Smart Investing
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The Federal Budget’s confirmation that the annual cap on concessional superannuation contributions for all fund members over 50 will halve to $25,000 from the 2012-13 financial year, has some investment commentators envisaging that more investors will turn to negative gearing.
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We've been told by the financial community at large that it's a tough time to be an investor. The financial markets are extremely volatile. Bond yields are near historic lows. The outlook is uncertain.
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The latest bouts of sharemarket volatility and this month’s cut in official interest rates once again highlight the crucial role of bonds in a properly diversified investment portfolio.
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Self-managed super funds typically have a much high exposure to cash than fixed interest.
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The Australian superannuation industry reverted this week to its unwanted status as one of the government’s favourite Budget ‘hollow logs,’ with billions of dollars in savings extracted from the system by reneging on a tax break meant to encourage higher retirement savings, and a doubling of the concessional tax rate on the super contributions of those earning more than $300,000.
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News & Commentary
ETFs in volatile times 29 Nov 11
Despite intense market volatility, the total market capitalisation of exchange traded funds (ETFs) continues to solidly grow on a year-by-year basis.
The latest Listed Managed Investments Monthly Update, published by the ASX, reports that the market capitalisation of Australian-listed ETFs rose by more than 9 per cent to $4.5 billion (excluding exchange traded commodities) over the 12 months to October.
And over the past two years, the market cap of ETFs (again not counting exchange traded commodities) is up by 58 per cent.
During times of high market volatility, more investors are likely to recognise the attributes of ETFs as a convenient, flexible and low-cost means to rebalance their share portfolios. The aim, of course, is to further diversify risks while aiming to maximise returns.
One common strategy is to use ETFs and/or traditional index funds to provide the “core” of a share portfolio, capturing market returns. And then to hold a “satellite” of specific shares and/or actively managed share funds to add diversity as well as the chance of out-performance from favoured investments.
A phenomenon of the local ETF market is the rapid expansion in the product line-up. Over the past two years, 25 new ETFs have been listed on the Australian market, bringing the total to 50. New ETFs listed since December include products covering high yields, small companies, and large companies.
* Written by Robin Bowerman, Principal, Corporate Affairs & Market Development at Vanguard Investments Australia.
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