A Better Investment Experience
The following 10 decisions can help investors target long-term wealth in capital markets and help you enjoy a better investment experience…
The market effectively enables competition among many market participants who voluntarily agree
This trading aggregates a vast amount of dispersed information
and drives it into security prices.
Source: World Federation of Exchanges. Global electronic order book figures gathered from the 60 WFE member exchanges.
Percentage of Funds that outperformed the Index
Over time, only a small fraction of money managers outperform the market after fees, and it is difficult to identify them in advance.
Standard and Poor’s Indices versus Active (SPIVA) Funds Score Card Australia June 2015.
Growth of a Dollar, 1980–2015 (Compounded monthly)
The financial markets have rewarded long-term investors.
People expect a positive return on the capital they supply, and historically, the equity and bond markets have provided growth of wealth that has more than offset inflation.
Inflation CPI: Australian Consumer Price Index, Short-term Fixed Interest Securities: Bloomberg AusBond Bank Bill Index and Australian Share Market: S&P/ASX 300 Index (Total Return). Past performance is no guarantee of future results. S&P/ASX data reproduced with the permission of S&P Index Services Australia. Securities and commodities data provided by Bloomberg.Indices are not available for direct investment. Index performance does not reflect expenses associated with the management of anactual portfolio. Past performance is not a guarantee of future results.
Dimensions of Expected Returns
Academic research has identified these equity and fixed income dimensions, which point to differences in expected returns.
These dimensions are pervasive, persistent, and robust and can be pursued in cost-effective portfolios.
Diversification does not eliminate the risk of market loss. Relative price is measured by the price-to-book ratio; value stocks are those with lower price-to-book ratios.
Profitability is a measure of current profitability, based on information from individual companies’ income statements.
It’s not enough to diversify by security. Deeper diversification involves geographic and asset class diversity.
Holding a global portfolio helps to lower concentration in individual securities and increase diversification.
Data as at 31 December, 2015.
The ‘Diversified Portfolio’ is purely a hypothetical portfolio intended to demonstrate geographic and asset class diversification. ‘Australian Equity Portfolio’ consists of 100% in S&P/ASX 300 Index. ‘Diversified Portfolio’ consists of 12.5% in S&P/ASX 300 Index (Total Return), S&P Australia BMI Value Index (AUD, gross div.), S&P/ASX Small Ordinaries Index (Total Return), MSCI World ex Australia Index (AUD, net div.), MSCI World ex Australia Small Cap Index (AUD, net div.), MSCI World ex Australia Value Index (AUD, net div.), MSCI Emerging Markets Index (net div., AUD) and S&P Developed REIT Index (AUD, net div.). S&P/ASX data reproduced with the permission of S&P Index Services Australia. MSCI data copyright MSCI 2016, all rights reserved. Securities and commodities data provided by Bloomberg. Indices are not available for direct investment. Index performance does not reflect expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results.
Annual Returns by Market Index
You never know which market segments will outperform from year to year.
By holding a globally diversified portfolio, investors are well positioned to capture returns wherever they occur.
Data is the annual return to 31 December 2015. Data used for each asset class is as follows – Australian Large: S&P/ASX 100 Index (Total Return), Australian Small: S&P/ASX Small Ordinaries Index (Total Return), Australian Value: S&P Australia BMI Value Index (AUD, gross div.), Global Large: MSCI World Index (net div., AUD), Global Small: MSCI World Small Cap Index (net div., AUD), Global Value: MSCI World Value Index (net div., AUD), Emerging Markets: MSCI Emerging Markets Index (net div., AUD), Property: S&P Global REIT Index (net div.), Cash: Bloomberg AusBond Bank Bill Index, Fixed Interest: Barclays Global Aggregate Bond Index (hedged to AUD). S&P/ASX data reproduced with the permission of S&P Index Services Australia. The S&P data are provided by Standard & Poor's Index Services Group. MSCI data copyright MSCI 2016, all rights reserved. Bloomberg indices copyright Bloomberg 2016. Barclays indices copyright Barclays 2016.
Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio.
Reactive Investing in a Market Cycle
Many people struggle to separate their emotions from investing.
Markets go up and down.
Reacting to current market conditions may lead to making poor investment decisions at the worst times.
For illustration purpose only.
Daily market news and commentary can challenge your investment discipline.
Some messages stir anxiety about the future while others tempt you to chase the latest investment fad.
When tested, consider the source and maintain a long-term perspective.
For illustration purpose only.
Net Growth of $1 Million
Over long time periods, high costs can drag down wealth accumulation in a portfolio.
Costs to consider include: Management fees, fund expenses and taxes.
For illustrative purposes only. Assumes 6.5% annualised return over 30 years.
A financial advisor can create a plan tailored to your personal financial needs while helping you focus on actions that add value.
This can lead to a better investment experience.
Diversification does not eliminate the risk of market loss.
There is no guarantee investment strategies will be successful. This information is for illustrative purposes only.