Opportunity in volatility: High Growth Portfolio quarterly update

FY19 was an interesting year for the High Growth Portfolio, as the capital performance of both sides of the portfolio was very strong.

By ·
15 Oct 2019

The InvestSMART High Growth Portfolio is suited to people with a long term investment plan. You might be compounding your savings over the long term, growing your nest egg to provide you with an income down the track or investing in your SMSF to provide for your lifestyle in retirement. Below is our quarterly update for the portfolio which is part of the InvestSMART Capped Fee range.

 

Quarterly Highlights

  • The InvestSMART High Growth Portfolio produced a return of 3.20% (after fees) during the September quarter
  • No changes were made to the portfolio during the quarter
  • Estimated yield on the portfolio is currently 4.17%
  • All holdings of the portfolio attributed to the quarter’s performance

 

FY19 was an interesting year for the High Growth Portfolio, as the capital performance of both sides of the portfolio was very strong. The defensive side of the portfolio was particularly interesting considering fixed interest and treasuries produced capital returns one would normally associate with growth asset. This meant the portfolio produced above average returns.

However, to start FY20 its performance has slowed, and this is despite the fact that July saw 5 of the 23 MSCI developed equity markets making new record all-time highs and closing highs while another 6 were with in 2% of their respective all-time highs. As we forecasted at the end of FY19 we did not expect the kind of capital performance seen last year to flow through into this financial year. So far, that expectation is becoming fact as the premium price in markets, low yields on offer and global risks impact investor appetite.

With central banks the world over beginning their new accommodation cycle the other major theme of FY19 had been the differential between bond and equity markets in that; bonds have been forecasting global malaise, while equities the possible ‘cure’ to this malaise in the form of more accommodation from central banks. This is now reality, however, as the monetary policy accommodation cycle begun the level of disappointment from the market ramped up, something that is likely to hold true in the remained of FY20.

Equities are also moving into what is traditionally the most volatile quarter of the financial year, with October being the most volatile month of a calendar year.

The US has started Q2 in with its worst start to a quarter since the March quarter of 2009 and its worst start to an October since 2014. We would also point out that on average since 1900 the US experiences one correction (10% decline or more) a year. This hasn’t happened in 2019 yet.

The ASX too has started the quarter with a 2.4% decline despite the RBA cutting rates for the 3rd time in 5 months in October as the RBA looks to take pre-emptive measures.

We highlight this for constructive a reason – and that is that your investment time horizon is key, and one should always be thinking in 7 year timeframe. Pull backs are opportunities not impediments.

Your opportunity to average down your cost base as you look to your investment time horizon gives you the ability to look through the intra-day, week, month and even yearly fluctuations with a resolve that will minimise making an investment mistake.

 

Click here to read up on the InvestSMART High Growth Portfolio, download a PDS and start an online application.


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