InvestSMART's Performance for the month of May

If you only viewed the investment markets through the lens of the media headlines you'd expect to see poor performance for the last twelve months, however the reality is quite different.
By · 21 Jun 2023
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21 Jun 2023 · 5 min read
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Hybrid Income Portfolio Designed for investors an opportunity to diversify their income stream, with a portfolio of predominantly ASX-listed hybrid securities. Download PDF More info

InvestSMART's core diversified portfolios had a positive 12 months. If you only went by media headlines this may be a surprise. We've said it before, but the importance of diversification cannot be overstated when looking at the results and into the future. Australian equities were flat with iShares ASX 200 ETF (IOZ) up 2.90% while property (VAP), global bonds (VBND) and infrastructure (IFRA) were negative. It was international equities through our holding in the Vanguard MSCI Index International Shares ETF (VGS) which returned 13.48% that provided the performance. 

Diversification was a strong feature of our latest investor webinar. Whilst we do not focus on macro-economic events, the economic outlook remains murky and is weighing on investors' minds. As interest rate and recession speculation are still front-page news I spoke with our own Evan Lucas and Senior APAC Economist for Indeed Group, Callam Pickering to get their view.

Callam noted the labour market remained strong, and as an economy if we had to have a recession, you'd want to be entering it with a strong labour market. It positions the nation well for coming out the other side. Evan has labelled it as a "buyer's strike" recession. Meaning people are reducing spending, purchasing cheaper essential goods and services and cutting luxury expenses.  

On the income prospects for the portfolios Evan again noted the benefits of the portfolios' diversification: “Whilst we may see a decline in dividends from the consumer staples and discretionary component of the ASX 200, you’ve got the banks with healthier than ever margins. Also, any decrease you may see in Australian equity yields, we expect these to be offset by higher cash and bond yields." 

Both Callam and Evan expect further interest rate rises in the near-term, but anticipate that they'll decline back towards neutral territory (e.g. 2 - 3%) over the long-term. They do not believe that high interest rates will remain for an extended period of time due to the potential damage they could inflict on household debt. 

So, how does this affect our portfolios? As always, InvestSMART's focus is on our investment pillars of low cost, passive index tracking investments, and diversification. Twelve months ago, the future was just as uncertain as it is today. Our focus on diversification has helped our portfolios weather the uncertainty.

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Mitchell Sneddon
Mitchell Sneddon
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