Popular investment themes of 2020

Understanding where other Aussies are investing can shed some light on which segments of the market are popular.

Understanding where other Aussies are investing can shed some light on which segments of the market are popular and which aren’t. Which markets have momentum and which ones are unloved? 

We offer clients who invest $50,000 or more the ability to pick from a range of 12 global investment themes and add them to their diversified portfolio. Each theme is represented by a low cost exchange traded fund (ETF) that gives access to a specific country, asset class or strategy.

Themes include investments like global bonds, US shares or dividend shares. We last looked at which themes were popular back in 2016. Here’s what’s changed since then…

Most popular investment themes

Theme2020 ranking2016 ranking3 year return (p.a.) December 2019
US shares1st 1st16.0%
Global Bonds2nd 2nd3.7%
Global (non-US) Shares3rd 6th11.1%

US shares remain our client’s top choice, unsurprisingly given the strong performance of the US market and tech giants like Google, Apple and Amazon.

The US share market has delivered an outstanding return of 16% p.a. over 3 years, trouncing Australian shares (11.6% p.a. return). Lately we’ve recently seen the popularity of this theme fade just a bit.

Investors may be starting to turn more cautious on the US tech giants like Facebook on fears of increased government regulation, and ongoing trade wars between the US and China.

Global bonds remain our second most popular theme. Bond ETFs saw some of the highest inflows for the year in 2019, so it’s no surprise to see our clients wanting global bonds in their portfolios. Many of our retired SMSF clients are still gravitating towards boosting the bonds in their portfolio to protect against share market falls.  

Global (non-US) shares closes out the top 3. This theme has shot up the ranks the fastest, moving from #6 to #3 as more people look to diversify out of Australian shares while also being cautious on the red-hot US market.

This ETF includes large holdings in companies like Nestle and Roche, returning 11.1% p.a. over 3 years. Compared to US shares it has fewer technology companies and more of a focus in financial, consumer goods, materials and industrials.

Least popular investment themes

Theme2020 ranking2016 ranking3 year return (p.a.) December 2019
Japanese shares12th 10th9.3%
European Shares11th 11th10.6%
Australian large companies10th 11th11.3%

Japanese shares have had a tough ride over the last 30 or so years, but recently started to see some more positive performance. This investment theme was one of our least popular in 2016 and remains unloved despite a respectable 9.3% p.a. return over the last 3 years.

It includes companies like Toyota, Sony and Mitsubishi, and Nintendo. Maybe like fashion these ‘retro’ companies which were the big winners of the early 90s will make a comeback soon.

European shares remained our 2nd most unpopular theme as confidence amongst investors reduced thanks to a combination of Brexit, negative interest rates in most of the european countries, and slower economic growth. Despite this, European shares have delivered an impressive 10.6% p.a. return over the 3 years. Europe has a larger exposure to consumer companies like Nestle, LVMH and Unilever.  

Australian large companies have been a mixed bag over the last few years with the banks and Telstra in the doldrums while CSL and resources like BHP, Rio Tinto have powered higher. We’ve started to see some investors return to this theme recently as the Australian market makes new 11 year highs. It returned 11.3% p.a. over the last 3 years.

Australian property (REITs) is a worthy mention as another unpopular theme. It fell from our 2nd most popular theme in 2016. Uncertainty surrounding the Australian property market has driven clients out of this theme.

Since REITs generally invest in retail property (e.g. Westfield), office property (e.g. Dexus) and industrial property (e.g. Goodman Group), they’ve performed better than the residential property market and benefited from the recent interest rate cut. Australian property shares are up 9.5% p.a. over 3 years.

Final thoughts

There’s a continued move out of direct shares into ETFs as a way of accessing different investment themes. ETFs have the benefit of instant diversification, low costs, daily liquidity and tax efficiency.

The ETF market in Australia has more than doubled from $21 billion to $62 billion since 2016. We’ve seen the number of clients using ETF themes increase by 400% in that time.

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. We’re proud to be the only automated investment adviser in Australia – and around the world – to offer this level of portfolio personalisation.

Find out how Stockspot makes it easy to grow your wealth and invest in your future.

Investment Associate

Marc has previously worked for Morgan Stanley, AMP and KPMG. He holds a Bachelor of Business (Finance/Accounting) from the University of Technology Sydney (UTS), and has completed his Chartered Financial Analyst (CFA) Level 1.

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