InvestSMART Portfolio Update - January 2018
Activity during the month
During the month we made adjustments to the Interest Income Portfolio, redeploying cash across the portfolio into higher yielding securities. This portfolio is designed to form the fixed interest component of a diversified investor’s portfolio. You can read more about the changes in the portfolio update .
While our funds continue to perform as expected, it has been a particularly poor couple of months for listed property and this has been reflected in the Diversified Property & Infrastructure Portfolios recent performance.
Strategic Asset Allocation
Annualised performance figures are often quoted over periods of 20 years, demonstrating the cumulative benefit of continued long-term investment.
However, the reality is that not every investor has 20 years to invest and most use recent, short term performance figures to make their investment decisions regardless of their individual circumstances. Making investment decisions on this basis substantially increases the risk of underperformance from attempting to time markets.
Figure 1 shows the annual performance of various asset classes since 2000 and illustrates that while performance tends to average out over longer periods, in the short term, performance follows no discernible pattern. Monthly, quarterly and even 12-month performance figures are too short a period to judge performance. However, these are often the same figures on which investors base their decisions.
It is because of this inherent unpredictability that we promote Strategic Asset Allocation over attempting to time markets. This is the idea that investors should, instead of performance, focus first on understanding their objectives, time horizon & risk tolerance and construct diversified portfolios designed to deliver returns in line with them.
Discipline in maintaining this focus as opposed to chasing last periods’ returns should result in appropriate risk adjusted returns that are better suited to your specific circumstances. Is your portfolio appropriately positioned? Complete a Health Check today.
| Asset Class | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 |
|---|---|---|---|---|---|---|---|---|---|
| Cash |
6.19% | 4.89% | 4.74% | 4.89% | 5.49% | 5.64% | 5.99% | 6.66% | 6.98% |
| Domestic Equities |
5.22% | 10.36% | -8.77% | 14.61% | 27.99% | 22.83% | 24.22% | 16.07% | -38.44% |
| International Equities |
2.19% | -9.97% | -27.44% | -0.76% | 9.94% | 16.84% | 11.49% | -2.60% | -24.92% |
| Domestic Fixed Interest |
12.04% | 5.48% | 8.81% | 3.05% | 6.96% | 5.79% | 3.12% | 3.50% | 14.95% |
| International Fixed Interest |
11.65% | 8.29% | 11.57% | 6.59% | 8.92% | 3.81% | 5.40% | 6.63% | 9.23% |
| Domestic Property |
19.71% | 14.60% | 11.76% | 8.80% | 32.01% | 12.50% | 34.03% | -8.41% | -53.99% |
| International Property |
Insufficient Data | -49.04% | |||||||
| Asset Class | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 |
|---|---|---|---|---|---|---|---|---|---|
| Cash |
3.43% | 4.68% | 4.85% | 3.74% | 2.78% | 2.68% | 2.25% | 1.99% | 1.74% |
| Domestic Equities |
37.03% | 1.57% | -10.54% | 20.26% | 20.20% | 5.61% | 2.56% | 11.80% | 11.80% |
| International Equities |
-0.30% | -2.04% | -5.34% | 14.14% | 48.03% | 15.01% | 11.80% | 7.92% | 13.38% |
| Domestic Fixed Interest |
1.73% | 6.04% | 11.37% | 7.70% | 1.99% | 9.81% | 2.59% | 2.92% | 3.66% |
| International Fixed Interest |
8.03% | 9.28% | 10.51% | 9.66% | 2.27% | 10.37% | 3.35% | 5.24% | 3.68% |
| Domestic Property |
7.92% | -0.41% | -1.48% | 32.99% | 7.11% | 27.04% | 14.32% | 13.16% | 5.72% |
| International Property |
31.45% | 19.18% | -4.19% | 31.81% | 11.06% | 21.92% | 4.96% | 6.25% | 9.82% |
Figure 1: 1-year Performance comparison by asset class
Source: Morningstar
Performance data is represented by the following benchmarks. Cash: RBA Bank accepted Bills 90 Days. Domestic Equities: S&P/ASX 200 TR AUD. International Equities: MSCI World Ex Australia NR AUD. Domestic Fixed Interest: Bloomberg AusBond Composite 0 Y TR AUD. International Fixed Interest: BBgBarc Global Aggregate TR Hdg AUD. Domestic Property: S&P/ASX 200 A-REIT TR. International Property: S&P Developed Property NR Hdg AUD. Source, Morningstar.
InvestSMART Core Growth Portfolio
The InvestSMART Core Growth Portfolio produced a return of 0.05% (after fees) during January.
The Vanguard All World Ex US Shares ETF (VEU) was the best performing security for the month up 2.39%.
The estimated yield on the portfolio is currently 2.87%.
Since inception, the portfolio has returned 7.89% per annum (after fees).
| Performance to 31 January 2018 | 1 Month | 3 Months | 6 Months | 1 Year | 2 Years | 3 Years | SI (p.a) |
|---|---|---|---|---|---|---|---|
| InvestSMART Core Growth | 0.05% | 2.03% | 6.36% | 10.61% | 10.50% | 5.74% | 7.89% |
| Morningstar Aus Msec Growth TR AUD | 0.13% | 2.18% | 6.93% | 10.69% | 9.97% | 6.78% | 8.61% |
| Excess to Benchmark | -0.08% | -0.16% | -0.56% | -0.09% | 0.54% | -1.03% | -0.71% |
| RBA Cash Rate 3% | 0.37% | 1.13% | 2.27% | 4.59% | 4.69% | 4.86% | 4.92% |
| Excess to Objective | -0.32% | 0.90% | 4.09% | 6.01% | 5.81% | 0.89% | 2.97% |
Figure 2: Portfolio Performance after fees
Source: InvestSMART, MorningStar, Praemium
InvestSMART Diversified Income Portfolio
The InvestSMART Diversified Income Portfolio produced a return of -0.54% (after fees) during January.
Macquarie Income Opportunities (MAQ0277AU) was the best performing security for the month up 0.29%.
The estimated yield on the portfolio is currently 3.24%.
Since inception, the portfolio has returned 4.55% per annum (after fees).
| Performance to 31 January 2018 | 1 Month | 3 Months | 6 Months | 1 Year | 2 Years | 3 Years | SI (p.a) |
|---|---|---|---|---|---|---|---|
| InvestSMART Diversified Income | -0.54% | 1.15% | 3.26% | 5.49% | 6.13% | 3.69% | 4.55% |
| Morningstar Aus Msec Moderate TR AUD | -0.11% | 0.99% | 3.36% | 5.85% | 5.53% | 4.35% | 4.92% |
| Excess to Benchmark | -0.43% | 0.16% | -0.10% | -0.37% | 0.60% | -0.65% | -0.37% |
| RBA Cash Rate 1% | 0.21% | 0.63% | 1.26% | 2.53% | 2.63% | 2.79% | 2.81% |
| Excess to Objective | -0.74% | 0.53% | 2.00% | 2.96% | 3.50% | 0.91% | 1.74% |
Figure 3: Portfolio Performance after fees
Source: InvestSMART, MorningStar, Praemium
InvestSMART Interest Income Portfolio
The InvestSMART Interest Income Portfolio produced a return of -0.02% (after fees) during January.
The VanEck Vectors Australian Floating Rate ETF (FLOT) was the best performing security for the month, up 0.35%.
The estimated yield on the portfolio is currently 2.65%.
Since inception, the portfolio has returned 2.07% per annum (after fees).
| Performance to 31 January 2018 | 1 Month | 3 Months | 6 Months | 1 Year | 2 Years | SI (p.a) |
|---|---|---|---|---|---|---|
| InvestSMART Interest Income | -0.02% | 0.23% | 0.76% | 2.02% | 2.03% | 2.07% |
| Bloomberg AusBond Composite 0 Y TR AUD | -0.27% | 0.08% | 0.85% | 2.75% | 2.52% | 2.97% |
| Excess to Benchmark | 0.25% | 0.15% | -0.09% | -0.73% | -0.49% | -0.90% |
| RBA Cash Rate | 0.12% | 0.38% | 0.75% | 1.51% | 1.61% | 1.60% |
| Excess to Objective | -0.14% | -0.15% | 0.00% | 0.51% | 0.42% | 0.47% |
Figure 4: Portfolio Performance after fees
Source: InvestSMART, MorningStar, Praemium
InvestSMART Diversified Property & Infrastructure Portfolio
The InvestSMART Diversified Property & Infrastructure Portfolio produced a return of -3.56% (after fees) during January.
In what was a fairly poor month for listed property & infrastructure, the VanEck Vectors Global Infrastructure ETF (IFRA) was the best performing security for the month, down 2.08%.
The estimated yield on the portfolio is currently 3.27%.
Since inception, the portfolio has returned 3.70% per annum (after fees).
| Performance to 31 January 2018 | 1 Month | 3 Months | 6 Months | 1 Year | 2 Years | SI (p.a) |
|---|---|---|---|---|---|---|
| InvestSMART Diversified Property & Infrastructure Portfolio | -3.56% | -1.01% | 0.63% | 0.66% | 2.84% | 3.70% |
| A Composite Index | -1.75% | 0.32% | 2.56% | 3.75% | 5.14% | 5.96% |
| Excess to Benchmark | -1.81% | -1.33% | -1.93% | -3.09% | -2.30% | -2.26% |
Figure 5: Portfolio Performance after fees
Source: InvestSMART, MorningStar, Praemium
InvestSMART International Equities Portfolio
The InvestSMART International Equities Portfolio produced a return of 1.96% (after fees) during January.
The iShares Asia 50 ETF (IAA) was the best performing security for the month up 4.95%.
The estimated yield on the portfolio is currently 1.93%.
Since inception, the portfolio has returned 12.31% per annum (after fees).
| Performance to 31 January 2018 | 1 Month | 3 Months | 6 Months | 1 Year | 2 Years | 3 Years | SI (p.a) |
|---|---|---|---|---|---|---|---|
| InvestSMART International Equities | 1.96% | 3.94% | 12.56% | 18.63% | 15.01% | 8.36% | 12.31% |
| MSCI World Ex Australia NR AUD | 1.75% | 3.24% | 12.27% | 18.15% | 13.42% | 10.49% | 14.15% |
| Excess to Benchmark | 0.21% | 0.69% | 0.29% | 0.47% | 1.59% | -2.13% | -1.84% |
Figure 6: Portfolio Performance after fees
Source: InvestSMART, MorningStar, Praemium
InvestSMART Hybrid Income Portfolio
The InvestSMART Hybrid Income Portfolio produced a return of 0.17% (after fees) during January.
National Income Securities (NABHA) was the best performing security for the month up 1.50% while Macquarie Capital Notes II (MQGPB) was worst performing at -1.7%.
The estimated gross running yield (incl. of franking) is currently 5.28%.
Since inception, the portfolio has returned 3.22% per annum (after fees).
| Performance to 31 January 2018 | 1 Month | 3 Months | 6 Months | SI (p.a) |
|---|---|---|---|---|
| InvestSMART Hybrid Income | 0.17% | 1.32% | 3.11% | 3.22% |
| RBA Cash Rate 3% | 0.37% | 1.13% | 2.27% | 2.65% |
| Excess to Benchmark | -0.20% | 0.19% | 0.84% | 0.57% |
Figure 7: Portfolio Performance after fees
Source: InvestSMART, MorningStar, Praemium
Frequently Asked Questions about this Article…
In January 2018, the InvestSMART Interest Income Portfolio saw adjustments with cash being redeployed into higher yielding securities to enhance returns.
The InvestSMART Core Growth Portfolio produced a return of 0.05% after fees in January 2018, with the Vanguard All World Ex US Shares ETF being the best performer, up 2.39%.
Strategic Asset Allocation is recommended because it focuses on understanding investment objectives, time horizon, and risk tolerance, rather than attempting to time unpredictable market movements, which can lead to underperformance.
The InvestSMART Diversified Income Portfolio returned -0.54% after fees in January 2018, with Macquarie Income Opportunities being the best performing security, up 0.29%.
The InvestSMART International Equities Portfolio achieved a return of 1.96% after fees in January 2018, with the iShares Asia 50 ETF leading performance, up 4.95%.
The estimated gross running yield of the InvestSMART Hybrid Income Portfolio, including franking, is currently 5.28%.
Listed property has experienced a particularly poor performance in recent months, as reflected in the performance of the Diversified Property & Infrastructure Portfolio.
Understanding your investment objectives and risk tolerance is crucial for constructing a diversified portfolio that aligns with your goals and delivers appropriate risk-adjusted returns.
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