Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn
About

News

Firstlinks newsletter - 23 January

Graham Hand  |  23 Jan 2020Text size  Decrease  Increase  |  
Email to Friend

Morningstar acquired Cuffelinks (Firstlinks) in October 2019. Join 60,000 unique users and receive the Firstlinks weekly editorials and free investment ebooks.

The majority of investors hold a diversified portfolio no more than half invested in equities. The share exposure often declines with age as retirees seek capital preservation, and even young people place their super in balanced funds. Delight in the noisy 'all-time highs' is far from universal, with millions of Australians missing the big gains. Stockmarket analysts live in a blinkered world of screens focussed on share investments, as one told AAP this week:

"The local bourse is on fire and then some! It's a thing of beauty and local investors are pleased as punch. Australia is historically a bit of a laggard compared to our US counterparts but we're mixing it up with the big boys at the moment."

Better to ignore the bluster and consider the words of Howard Marks in 2013:

"Another mistake that people often make is that they compare themselves with others who are making more money than they are and conclude that they should emulate the others’ actions ... after they’ve worked. This is the source of the herd behaviour that so often gets them into trouble. We're all human and so we’re subject to these influences, but we mustn’t succumb. This is why the best investors are quite cold-blooded in their professional activities ...

"Too little scepticism and too much eagerness in an up-market – just like too much resistance and pessimism in a down-market – can be very bad for investment results."

The biggest investment news last week was the world's largest investor, BlackRock, moving away from thermal coal and making sustainable investing a new priority. As a major index provider under the iShares banner, it's a massive issue because the Big 3 index providers (BlackRock, Vanguard and State Street) now own on average 22% of a typical S&P500 company. The table below shows they own 18% of Apple, around 20% of US banks and up to 35% of some companies. Their actions will influence hundreds of companies, often behind closed doors.


Data compiled by Bloomberg.

Social trends guide investment results, and David James provides a detailed review of Australian demographics. The ageing and composition of our population point to both opportunities and traps. He explores our role in Asia, and on the same tack, Glenn Freeman reports on three large Australian companies whose fortunes depend on China.

Ashley Owen's amazing database demonstrates how much Australian shares have delivered in a diversified portfolio, and he reveals the four components that make up sharemarket returns. What drives your portfolio's performance? Then Richard Dinham shows why investing during retirement differs from saving in the earlier accumulation phase.

The selling fee debate on LICs and LITs shows no signs of abating, with Christopher Joye writing in The Australian Financial Review" ...conflicted selling fees could determine the fate of the advice industry and the Treasurer's political future." Wow, there are 25,000 financial advisers out there that millions of Australians rely on. In a more sober assessment, Jonathan Rochford identifies three vital points everyone is missing, and I agree with him.

Olivia Long then provides guidance on early access to super for victims of the bushfires and other emergencies, and Dubravka Cecez-Kecmanovic explains that despite enthusiasm for the use of algorithms and AI, they will not lead to the impartial and efficient outcomes most are expecting.

This week's Sponsor White Paper from UBS Securities is a detailed stock review of the impact of the fires on listed Australian companies as well as an assessment of the economic effect.

And while the popular press frothed that Labor leader Anthony Albanese has dropped the previous franking credit proposal, all he actually said was: “We won’t be taking the same policy to the next election.” Which means that like the euthanasia laws, it could come back from the dead. 

 

is the editorial director of Morningstar Australia

© 2020 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'class service' have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

Email To Friend