndash; you're testing my memory &ndash; but 1936 and I think that charges in the region of 14 basis points, so 0.14%. So, that is quite comparable to passively-managed ETFs. On the other side of the coin, there are more expensive LICs that have what we'd described as more active fees, so fees close to 1% as opposed to 0.14%.</p> <p><strong>Hall:</strong> To pick you up on history there, you were saying that LICs have been around for a lot longer than ETFs, is that right?</p> <p><strong>Miles:</strong> Yeah, I think so.</p> <p><strong>Hall:</strong> Did ETFs evolved out of LICs or&hellip;?</p> <p><strong>Miles:</strong> I'm not entirely sure on that history. But LICs are an incredibly old structure. So, they are an old structure in Australia. Actually, if you go to the Northern Hemisphere in the U.K., there might be some that are maybe 200-years-old. They really are quite an old investment structure, whereas ETFs are probably in the last decades they've sort of come about.</p> <p><strong>Hall:</strong> Okay. Let's talk about some names. Who are the big players in the LIC sphere, who do you rate?</p> <p><strong>Miles:</strong> So, I'd say &ndash; so, AFIC is one that we rate. And really the things that we like about it is that sort of patient long-term low-cost approach. So, we think&hellip;</p> <p><strong>Hall:</strong> Yeah, I should have asked you first. What do you look for in a listed investment company?</p> <p><strong>Miles:</strong> So, how we assess these strategies is really the same across managed investments, exchange-traded funds, listed investment companies. We have a fundamental approach. So, we look at the people running the product. We look at the process, how they invest investors' money. We look at the parent, which is really important, the sort of the structure of the business. And that ties in with incentives and how are people incentivized. We look at the price as well. That's a very predictable thing to look. And we look at historic performance as well. But I would note that we put the lowest weight on that. So, that's the same regardless of the legal structure. But with LICs, there's a couple of other things that we do consider as well. So, corporate governance is one because there is that board and you want to make sure that that board has got the best interest of investors at heart.</p> <p><strong>Hall:</strong> Sure. I should have mentioned when I talked about risks. There's also &ndash; you were telling me there's systematic risks in that if something happens to the economy that affects what happens to your LIC, is that right?</p> <p><strong>Miles:</strong> It really depends on what you're invested in. But I think the big sort of buyer be aware for listed investment companies, it just is that premium and discount. And we take long-term views here and we don't want to try and market time, but investors should just be really aware that if it's trading at a premium or discount, that can really impact your performance. So, it could add performance if you buy something at a discount and that discount closes. But quite possibly, if you buy something at a premium and it turns into a discount, that can harm your returns as well. So, it's really difficult to say sort of what investors should do. But I would impress upon people just really think about that premium and discount and be prepared that these premiums and discounts can persist for longer than you might think, because there are inefficiencies in the market. So, yeah, I would really impress upon people just to really think about that when they are investing.</p> <p><strong>Hall:</strong> Let's get back to names. You mentioned AFIC. Who else do you like?</p> <p><strong>Miles:</strong> So, maybe shifting gears slightly to the global equity side, so we do like &ndash; Platinum have a LIC as well. So, it mirrors quite closely their unlisted product and we just think Platinum has been investing money internationally for a very, very long time ago, very experienced team and lots of good investors. And even with Kerr Neilson stepping back slightly, he's still involved. There's some great people at Platinum. And we just think the way they invest and the way that they find value &ndash; I suppose off the beaten track, they've had success in emerging markets. We just think that's an attractive investment there.</p> <p>Magellan as well. Magellan has launched a LIT.</p> <p><strong>Hall:</strong> Listed Investment Trust?</p> <p><strong>Miles:</strong> Listed Investment Trust. So, that's incorporated as a trust as opposed to a company. And Magellan launched that a couple of years ago. I think it might have been at the end of 2017 and that's another strategy that we're very familiar with. We've known Hamish Douglass and that team for a very long time. We really like the way they invest. They invest differently. It's more &ndash; it tends to be developed markets; it tends to be quite concentrated and there's a real sort of quality focus on the stocks that they invest in. But they are too that sort of catch our eye.</p> <p><strong>Hall:</strong> Hamish Douglass incidentally is going to be speaking at the Morningstar Investment Conference which is next Thursday in Sydney at the International Convention Center.</p> <p>I'm Lex Hall for Morningstar. If you're just joining us, I'm with Andrew Miles. He is an analyst with Morningstar. We're talking about Listed Investment Companies. How they differ to exchange-traded funds, how they work, how you can get into them. We've got a few questions, Andrew, and I'm afraid they are pretty prickly actually.</p> <p>We'll start with Tony. Tony asks can you please discuss the differences between LICs and ETFs? We've gone over the pros and cons between the two. Anything that I've missed out that we should add? I think you've talked&hellip;</p> <p><strong>Miles:</strong> I think it's just that difference between the closed-end and open-end structure. I would just reiterate that both can be &ndash; there's sort of active and less active versions of both. So, we can't quite make that distinction. But I think the biggest one is that premium and discount difference between the two. But they are both listed on an exchange, so you can transact that way.</p> <p><strong>Hall:</strong> I should also remind you. You can go back to Morningstar.com.au and see the webinar that we did earlier with Alex Prineas about exchange-traded funds with Emma Rapaport it's very insightful there and it will give you a good counterpoint to what we are talking about today.</p> <p>Barbara, who I touched on earlier, who was terrified about franking credits asks, "I'm very interested in listed investment trusts, which you just talked about, particularly because of Bill Shorten's promise now to cut franking credits, how do dividends operate in LICs?</p> <p><strong>Miles:</strong> So, that's a really good question and that is something that is quite notable about the LIC structure. So, as I said, it's incorporated as a company. So, when that LIC receives income from &ndash; let's keep it simple &ndash; income from the shares and realized capital gains, they don't have to pass all of those through. So, they would hold those, they will pay a company tax rate, so 30%, and they can keep some of those profits in reserve and then the Board can decide how much to pay out. Very similar to an equity, what an equity would do with its profits.</p> <p>So, for certain investors you're going to be taxed at &ndash; the company is going to be taxed at 30% and then it's going to be passed through and there may be some tax benefits there if you're, as I say, a 0% tax liability.</p> <p><strong>Hall:</strong> Do people look at LICs because of dividends, franking credits in particular, or&hellip;?</p> <p><strong>Miles:</strong> I think that has been one of the reasons that LICs have been quite popular. And I think it's because with interest rates where they are globally, bank deposits where they are, the need for yield and the need for sort of nice stable income is something, I think, investors have really been interested in and really need. And there's lots of LICs that have done a really good job of taking those profits, paying some out and just trying to ensure a nice, smooth income stream for investors. And so, if people are in retirement, that nice smooth income stream can help them budget and help them support their lifestyle.</p> <p><strong>Hall:</strong> Okay. John asks, "I have $500,000 to place to earn better interest than is available from the banks. I'm looking at the Australian Foundation Investment Company, AFIC and Argo, another name, to cover Australian shares, but also ETFs to broaden my risk spread by placing some funds in Australian-listed ETFs to get exposure to commercial property in Australia and overseas. And he asks "Is there an Australian-listed LIC that will cover the alternatives to Aussie shares that he mentions?</p> <p><strong>Miles:</strong> Yeah. So, I think, we don't cover the whole market. So, there's maybe a 100 roughly LICs on the market. We cover a fraction of that. I'm probably not in a best place to give personal advice, but I would say there's &ndash; as I mentioned those global equity LICs that potentially could be quite attractive. But a lot of our research is available&hellip;</p> <p><strong>Hall:</strong> Sure. Yeah. I was just going &ndash; we're happy to answer your questions offline, Morningstar.com.au, you can go there for all the research. We'll get back to that in a second.</p> <p>Basil Ladyman writes from WA. Good day, Basil. I have a couple of queries please. To allow us (SMSF investors) an opportunity to diversify our risk are there any LICs that invest in unlisted assets such as infrastructure and property?</p> <p><strong>Miles:</strong> So, there's nothing that we have formal coverage of. So, most of the LICs are invested in Australian shares, global shares. There's a few in the fixed income space as well, and I think there are more things coming to market. So, I think, off the top of my head &ndash; and I can double check this &ndash; I think there might be an alternatives product listed from a company called Blue Sky. But we've never covered it. We never really got comfortable with that organization and people have probably read in the press some of the issues that Blue Sky, the management company is experiencing. So, I would say that is listed, but certainly seek financial advice before you invest in that or look at that and it's probably not something that we would ever cover.</p> <p><strong>Hall:</strong> Okay. All right.</p> <p><strong>Miles:</strong> But I guess the point is that there's &ndash; choice is improving and there's these things coming to market. So, there's more asset classes becoming available.</p> <p><strong>Hall:</strong> Okay. Part two of Basil's question. He says in regard to capital reserves, the dividend is paid out topped up by profits. Is there a recognized ratio that is used to determine what a healthy reserve fund should look like? Does having a larger reserve fund meaning that a LIC is more conservative?</p> <p><strong>Miles:</strong> That's a good question. I mean, when we sort of assess these things, we don't have a hard and fast rule about what is a suitable reserve or make any predictions about what the reserve will look like. I think the thing just to remember is that if you're investing for income how that they sort of think about paying out that income is really important. But in times of real market stress, that reserve could be depleted really quickly. So, I think, yeah, it's a good point, but we don't make judgements on the attractiveness of a LIC based on the reserve that they have.</p> <p><strong>Hall:</strong> Okay. You're with me Lex Hall from Morningstar and Andrew Miles, analyst from Morningstar. We're talking about Listed Investment Companies. Because it's Facebook live, we are getting some live questions. We thank you for that. Please send in more. We'll answer them here and also offline as best we can. We got a question here. I'm not quite sure who it's from, but it says, what is &ndash; and we mentioned this &ndash; what is different about a Listed Investment Trust.</p> <p><strong>Miles:</strong> Yeah. There's just so many acronyms in this space. But Listed Investment Trust is again closed-end. So, you can &ndash; going back to what I was earlier talking about, you can get that premium discount, but the trust means that &ndash; compared to the company means the trust is going to pass through those distributions. The company is going to tax them at the company tax rate and have a bit more discretion. So, the Magellan vehicle that I mentioned earlier is a listed investment trust. And I wouldn't be surprised if there were more listed investment trusts coming to market. Magellan were incredibly successful with the product that they brought to market.</p> <p><strong>Hall:</strong> Okay. And another question has just come in. Please explain how some LICs can pass on capital gains as a dividend? We sort of touched on that. What is the benefit?</p> <p><strong>Miles:</strong> Yeah. So, again, I think it's the flexibility that they have. So, with that income and that realized capital gains that they get from their investments, often they will have a target for distributions, and it is just helpful that they have that flexibility. And similar to Basil's question, they've got that reserve. So, they have a particularly fantastic year investment-wise and they collect lots of income and they make successful decisions and they got lots of capital gains and they can hold them in reserve. They can hopefully smooth that out for investors. But I would &ndash; just as sort of a warning &ndash; I would say to people that on the tax side it's really important to seek tax advice and speak to your financial advisor, speak to an accountant just to understand your own situation.</p> <p><strong>Hall:</strong> Sure. That question was from (Venti Settembre). So, thank you (Venti) for question and all the questions today. Please send in more comments. We'll answer them offline. We've been going for quite a while now. I think that's probably it. I'm getting a word my producers here who are frantically waiving their hands. So, it's a lot to take in and a lot to take in anyway, isn't it?</p> <p><strong>Miles:</strong> Yeah, absolutely. And there's some research that maybe we can share with them, with some of the viewers today as well.</p> <p><strong>Hall:</strong> Yeah. Okay. Of course, thank you all for watching and for sending in the questions, they were really good. There's obviously a lot of people out there who are not only interested in LICs but know a lot about them. We'd like you to go and visit Morningstar.com.au where you'll find all the latest news and all the company research and investment ideas. You can also check out our portfolio creation tools which are very powerful in helping you to select stocks, funds, evaluate them, tap into some of Andrew's insights. If you like, sign up for a trial. It's free. You can also sign up for a premium subscription which is about $33 a month and premium subscribers can also visit our new website which is fantastic which Mark and Steph outlined a couple of weeks ago which is so much more powerful now because it allows you to look at not only Australian stocks and funds but also the investment world at large. So maybe you could tap in any stock you want really and see what people think it's worth and what the market is paying for it. So, it's quite fascinating. So, that's premium.morningstar.com.au and you can drop us a line on Facebook, obviously. And don't forget Twitter. Our handle is @MstarAus.</p> <p>Andrew, thanks very much for your insights.</p> <p><strong>Miles:</strong> Thanks, Lex.</p> <p><strong>Hall:</strong> I'm Lex Hall for Morningstar. Thanks for watching.</p>

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2 high-quality US mid-cap stocks to consider
09/04/2019  Ariel's John Rogers discusses why he likes Jones Lang LaSalle and Stericycle. 
Use caution when chasing the latest investing trend
08/04/2019  Marijuana-focused funds produced spectacular returns last year, but they come with significant risks. 
Ask the Expert: John Likos on global growth, franking and hybrids
05/04/2019  Morningstar's director of equity and credit research gives his take on slowing global growth, the impact of Labor's franking policy and whether hybrid securities suit your portfolio.
Behind Wesfarmers' surprise bid for Lynas
04/04/2019  Morningstar equity analyst Johannes Faul explains the motives behind Wesfarmers' $1.5bn surprise bid for rare earths miner Lynas Corporation. 
Ask the Expert: Woolies' $1.7bn share buyback
03/04/2019  Morningstar analyst Johannes Faul explains the motives behind Woolworths' sale of its petrol business and its $1.7bn share buyback.
Does the yield inversion really signal a recession?
02/04/2019  The rare inverted yield curve environment today does not determine the markets tomorrow explains Dan Kemp, chief investment officer, EMEA at Morningstar Investment Management.
How We Invest Your Money: '75pc of our stocks did well so the batting average is good
01/04/2019  Ned Bell explains how Bell Asset Management managed to outperform last year when the market at large was getting beaten up.
What is Lyft worth?
29/03/2019  Morningstar's Ali Mogharabi gives his take on the company's value, how it stacks up against Uber, and the threat that regulation poses.
3 top picks in global small- and mid-caps
28/03/2019  A Danish medical device company, an American computer networking firm, and a Swiss leader in alternative asset management are among the small- to mid-cap stocks on Ned Bell's stock radar.
3 approaches to sustainable investing
27/03/2019  The three main approaches that an ESG-conscious investor can follow often overlap, says Hortense Bioy, director of passive strategies and sustainability research at Morningstar.
Fox Corporation has well-placed bets on live sports, news
26/03/2019  Morningstar has initiated coverage of the Fox Corporation after the Disney merger.
WAAAX on: taking the pulse of small-cap players
25/03/2019  Tech darlings WiseTech and Xero may not yet be household names but they have made some stellar gains, says Ross Macmillan, senior analyst with Morningstar Manager Research.  
Friday fundamentals webinar: new site preview
22/03/2019  In this exclusive Friday Fundamentals Webinar, we preview the new Morningstar Premium website, showcasing the big improvements to how we present our research and data, which will help you make better decisions.
Strategic-Beta ETPs on the rise
21/03/2019  Strategic or smart beta exchange traded products continued to expand in 2018 and now make up 10.5 per cent of Australia's ETP market, says Morningstar associate director, manager research Alexander Prineas.
Why successful investors avoid knee-jerk reactions
19/03/2019  Tuning out from unhelpful market noise is often a far better investing strategy than responding to events that are outside your control, and Brexit is a prime example, says Morningstar's Dan Kemp.
Ask the expert: From Fairfax family to Morningstar members
14/03/2019  Previous roles managing the Fairfax family’s money and at Qantas Super provide several contrasts and comparisons to Matt Wacher’s new chief investment officer role at Morningstar Investment Management Australia.
Earnings season insights: Why record dividends unsustainable
12/03/2019  The record $85bn in shareholder returns for the first half of 2019 isn't likely to be replicated any time soon, says Morningstar’s Peter Warnes, who also singles out a few winners and losers.
More women on US boards, but gender imbalance remains
11/03/2019  Women hold 16 per cent of all company board positions, but there are several caveats including company size and a higher rate of double-up, according to a Morningstar US report.
Ask the expert: Strategic beta ETFs
07/03/2019  State Street’s Thomas Reif explains smart beta exchange-traded funds, how style tilts such as value, size and low volatility work, and how such ETFs respond to higher volatility.
Banks hold up better than expected
06/03/2019  Despite Hayne fallout and other short-term pressures, three of the big four remain undervalued and dividends are solid, says Morningstar’s David Ellis.
Microsoft holds strong upside for investors, says Morningstar
05/03/2019  Very few companies the size of Microsoft can offer 12 percent revenue growth and 15 per cent earnings growth in each of the next several years.
Coles, Woolies and shareholders facing tough facts
20/02/2019  As margin pressures keep profits flat for supermarket giants Woolworths and Coles, the market is gradually realising their share prices are too high, says Morningstar’s Johannes Faul.
The what, how and why of flexible bonds
19/02/2019  Unconstrained bond strategies can outperform traditional fixed income in rising rate environments but the full story is more nuanced, says Morningstar’s Tim Wong. 
'Cheap and hated' China market packed with opportunity
18/02/2019  Describing China's A share market as 'a stock pickers' paradise,' T Rowe Price's Eric Moffett is among a cohort of professional investors rushing to identify the best opportunities.
3 reasons for optimism on Telstra result
15/02/2019  Critics of Telstra's 1H19 earnings result ignore the positive signs on its crucial NBN-proofing and other measures to help secure long-term earnings, says Morningstar's Brian Han.
Don't get decimated in a downturn
13/02/2019  Diversification is your best bet to minimise losses during a downturn rather than expecting an active equity fund to turn defensive, says Morningstar's Russ Kinnel.
What Fed’s pause means for investors
12/02/2019  The US Federal Reserve’s pause on interest rate rises last week was a relief for equity markets and riskier types of credit, but investors should prepare for increases later in 2019, says Mellon’s head of multi-sector strategies.
CBA result highlights challenges facing Aussie banks
08/02/2019  Commonwealth Bank delivered a "messy" and slightly disappointing result for 1H18 amid slowing loan growth and weaker house prices, but the long-term earnings outlook remain positive, says Morningstar’s David Ellis.
3 key investor themes for 2019
05/02/2019  UK equities look undervalued in all but the most extreme Brexit scenarios, says Morningstar Investment Management's Mark Preskett.
Recap of key revelations from the Hayne inquiry
04/02/2019  We retrace some of the key milestones from Kenneth Hayne's banking royal commission, ahead of the final report's public release after 4pm today.
Index investors 'get what they don't pay for'
31/01/2019  The late Vanguard founder, Jack Bogle, was a committed believer in index investing and the Cost Matters Hypothesis, says Morningstar's Russ Kinnel.
TPG decision will shake-up Aussie telco sector
30/01/2019  TPG's abandoning of its mobile network plans holds two powerful implications for the company and its competitors, particularly Telstra, says Morningstar's Brian Han.
4 tech giants look cheap ahead of earnings
29/01/2019  It's a full week of earnings, with Apple, Amazon, Facebook, and Microsoft all trading in 4-star range ahead of their reports.
Spooked investors, market sell-off create opportunity
25/01/2019  US stocks are still considered broadly expensive, but consumer staples is one area where lower valuations are creating opportunity, says Morningstar Investment Management’s Bryce Anderson.
International exposure can bring big benefits, says Morningstar
23/01/2019  Minimising home bias within their portfolios should be a key focus for Australian investors in 2019, says Tim Murphy, director of manager research, Morningstar Australia.
Netflix appeal wanes amid cash burn, competition
22/01/2019  Netflix ended 2018 on a strong note, but its ongoing use of cash and increasing competition from the likes of NBC, Universal and Disney hurt its prospects for 2019.
5 US mega-stocks set to announce earnings
21/01/2019  Chipmaker Intel and household name tech firm IBM are due to announce quarterly earnings this week, alongside Procter & Gamble, Johnson & Johnson and Starbucks.
Finding good returns in alternatives
17/01/2019  When all else is falling, alternative asset classes such as hedge funds, soft commodities, emerging market debt and banks loans can offer decent returns, says Morningstar's Brad Bugg.
Changes ahead for ETF investors
15/01/2019  The inclusion of mainland China shares in more indexes including S&P Global, an expanding menu of active ETFs, and the potential for more ESG-focused funds are among trends investors can expect in 2019.
What to expect from bonds in 2019
14/01/2019  Fixed income assets will be even more important to investors’ capital preservation strategies this year than last, but some sectors are safer than others, says John Likos.
Risk, return and the share price triple threat
11/01/2019  The challenge of creating a quality-focused share portfolio using only Aussie stocks is one of several reasons why a broader focus is important, says Morningstar Investment Management’s Peter Bull.
The rational investor is dead
10/01/2019  The banking royal commission and other inquiries have shown product disclosure regulations alone are not enough to protect investors, especially from themselves, says The Chaser’s Julian Morrow.
Why a share price slump does not always mean buy
09/01/2019  Disciplined investors always urge others to buy on the dips - but not all stock market falls create buying opportunities.
US remains dominant macro theme in 2019
08/01/2019  The resumption of a US-China trade war and the Fed’s ability to stave off recession are the most important global themes for Australian investors this year, says Morningstar’s Peter Warnes.
3 ways to cope in tough investment markets
07/01/2019  Drowning out the noise and creating personal policy statements are among Christine Benz's top tips for sticking to your strategy as the market downturn bites.
Apple shares look attractive
04/01/2019  Our US$200 fair value estimate for the iPhone maker is unchanged as stronger services and wearables revenue should offset China weakness.
Banking inquiry, global market rout among key influences of 2018
24/12/2018  The banking royal commission, pronounced falls in global markets and continuing ETF tail-winds are among the stand-outs of 2018, say Morningstar experts.
Global debt, Aussie housing dominant themes for 2019
21/12/2018  Record global debt alongside mixed signals from the Fed, and the link between Aussie housing, consumption and GDP will be next year’s big macro themes, says Morningstar’s Peter Warnes.
Sydney casino a jewel for Crown
21/12/2018  Its new Sydney casino set for a 2021 open underpins Morningstar’s continued positivity on Crown, despite falling VIP gaming volumes and other challenges.
China could lead an EM rally in 2019
19/12/2018  Asian equities could lead an emerging market uptick in 2019, even after a tumultuous 2018 dominated by the US-China trade war and geo-politics.
State Street: be ready to invest in 2019
18/12/2018  State Street Global Advisors' Kevin Anderson says 2019 will be volatile - but there will also be opportunities for investors who are ready to pivot.
Spotting potential amid Brexit volatility
17/12/2018  Knowing which Brexit scenarios are priced into equity, fixed income and currency markets is key, says James Foot, who sees value in the pound, and potential in short-term volatility.
3 global stocks in power, EV and biotech
13/12/2018  A German utility, Japanese electric vehicle play and US biotech are singled out as three global stocks to watch by UK fund manager Killik & Co.
Beware the allure of geared funds
12/12/2018  Geared funds can offer spectacular returns compared to the sharemarket, but they can equally plunge when things sour, warns Morningstar's Alex Prineas.
Emerging Asia: Lower expectations, outsized opportunities
11/12/2018  Japanese financials and technology firms in Taiwan and Korea are among some of the most attractive opportunities on Morningstar Investment Management’s radar into 2019.
How to reduce risk in your portfolio
10/12/2018  Reducing risk in your investment portfolio doesn't have to mean de-railing your long-term plan, says Christine Benz.
Euro economies insulated from Italian drama
07/12/2018  Italy's government is shaking up local politics, but even their anti-EU policies aren't necessarily a harbinger of doom for investors.
Bank probe prompts board-exec relationship reset
06/12/2018  The banking royal commission has forced a shift in the way boards and company executives interact, which will affect the entire listed corporate sector, says Mornignstar's David Ellis.
3 top picks: Roads, power and education
05/12/2018  Large-cap companies Transurban, Navitas and Spark are highlighted by the head of Lazard’s defensive income strategy, Aaron Binsted.
Property crash, royal commission are key for income investors
04/12/2018  Australia’s residential property downturn and banking inquiry have influenced this income-focused strategy’s portfolio in 2018, as have commercial property valuations.
2019 will be a difficult year for the markets, says Psigma
03/12/2018  The upward rising markets of the past decade are over and investors should brace for a risky year ahead, says Psigma chief investment officer Tom Becket.
The elephant in the room of retirement planning
29/11/2018  Long-term care expenses in retirement are commonly overlooked, even among those who plan for the out-of-pocket ongoing costs, says Jean Young from Vanguard in the US. 
Where ETFs fit in 4 retirement stages
27/11/2018  Exchange-traded funds have pros and cons depending on your investment style and other variables as you approach retirement, along with applications in the accumulation and withdrawal phases, explains State Street's Jonathan Shead.
Some flawed thinking from emerging market investors
26/11/2018  The way many investors think about emerging markets is incorrect – they’re not uniformly volatile, and over-exposure to individual sectors and stocks can be problematic, says Morningstar Investment Management’s Nimalan Govender.
High risk, high return: scoping out small-caps
23/11/2018  More investors are looking to small caps for higher returns, in sectors such as healthcare, dairy and data storage, but there are risks, says Morningstar's Ross Macmillan. 
Coles priced to perfection following spin-off
22/11/2018  The IPO of Coles, as it split from Wesfarmers earlier this week, leaves the grocery giant close to its fair value and now directly comparable with competitor Woolworths, says Morningstar’s Johannes Faul.
Australian retirees lack confidence
21/11/2018  Superannuation complexities, investment risk and regulatory uncertainty mean a shortfall in confidence is understandable in our current environment, says State Street’s Jonathan Shead.
4 stocks Buffett bought
20/11/2018  Morningstar looks at which companies Berkshire Hathaway bought and sold during a surprising third-quarter 2018.
The art and science of valuing stocks
19/11/2018  Morningstar's Adam Fleck guides us through the process his team uses to build a forecast, discount future cash flows, and incorporate a company's moat into their analyses.
The double-edged sword of listed investments
16/11/2018  There are very good reasons for the popularity of listed investment vehicles, but some of these attributes also give rise to potential challenges, explains Morningstar’s Matthew Wilkinson.
Super policy shifts and the retirement roadmap
15/11/2018  Saving for retirement is well catered-for within existing superannuation provisions, but the transition to pension mode isn’t as developed, says Vanguard’s Robin Bowerman.
Where to now for big four banks?
14/11/2018  Morningstar's senior banks analyst David Ellis explains why he has cut his fair value estimates for the major Australian banks, even as they remain undervalued, and why Westpac navigated the royal commission “least-worst”.