Investing

What are the most popular investment themes?

A portfolio diversified across assets, countries & sectors will, in the long run, give the best risk-adjusted returns.

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 21 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, U.S. shares or dividend shares. 

If you want to add Stockspot Themes to your portfolio you can do so via your dashboard on your desktop (under the Portfolio Settings section). 

Most popular investment themes

ThemeMar 2021 rankingDec 2020 ranking3 year return (p.a.) as of March 2021
U.S. shares1st 1st16.7%
Global Bonds2nd 2nd3.2%
Asian large companies3rd 4th13.3%

U.S. shares are the most popular investment theme

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

The U.S. share market has delivered an outstanding return of 16.7% p.a. over three years, trouncing Australian shares (9.7% p.a. return).

However, investors may be more cautious about whether the U.S. can retain its dominance over the next decade in a reflationary and potentially higher interest rate world. 

Global bonds the second most popular theme 

Global bonds remain our second most popular theme and bond ETFs saw some of the highest inflows for the year in 2020. Many of our retired SMSF clients are still gravitating towards boosting the bonds in their portfolio to protect against share market falls.

Asian companies are in third place

Asian large companies close out the top three most popular themes, up from fourth most popular place last quarter. The popularity of this theme is likely because more people want to diversify out of Australian shares into broader Asian countries. This ETF, which includes large holdings in companies like Tencent, Alibaba and Samsung, returned 13.3% p.a. over three years. Compared to U.S. shares, there are less technology companies and more of a focus in financial, consumer goods, materials and industrials.

Other popular themes

Aside from the abovementioned themes, we’ve also seen client enthusiasm for U.S. technology, Asian technology, and global healthcare.

Least popular investment themes

The least popular themes are currently some of the ones that we recently launched in July 2020, with global consumer staples, global infrastructure and global gold miners still gaining traction amongst our clients. 

Historically, we have seen less of our clients invest in themes such as European shares, Japanese shares and Australian property.

ThemeMar 2021 RankingDec 2020 Ranking3 year return (p.a.) as of March 2021
Global consumer staples21st N/A7.6%
Global infrastructure20th N/A7.1%
Global gold miners19th N/A14.7%
N/A as themes were only recently introduced

Japanese shares have had a tough ride over the last 30 or so years, but recently started to see some more positive performance. Japan still remains relatively unloved by Stockspot clients and had a 10.2% p.a. return over the last five years, although have failed to deliver in 2021. Japanese shares include companies like Toyota, Sony, 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 also remain an unpopular theme as confidence amongst investors reduced due to a combination of COVID-19 lockdowns and high infection rates. BREXIT, negative interest rates, and slow economic growth have contributed to lack of investor interest. 

Despite this series of unfortunate events, European shares have delivered an impressive 8% p.a. return over the last five years, and so far are up over 6% in 2021. Europe has a larger exposure to consumer companies like Nestle, LVMH and Unilever.

Australian property (REITs) is another unpopular theme, despite being one of our most popular themes in 2016. Despite rising residential property prices and elevated auction clearance rates at the beginning of2021, COVID-19 saw Australian property across retail, industrial and office fall almost 50% in March 2021. REITs generally invest in retail property (e.g. Scentre Group), office property (e.g. Dexus) and industrial property (e.g. Goodman Group), and are up 5.9% p.a. over the last 5 years, although have recovered by 45% over the last 12 months. 

Market Flows

In terms of general investor behaviour over the last three months, we’ve observed Australian investors are favouring technology (both U.S. and Asia) and large global markets like the U.S. and global non-U.S. shares. 

Interestingly, despite a lack of interest in European shares from Stockspot investors, the broader Australian investor is warming to European shares, as many might see this as a potential pocket of value that has lagged over the last decade.

Best Performing Themes

Asian technology has been the best performing theme over the last year, returning 63.3%, thanks to large gains in some of the leading Asian technology companies. 

Australian small companies were also a stand out performer, up 61% as small companies tend to do better in the start of a new economic cycle following a recession. Both Australian property and Australian dividend shares returned 45% as they have both recovered from the COVID-19 market correction, and seen more money moving into “value” orientated sectors which tend to pay higher dividend yields.

ETF CodeTheme1 year return3 year return p.a.5 year return p.a. 
ASIAAsia technology63%N/AN/A
IAAAsian large companies34%13%18%
VACFAustralian corporate bonds3%4% N/A
VHYAustralian dividend shares45%9%9%
ILBAustralian inflation bonds5%4%3%
SFYAustralian large companies33%9%9%
VAPAustralian property45%8%6%
VSOAustralian small companies61%11%12%
RARIAustralian socially responsible shares37%6%8%
IZZChinese shares2%3%9%
IEUEuropean shares16%5%8%
VEUGlobal (non-US) shares22%7%10%
VIFGlobal bonds-2%3%3%
IXIGlobal consumer staples0%8%6%
GDXGlobal gold miners12%15%11%
IXJGlobal healthcare3%13%12%
IFRAGlobal infrastructure20%7%N/A 
DJREGlobal property8%4%2%
IJPJapanese shares13%6%10%
NDQU.S. technology35%27%25%
IVVU.S. shares25%17%16%
Data as of 31 March 2021. Source: ETF Providers. N/A indicates the ETF does not have enough of a track record.

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

If you would like some assistance on how Stockspot Themes work or what it could mean for your overall portfolio, you can contact our team of helpful advisers.

If you want to personalise your portfolio and you’re investing above $50,000, find out more about Stockspot Themes.

Investment Manager

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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