Investment update: US election

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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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Investment update: UK Exit (Brexit)

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The UK voted to leave the European Union after 43 years of membership. This surprised markets which had assumed only a small chance of the UK leaving.

What does it mean?

Nobody actually knows what the medium to long term implications are for the UK or global economy, due to uncertainty around how the exit will play out.

Not surprisingly share markets reacted negatively with all global markets initially falling. The good news is defensive assets like bonds and gold rose. Both assets are key parts of Stockspot’s portfolios and have helped minimise the impact of share market falls.
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2015 : Stockspot end-of-year update

The Stockspot portfolios generated positive returns over the 12 months to December, and demonstrated lower risk than a broad portfolio of Australian shares over that time.

Most of the positive price performance came between January and April, before troubles in Greece and China dragged markets lower by 10% to 15%. It has been great to see many of our clients using the market dips this year as a good opportunity to top-up their portfolios and take advantage of lower prices. When markets return to their long-term uptrend, those who have been slowly adding to their investments will see the greatest impact.

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2015: Stockspot mid-year update

Welcome to our mid-year video update.

 
In this update:

  • Performance of the Stockspot portfolios for the 2015 financial year
  • Update on the response from our Australian ETF Report
  • Completion of our recent capital raising
  • News and events coming up in the second half of 2015

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Greece and China: 3 lessons for everyone

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The recent turmoil in global markets has been aggravated by 2 countries on opposite sides of the earth.

Greece, which makes up a minuscule portion of the global economy has destabilised world markets because of the flow-on effects that could result from an possible exit from the Eurozone. Meanwhile the Chinese share market which rose 150% in the 12 months to June, has now collapsed more than 35% from its peak, and with it brought wild gyrations in the markets of its regional partners, including Australia.

For an investor with a well-balanced portfolio, the impact of these crises has been more moderate. For example, the 3-5% falls our portfolios have experienced from their April peak are well within the normal range of moves that can be expected year-to-year since we have near zero direct exposure to Greek shares and only 1-3% in Chinese equities. Diversification across countries, currencies and assets has helped prevent much larger falls, while investments like our Global top 100 shares ETF (IOO) remain within 1% of their all-time highs.

Notwithstanding, once the dust settles there are some valuable lessons that can be learned from the situations in Greece and China, particularly on the dangers of debt and leverage.
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What does the falling interest rate mean for your portfolio?

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The RBA has moved to cut interest rates to the lowest level in over 50 years.

Interest rates play a large role in determining the performance of your investments. Here we look at how interest rates and expectations about future rates have impacted 5 different assets classes: Australian shares, Global shares, Emerging market shares, Australian bonds and Gold.

First, what has caused interest rates to fall?

In order to understand how different asset classes have been impacted by Australia’s low and falling interest rates, it is first important to explain how our terms of trade (the relative price of the things we export versus the price of things we import) have impacted interest rate expectations and the Australian dollar over the past year.

Over the last 2-3 years Australia’s terms of trade have fallen drastically as the price of our major exports like iron ore have collapsed. After reaching an all time high of 118.50 in 2011, Australia’s terms of trade have plunged into the low 80s and look likely to continue falling as commodities like iron ore, copper and oil fall to levels not seen since 2008 or earlier.

A fall in the terms of trade is sometimes referred to as an unfavourable movement in the terms of trade because it means that Australia must export more goods and services to maintain the same level of imports. This is bad news for the economy, reducing inflation and tax receipts for the government, putting pressure on the budget and jobs growth, and in turn forcing the Reserve Bank (RBA) into considering interest rate cuts to encourage spending and stimulate the economy.
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2014 : Stockspot end-of-year update

A short video update on how Stockspot portfolios have performed this year, along with some of our business highlights and what to expect in 2015.

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Chasing returns can harm your financial health

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The tendency for analysts and investors to chase return trends is a well-documented phenomenon.

Numerous studies have showed that flows into and out of funds and asset classes are related to recent returns. Because investment returns tend to revert to a long-term average over time, however, return-chasing is a dangerous game. The greatest inflow into a given fund or asset class typically occurs immediately after it has generated above-average performance and immediately before it starts to underperform.
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