From the Bunker: Welcome to the first COVID financial year
- Stock market indices are inherently overweighted towards specific sectors
- Active investing may present many opportunities this year so long as you have the best resources
- A combined approach of active and passive investing may work well for the long term
This week on From the Bunker Evan Lucas and I were joined by Nathan Bell from Intelligent Investor to go through the challenges we are likely to face this new financial year. The problems are many with the COIVD crisis likely to dominate leaving billionaire hedge fund manager Ray Dalio to refer this period as a ‘lost decade’ coming for stock investors.
We covered the various market indices and their overweighting to specific sectors that may present a risk going forward. In particular, the US S&P 500 with technology stocks and the Australian S&P 200 comprising mostly of banks and miners. Nathan discussed several shares that he has his eye on and how ‘active’ investing, such as the Intelligent Investor portfolios and stock recommendations, may shine this financial year.
Evan spoke about how the Australian dollar may fair this year and how knowing more about CEOs and founders of companies give you insight into potential opportunities. Alan Kohler is uniquely placed to quiz CEOs, founders, and portfolio managers as seen on Eureka Report.
I was able to shed some light on dollar-cost averaging and the passive investment approach that has favoured investors over the past number of years.
Ultimately, we all agreed that an investment strategy that combined a mixture of a passive and active approach was one that should be given consideration. To that end, you can discover more about InvestSMARTs range of diversified capped fee portfolios here.
To sum up, while it is going to be an interesting financial year for markets, we are quietly optimistic that with the right approach, it is one that can be successfully navigated.
You can watch the recorded webinar below:
Frequently Asked Questions about this Article…
Stock market indices being overweighted towards specific sectors, like technology in the US S&P 500 or banks and miners in the Australian S&P 200, can pose risks. If these sectors underperform, it can significantly impact the overall index performance, affecting investors who are heavily invested in these indices.
Active investing can present opportunities during the COVID financial year by allowing investors to make informed decisions based on current market conditions and expert insights. With resources like Intelligent Investor portfolios and stock recommendations, investors can potentially capitalize on market fluctuations and sector-specific trends.
A combined approach of active and passive investing can be beneficial as it allows investors to balance the stability of passive strategies with the potential for higher returns through active management. This diversified strategy can help mitigate risks and take advantage of market opportunities.
Understanding CEOs and founders of companies can provide valuable insights into a company's potential opportunities and challenges. Their leadership style, vision, and track record can influence a company's performance and strategic direction, offering investors a deeper understanding of their investments.
Dollar-cost averaging benefits investors by reducing the impact of market volatility. By investing a fixed amount regularly, investors can buy more shares when prices are low and fewer when prices are high, potentially lowering the average cost per share over time.
The outlook for the Australian dollar this financial year is uncertain, but understanding economic indicators and market trends can help investors make informed decisions. Keeping an eye on global economic conditions and trade relationships can provide clues about the currency's future performance.
InvestSMART's diversified capped fee portfolios can help investors by offering a range of investment options that combine active and passive strategies. These portfolios are designed to provide diversification and cost-effectiveness, helping investors achieve their financial goals while managing risks.
The general sentiment for the financial markets this year is cautiously optimistic. While challenges remain due to the COVID crisis, with the right investment approach, including a mix of active and passive strategies, investors can navigate the markets successfully.
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