- What are Stockspot Themes?
- How are Stockspot Themes implemented in the portfolio?
- How many themes can I select?
- Do I need themes? Aren’t the Stockspot Portfolios already diversified enough?
- How will Stockspot Themes impact my portfolio?
- Ideas for choosing themes – which ones are best?
- Our chosen Stockspot Themes
What are Stockspot Themes?
Stockspot Themes allow clients investing $50,000 or more to add investments to their portfolio that they feel strongly about and would like a higher exposure to. You can add in certain countries (such as China or the U.S.), asset classes (global property or bonds), or market factors (small companies and dividend shares).
Exchange traded funds (ETFs) are a great way of accessing different investment themes and have the benefit of instant diversification, low costs, daily liquidity and tax efficiency. We’re proud to be the only automated investment adviser in Australia – and around the world – to offer this level of portfolio personalisation to clients.
How are Stockspot Themes implemented in the portfolio?
We ensure that your investment strategy stays balanced based on your goals and investment time horizon. We optimise themes in your portfolio and integrate them seamlessly so there’s nothing you need to do.
When you select a theme, we will sell down a portion of your existing portfolio, and allocate this portion to your chosen theme. Each theme will typically contribute between 5% and 10% of your overall portfolio once fully implemented.
Note that choosing and changing themes may result in capital gains/losses and have tax implications. You can add or change themes via the Portfolio settings section of your dashboard.
How many themes can I select?
Stockspot clients can have up to 3 themes in their portfolio at any one time including a maximum number of growth and defensive themes based on your investment strategy.
Themes are broken down into growth and defensive strategies. Growth themes tend to have higher potential return but come with more volatility, whereas defensive themes tend to reduce the risk of your portfolio.
You can make a maximum of 4 theme changes per year as we don’t want clients to be over-trading which can harm returns.
Do I need themes? Aren’t the Stockspot Portfolios already diversified enough?
Stockspot Themes are an optional product feature for clients investing $50,000 or more. The Stockspot Model Portfolios are designed to provide sufficient diversification to help you achieve your goals.
However, some clients may want to have greater control and wish to implement a tactical view they have. Here are some of the theme ideas.
How will Stockspot Themes impact my portfolio?
By choosing to implement a Stockspot Theme as part of your investment allocation, there may be an impact to your overall portfolio in relation to:
- Returns: Some themes may underperform/outperform the market at different periods in time, meaning there may be differences to the returns of the core ETFs used in the Stockspot Model Portfolios. This can be primarily driven by country and sector allocations, as well as underlying shares.
- Risk: Themes can both increase and decrease the risk profile of your portfolio. For example, regions like Asia and China tend to be more volatile than global international bonds.
- Asset allocation and diversification: Allocating themes may change the weighting of your portfolio to a particular sector, region or country. For example, adding U.S. shares will decrease your Australian share exposure, but give you more access to the American market.
- Cost: All ETFs charge a management fee. This is an indirect cost deducted directly from the daily ETF price. The ETFs offered through Stockspot Themes charge between 0.04% to 0.74% per year.
Ideas for choosing themes – which ones are best?
With plenty of themes to choose from, it can sometimes be tough to decide which one would suit your portfolio strategy and goals.
Below are some ideas to consider to help you with the selection process:
DIVERSIFY INTO GLOBAL BONDS
Global bonds hold over 1000 global bonds from the likes of the U.S., Japan and Europe. Much like Australian bonds, global bonds have 2 main benefits: 1) provide some stable income; and 2) help cushion the return should share markets fall. Global bonds have historically tended to be less risky, acting as a ballast, and may improve the geographical diversification of your bonds.
ENHANCE YOUR INCOME
Stockspot offers the following themes which have historically paid higher than average dividends:
- Socially responsible shares – Australian companies that have demonstrated positive environmental, social and governance (ESG) characteristics without significant involvement in activities such as tobacco, alcohol and weapons.
- Australian dividend shares – companies that have paid higher dividends relative to other listed companies. See more here.
- Large companies – the top 50 blue chip companies in the Australian market
- Australian property – real estate investment trusts (REITs) listed on the ASX across the retail, office, and industrial sectors.
- Global property – real estate investment trusts (REITs) and real estate investment companies (REICs) listed on the global markets such as the USA, Japan, and UK.
However, seeking the highest paying dividend options may not always be the best strategy to maximise your total return. We suggest a total return approach which seeks to hold a diversified portfolio aiming at maximising the total overall return (i.e. both income and growth), rather than solely preferring income.
INCREASE SPECIFIC COUNTRY EXPOSURE
Owning shares from global countries allows you to benefit from companies like Apple, Nestle and Nike that are listed on other share markets. The Stockspot Model Portfolios have an allocation to global developed markets (such as the U.S. and Europe), and global emerging markets (such as China and India).
You may want to increase your exposure to certain countries or regions such as:
- U.S. – access the largest 500 companies in the US (i.e. S&P 500)
- Global (non-U.S.) – access the world’s largest companies listed in major developed and emerging countries outside of the U.S.
- Europe – access the largest 350 companies in European countries such as the UK, Switzerland, France and Germany.
- Japan – access over 300 companies listed on the Tokyo Stock Exchange
- China – access the largest 50 companies that trade on the Hong Kong Stock Exchange
- Asia – access the largest 50 companies from Asian countries like China, Hong Kong, Singapore and South Korea.
Top 10 holdings per geographic/country theme
|2.||Tencent||Microsoft||Roche||SoftBank||Meituan Dianping||Taiwan Semiconductor|
|3.||Nestle||Amazon||Novartis||Sony||China Construction Bank||Samsung|
|4.||Roche Holding||SAP||Keyence||Ping An Insurance||AIA Group|
|5.||Novartis||Alphabet – Class A||ASML||Takeda Pharmaceutical||Industrial And Commercial Bank Of China||Meituan Dianping|
|6.||Taiwan Semiconductor||Alphabet – Class C||AstraZeneca||KDDI||China Mobile||China Construction Bank|
|7.||SAP||Johnson & Johnson||Sanofi||Daiichi||Xiaomi||Hong Kong Exchange|
|8.||Toyota||Berkshire Hathaway||LVMH||Nintendo||Bank Of China||Ping An Insurance|
|9.||ASML||Procter & Gamble||Novo Nordisk||Mitsubishi UFJ Financial||Alibaba||Industrial And Commercial Bank Of China|
|10.||AstraZeneca||Visa||Siemens||Daikin Industries||China Merchants Bank||China Mobile|
Our chosen Stockspot Themes
|Theme||ETF Ticker||ETF Name||Cost||1 year return||3 year return (p.a.)||5 year return (p.a.)|
|Australian dividend shares||VHY||Vanguard Australian Shares High Yield ETF||0.25%||-12.4%||0.9%||2.3%|
|Australian large companies||SFY||SPDR S&P/ASX 50 Fund||0.29%||-9.5%||4.7%||4.8%|
|Australian small companies||VSO||Vanguard MSCI Australian Small Companies Index ETF||0.30%||-1.4%||7.1%||8.9%|
|Australian socially responsible shares||RARI||Russell Australian Responsible Investment ETF||0.45%||-15.1%||1.0%||3.5%|
|US shares||IVV||iShares Core S&P 500 ETF||0.04%||9.1%||14.4%||13.0%|
|Global (non-US) shares||VEU||Vanguard Ex-US International Shares ETF||0.09%||-2.0%||5.1%||4.8%|
|European shares||IEU||iShares Europe ETF||0.60%||-5.1%||3.2%||3.3%|
|Japanese shares||IJP||iShares MSCI Japan ETF||0.47%||4.3%||6.1%||5.2%|
|Chinese shares||IZZ||iShares China Large-Cap ETF||0.74%||-3.3%||6.1%||1.6%|
|Asian large companies||IAA||iShares Asia 50 ETF||0.50%||9.7%||10.2%||9.7%|
|Australian property||VAP||Vanguard Australian Property Securities Index ETF||0.23%||-20.7%||2.2%||4.7%|
|Global property||DJRE||SPDR Dow Jones Global Select Real Estate ETF||0.50%||-17.0%||0.4%||2.3%|
|Global bonds||VIF||Vanguard International Fixed Interest Index (Hedged) ETF||0.20%||5.1%||4.7%||N/A*|
Data as of 30 June 2020
*Does not have a 5 year track record