What are the most popular investment themes?

Popular investment themes
 
Our philosophy on investing is a portfolio that is well diversified across assets, countries and sectors will, in the long run, give clients the best risk-adjusted returns.

This is how we built the 5 core strategies that we offer, the aim is to give the best balance of risk and return for any Australian investor.

Stockspot portfolios - why 5 asset classes

The story behind Stockspot Themes

We know that many of our clients may own assets outside of Stockspot (like property) or they want to invest more in a certain region, asset or market factor (like dividends).

That’s why in 2016 we introduced Stockspot Themes. The idea is to give clients more control over how they invest their money. Our Themes allow clients to add investments to their portfolio that they a) feel strongly about and b) would like more of in their portfolio. We’re proud to be the first (and only) automated investment adviser in the world to offer this level of customisation to clients.

After a rigorous research process to select the right investments, we launched 14 different themes for clients to chose from that fit into 4 different groups:

Australian shares
Australian dividend shares
Australian large companies
Australian small companies
Australian socially responsible shares
Global shares
US shares
Global (non-US) shares
European shares
Japanese shares
Chinese shares
Asian large companies
Property
Australian property
Global property
Bonds and cash
High interest cash
Global bonds

 

To ensure that all of our clients still benefit from the best possible diversification benefits, themes are blended with our core model portfolios. We balance any themes within clients portfolios so their overall strategy is continually optimised based on their investment goals and risk profile.

We think this is the best way to help clients have for a more personalised portfolio and ensure that they don’t take on too much risk. Unlike many digital investment products, Stockspot gives each client a personalised recommendation on the best strategy for them.

Our popular themes

Stockspot Themes has grown in popularity since launch. We asked some of our clients who added themes to their portfolio what they chose and why.

Overall the most popular are US shares and Australia property. However the reasons people have chosen different themes vary greatly.

Stockspot Themes chosen by clients

Why Stockspot clients have chosen different themes

Clients who chose a regional focus tend to either be backing momentum (i.e. US tech stocks continuing their strong returns) or mean reversion (Asian shares returning to popularity)

I chose to have a strong US shares theme as a bet on strong US companies in the future, particularly top tech such as Apple and Google influencing the market.

Asian shares had recently fallen more than the others when themes was first made available.

Clients who add an asset class like cash or global bonds are generally trying to reduce the risk in their portfolio due to macroeconomic or political factors. Others who chose property are typically expecting the macro factors that have boosted property prices to continue.

More cash to lower volatility over next 6 months with us election cycle and rising bond yields.

Macro economic themes appealed to me.

Clients who take a particular tilt towards an area of our market like dividend shares, small companies or socially responsible shares believe that a particular factor or area of the market deserved a larger place in their portfolio

Based on the markets/products I think will grow.

Related to my industry, profession and larger trends of technology, aging population and I guess chasing a higher return overall.

Stronger views on specific geographic market direction over medium to long term.

Interestingly there appears to be a strong relationship with the most popular themes chosen and the investments that have enjoyed strong performance over the last 5 years. US shares and dividend shares are the 2 most popular themes and both enjoyed strong returns since 2011. On the other hand, Chinese shares and Asian shares are the least popular and have underperformed over the last 5 years.

Stockspot Themes - 5 year returns

This supports the theory that investors have a bias towards momentum and chasing returns.

But just as looking in the rear vision mirror to work out what’s coming up ahead on the road is rather pointless, there’s no proven value looking backwards over a few years when investing – despite the temptation to do so. Historical market evidence suggests the best results actually come from doing the opposite and buying investments when they are less popular because market cycles mean that assets tend to bounce back after a period of poor performance and vice versa.

We’ll continue to monitor which themes are popular with our clients and the interplay between the popularity of certain themes, past performance and future returns.

 

Low fee, hassle-free investing

Stockspot is Australia’s fastest growing automated investment service. We can help you build and manage a personalised portfolio tailored to your financial situation and your goals. With Stockspot, there’s no paperwork, no need to be an expert and no hassles.

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Chris Brycki

Stockspot Founder and CEO