Why you shouldn’t feel bad about renting

Renting a property
 
The property market is rarely out of the news in Australia, with regular predictions of house prices collapsing being followed by weekends of record auctions and prices.

Property has certainly had a good run over the past few years. According to CoreLogic RP Data, the average house in Sydney has increased in value from $650,000 in 2012 to over $1,066,000 in 2017. That’s a 64% rise in 5 years!

Average house prices in major Australian cities
Sources: CoreLogic RP Data; RBA

As property has become less affordable, more people are looking at a popular alternative which is to rent and invest their savings in a portfolio of shares instead.

Over the last 30 years, both property and shares in Australia have returned between 11.0% and 11.5% per year so both are proven ways to grow your long term wealth.

But which is better today?
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Diversifying your investments – how to put eggs in different baskets

Eggs in one basket
 
You know the expression ‘don’t put all your eggs in one basket’? This should be the first lesson taught at investment school (if there were such a thing).

Placing your eggs in a variety of baskets or spreading your money across many different investments is diversification 101. If there are 2 lessons everyone should be required to learn before they invest they are:

1.  How compounding works
2. What is diversification and how does it work.

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What I’ve learned from 21 years of investing

21 years of investing
 
It’s been 21 years since I made my first investment on January 1st 1996. At the time I was 10 years old. Not your standard primary school hobby.

I was sport obsessed and starting to realise girls weren’t as annoying as I thought, but for some reason I quickly became fascinated by what made share prices go up and down.

Neither of my parents worked in finance but I was lucky that my dad had some shares in his self managed super fund and decided to teach me and my brother some of the basics. He let us choose a stock from the newspaper and gave us $1,000 (which later, to my dismay, I found out was only theoretical).

I had a few stock market wins, a few losses and I was hooked!

I kept a diary of every investment I made between 1996 and 1999 which I still have today. It looks more like a colouring-in book than a trading diary because I gave each stock a different set of colours – but in it I kept track of my running profit or loss, dividends and company news cutouts.
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The rise of socially responsible investing

Ethical investing
 
You may have heard some murmurs about socially responsible investing recently.

Given 2016 was the hottest year on record, Australia claiming the highest the gambling rate in the world and the recent scandals about labour standards, it’s fair to ask yourself:

“Are the companies I invest in helping the world?”

Enter socially responsible investing (SRI)

Known as ethical investing, sustainable investing or green investing, socially responsible investing is an investment strategy that considers both financial return and social good to bring about social change.

Its history is believed to date back to the Quaker Society in the late 18th Century when members were banned from participating in the slave trade. Seems fair enough today. Back then, it was a bold statement.

Fast forward a few hundred years we saw people question the ethics of companies during the Vietnam War. Dow Chemical, a napalm producer, was boycotted and the subject of protests across America for its war profiteering when a photo was released of a nine-year-old girl running naked and screaming with her back on fire from the napalm dropped on her village.

Recently fast fashion brands like H&M and Zara are under scrutiny for labour rights violations, some ethical funds have stopped investing in these brands.
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ETFs trump managed funds in 2016

ETF Update - Quarter 4, 2016
 
Our quarterly update on the Australian ETF market as at December 2016 and performance of the Stockspot portfolios.

ETF market highlights

  • Quarterly FUM growth was +7%, from $23,971 million at the end of September to $25,291 million at the end of December 2016.
  • Total ETF FUM has now reached the $25 billion milstone, including adding almost $4.3 billion in 2016.
  • The top 5 ETFs for the past 12 months have all been resources focused, reversing a 5 year period of underperformance since 2010.
  • After some US election volatility, Australian and global share ETFs showed steady inflows during November and December.
  • Overall we have seen another positive quarter for ETF FUM growth and returns, continuing the steady drive forward of the Australian ETF market.
  • Globally investors have put more money into ETFs than actively managed funds in 2016 for the 10th straight year.

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Best investment lessons from 2016

Best investment lessons from 2016
 
​2016 was the year of the unpredictable events. The world and financial markets were sent spinning several times over while commentators went into meltdown.

Who would have believed a year ago that​ Britain would leave the European Union, that Donald Trump will be next president of the United States​, and that both events would send global markets significantly higher!

There were many lessons to be learned from last year and we recently asked our clients to tell us the best investment lesson they’ve received in 2016. Here are some of their top learnings.
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Procrastination is your financial enemy

Procrastination is your financial enemy
 
Procrastination is one of those human foibles we all do at some point. It’s something we all knowingly shake our heads and chuckle at because it’s not quite the same as being lazy or incompetent.

Weirdly it has almost become socially acceptable. When the tools of our productivity (our laptop and smartphone) also provide our entertainment, procrastination is as easy and tempting.

Even the most motivated people on Earth can tell you about ‘that one time’ they procrastinated. For more normal people we do it regularly over major and minor things and it’s hugely frustrating. When we’re honest with ourselves, we know we could have done better by starting earlier.
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What is a MDA Service and how does it work?

Question - What is a MDA service?
 
When you invest with Stockspot, you sign-up online and answer some questions about your financial goals and personal circumstances, then you’re asked to review and sign an MDA Agreement before you can invest.

At this point, you ask yourself what is an MDA Agreement and what exactly am I tying myself into?

A good question you should ask before using any financial product is how exactly does the product work, is it the best product for me and is my money safe?

Here’s what a MDA service is, how your money is secured and why we think our MDA is the best way for many people invest.
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2016 : Stockspot end-of-year update

2016 update
 
Back in 2013 I left my job as a portfolio manager to start a better wealth management service for Australians. It’s hard to believe Stockspot has now been up and running almost 3 years.

It is something I am immensely proud of and I want to thank the thousands of clients who have been on the journey with us. In 2014 when we launched, automated investing and robo-advice were new in Australia so we appreciate the support of our early clients who trusted us to help manage their savings.

We’ve generated annualised net returns for those early clients of 6.2% to 9.2% per year with much lower fees than traditional managed fund options. At the same time our portfolios have been much less risky than just owning Australian shares.

We’re also thankful to the 22,000 people who have subscribed to our newsletter for our monthly investment insights. And none of it could happen without the tireless effort of the Stockspot team.
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Pay your future self – Best way to save money in your 20s & 30s

Saving money in your 20s and 30s
 
Saving money and getting started investing in your 20s and 30s is something everyone knows you should do. However life gets in the way and saving can take a back seat to fun and entertainment when you’re young.

There’s nothing wrong with clocking up experiences, smashed avo brunches and great dinners out, but living pay-cheque to pay-cheque isn’t sustainable as you get older.

As a (reformed) lover of spending my dosh I’m here to strongly encourage you to start saving now. Today! The reason why is simple, saving money earlier in life has an EXPONENTIAL impact on your long term wealth. Start 10 years later and the maths could make it impossible to get where you want to be.
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Why you won’t beat the share market (but many still try)

Won't beat the share market

Four things you will learn:

  • Why picking stocks or trying to time the market is pointless
  • Why fund managers have become ‘the market’ (and what that means)
  • How behavioural biases lead us to make bad investment decisions
  • Why index investing is the smart investor’s choice

The US election is the perfect demonstration of the futility of trying to beat the share market.

Those who tried to time their market entry were whipsawed in all directions, share markets initially fell 6% before staging an 8% recovery to close up for the week. Not only did most ‘experts’ call the election result wrong, they completely misjudged the impact that Trump would have on markets.

Meanwhile those with portfolios focused in popular yield-sensitive sectors of the market like property saw their investments crushed due to events in bond markets that were completely outside of their control.

None of this is unusual… time after time, finance commentators have their predictions proved wrong by the market. Those who try and beat the market by timing entry and exit points, or picking stocks or sectors, are outsmarted by each other.

So why is it so difficult for even the experts to get it right?
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Meet the team: Alice

Meet the team: Alice
 
It’s 30 degrees outside, the siren calls of delicious gelato are getting louder, the beach is on everyone’s mind in the Stockspot office, everyone’s that is, except for one person…

Enter Alice. Awesome snowboarder, adventure sports obsessed, epic coder and our resident front-end developer (the person who make things look good). Her advice to anyone considering a career as a developer – be passionate and write excellent code. Sounds spot on to us!

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Investment update: US election

US election
 
Does this feel like deja vu? After the market reaction to Brexit earlier this year, the US election result seems like we’ve been down this road before.

Unexpected political result causes wild market movements

Before you make any investment decisions based on politics, it’s worth considering what it actually means for your investments over the long-run. The answer, which may surprise you, it’s actually very little.

Market commentators and your emotions may lead you to believe the different policy positions (and personalities) of the candidates will lead to different market returns. However, history repeatedly shows us markets will overreact in the short term and pay no attention after that. In fact, investment markets often move in the opposite direction to what you would expect due to currency movements or because everyone is already positioned one way.

Take Brexit as a perfect recent example. After the surprise Brexit result, which was considered by many ‘investment experts’ to be a disaster for the UK economy, British shares rose 25% over the next 3 months.
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Australian ETFs add $10 billion in 2 years

ETF Update - Quarter 3, 2016
 
Our quarterly update on the Australian ETF market as at October 2016.

Highlights

  • ASX-listed ETFs have added $10 billion in new funds under management since October 2014, representing 31% p.a. growth.
  • Quarterly growth of ETF funds under management was 7%, from $22,404M in June 2016 to $23,971M by the end of September 2016.
  • After some volatility in the first half of September, the Australian share-market stabilised near a 12 month high.
  • Gold and small Australian shares have performed best over the last year with oil, ‘Bear’ and some currency ETFs performing worst.
  • Fixed income ETFs continued to attract new funds at the fastest rate of all sectors as more investors and Self Managed Super Funds (SMSFs) add fixed interest to their portfolios to balance equity risk.

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What is an ETF?

What is an ETF?
 
At Stockspot we believe Exchange Traded Funds (ETFs) are the building blocks for the best investment portfolios.

ETFs have been around for roughly 20 years and are fast becoming the most popular investment option. Each year more money leaves managed funds and goes into ETFs. This is because they can easily be traded on the stock exchange, they’re low cost and offer instant diversification.
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We need to talk about finance

We need to talk about finance
 
I love emojis. Admittedly I was a latecomer to the emoji party I (to my shame) thought I was above them. I was then convinced by a clever friend that they’re like modern hieroglyphics and a valid form of communication. I’m not going to argue with that.

What do emojis have to do with finance? Aside from my personal desire to see the finance news reported in a variety of smiley, joyous or sad faces, not a great deal… but this blog is about why we need to talk about finance more.
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$59 billion trapped in Fat Cat Funds

2016 Fat Cat Funds Report
 
Our latest Fat Cat Funds Report, the largest analysis of superannuation and managed funds in Australia, has found that the money managed by Fat Cat Funds increased to $59 billion, up from $53.5 billion in 2015.

We believe Australians deserve greater visibility around where their money is invested and how it is performing so we have been producing this report to highlight the issues of high fees, poor transparency and conflicts of interest within the investment industry.

This is the 4th year we’ve run the report and this year we compared a record 3,800 funds to assess how they have performed after fees.

Unfortunately for consumers, almost nothing has changed since our first report in 2013 as the big 4 banks and AMP continue to dominate the distribution of Fat Cat Funds.
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Why you shouldn’t rush into tech stocks

Chasing tech stocks
 
It’s easy to get swept up in the hype of a hot sector, but there are big dangers when the music stops.

Investing in the hot stock or sector de jour is a always strong temptation, especially in markets where there are very clear winners and losers. These days global technology is that hot sector – particularly the big US tech giants. They’ve all doubled, tripled or quadrupled since 2012 so have easily beaten the broad market. Their returns have trounced Telstra, BHP and Woolworths.
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Active vs Index investing – what’s the difference?

Active vs Index investing
 
Active investing and index (or passive) investing are 2 different ways to grow your wealth.

Actively managed funds aim to beat the returns of a given investment market. Passively managed funds, on the other hand, are designed to mimic the returns of a specific market as measured by a particular index like, for instance, the S&P/ASX 300. This is why they are also known as ‘index’ funds.

Most of the money in Australia is managed by active funds but passive investing has been growing fast, particularly since 2008. We look at some of the key differences and why index investing has been growing in popularity.
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How can I save and invest for my kids?

How can I save and invest for my kids?
 
Let’s be honest – saving and investing isn’t something a lot of kids think about. Life is mostly about friends, school, sports, parties, fancying someone, studying, learning to drive and trying to work out what to do with the rest of your life.

When it comes to talking about finances, the vast majority of people want to close their eyes, put their hands on their ears and sing ‘lalalala’ really loudly. Probably because the government, media, parents and well intentioned bloggers do a royal job of making it DULL. And scary. And way more difficult than it needs to be.
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