Investing 101

The benchmark S&P 500 index is characterised by “narrow, concentrated leadership” by a handful of mega-caps, leading to the “optical illusion” of outsized performance by US equities, says private investment manager Neuberger Berman.

Heightened volatility and market noise can be good things for the informed investors. That’s where capital markets assumptions come in, providing a starting point and a roadmap for portfolio construction primed to benefit from market dislocations, industry leaders said.

The recent re-embrace of active equity management by Australia’s sovereign wealth fund may herald a shift in the active-versus-passive debate, industry leaders said, as market volatility prompts greater dispersion and allows active management – at the right price – to prove its worth.

For the world to meet climate targets, the supply of battery-grade lithium will have to ramp up greatly, prompting expectations that the price will keep rising for years to come. And Australian companies with proven lithium deposits could do well as M&A in the sector stays hot, analysts say.

Much of what keeps Australian investors up at night – and the biggest investment mistakes they make – could be avoided through a greater focus on financial literacy, especially as markets “start acting like markets again”, the private wealth manager’s directors Jamie Nemtsas and Drew Meredith said.

With a successful and orderly energy transition “far from guaranteed”, disruptive themes are set to profoundly affect financial markets for years to come, the asset manager said in a new report. Investors should act – and potentially reallocate – accordingly.

The bond market has never had great investment appeal for Australia’s self-managed superannuation funds, but with rising yields improving their proposition, some observers say the investment tide may be coming in for fixed interest.

The surge in passive investment options in recent years, along with a record of underperformance by active managers, has pushed the ongoing active-versus-passive debate to the fore. Proponents of both styles agree, though, that how each approach performs in volatility will be the key question in 2023.

The meltdown of Silicon Valley Bank is “an early step” towards a more rational market environment, according to Howard Marks, but new problems might arise from bank exposure to commercial real estate.

Although more Australian companies are paying dividends in 2023, many have reduced payouts, with the year-to-date total slightly behind 2022’s figures, according to CommSec research. The big miners are leading the cuts, while energy producers are lifting dividends to reflect record high gas prices.

Basing an investment strategy on the Goldilocks investment markets of the last 35 years gives rise to considerable risk, writes Michael Block, and now might be the time to get out of growth assets.

For those planning to invest in offshore assets, the decision whether to hedge currency exposure is an important one as movements in the Australian dollar can either erode or add value to an investment.