A Better Investment Experience

We’ve yet to meet a person for whom we couldn’t improve their investment experience. Below we outline the Top 10 strategies every investor can adopt to enjoy a better investment experience.

1. Let markets work for you

The market is an effective information-processing machine. Millions of participants buy and sell securities in the world markets every day, and the real-time information they bring helps set prices. Remember – for every seller, there must be a buyer.

2. Invest, don’t speculate

3. Take a long-term approach

The financial markets have rewarded long-term investors. People expect a positive return on the capital they supply, and historically, the equity and bond markets have provided growth of wealth that has more than offset inflation.

4. Consider the drivers of returns

Academic research has identified these equity and fixed income dimensions, which point to differences in expected returns. These dimensions are pervasive, persistent and robust and can be pursued in cost-effective portfolios.

5. Practice smart diversification

It’s not enough to diversify by security. Deeper diversification involves geographic and asset class diversity. Holding a global portfolio helps to lower concentration in individual securities and increase diversification.

6. Avoid market timing

You never know which market segments will outperform from year to year. By holding a globally diversified portfolio, investors are well positioned to capture returns whenever they occur.

7. Manage your emotions

Many people struggle to separate their emotions from investing. Markets go up and down. Reacting to current market conditions may lead to making poor investment decisions at the worst times.

8. Look beyond the headlines

Daily market news and commentary can challenge your investment discipline. Some messages stir anxiety about the future, while others tempt you to chase the latest investment fad. When tested, consider the source and maintain a long-term perspective.

9. Keep costs low

Over long time periods, high costs can drag down wealth accumulation in a portfolio. Costs to consider included management fees, fund expenses and taxes.

10. Focus on what you can control

At Stewart Partners our team of advisers create plans tailored to each client’s personal financial needs whilst helping them focus on actions that add value. This leads to a better investment experience.

Disclosures:

Exhibit 1: In AUD. Year-end Bloomberg close FX rates used to convert original USD data to AUD.Source: World Federation of Exchanges members, affiliates, correspondents and non-members. Trade data from the global electronic order book. Daily averages were computed using year-to-date totals as of 31 December, 2016, divided by 250 as an approximate number of annual trading days.

Exhibit 2: Standard and Poor’s Indices versus Active (SPIVA) Funds Score Card Australia December 2016.

Exhibit 3: In AUD. Inflation CPI: Australian Consumer Price Index, Short-term Fixed Interest Securities: Bloomberg AusBond Bank Bill Index and Australian Share Market: S&P/ASX 300 Index (Total Return). Past performance is no guarantee of future results. S&P/ASX data reproduced with the permission of S&P Index Services Australia. Data provided by Bloomberg. Indices are not available for direct investment. Index performance does not reflect expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results.

Exhibit 4: Relative price is measured by the price-to-book ratio; value stocks are those with lower price-to-book ratios. Profitability is a measure of current profitability, based on information from individual companies’ income statements.

Exhibit 5: Data at 31 December 2016. The ‘Diversified Portfolio’ is purely a hypothetical portfolio intended to demonstrate geographic and asset class diversification. ‘Australian Equity Portfolio’ consists of 100% in S&P/ASX 300 Index. ‘Diversified Portfolio’ consists of 12.5% in S&P/ASX 300 Index, S&P Australia BMI Value Index, S&P/ASX Small Ordinaries Index, MSCI World ex Australia Index, MSCI World ex Australia Small Cap Index, MSCI World ex Australia Value Index, MSCI Emerging Markets Index and S&P Developed REIT Index. S&P/ASX data reproduced with the permission of S&P Index Services Australia. MSCI data copyright MSCI 2017, all rights reserved. Indices are not available for direct investment. Index performance does not reflect expenses associated with the management of an actual portfolio. Past performance is not a guarantee of future results.

Exhibit 6: In AUD. Chart is for illustrative purposes only. Index descriptions for asset groups: Australian Large: S&P/ASX 100 Index (Total Return), Australian Small: S&P/ASX Small Ordinaries Index (Total Return), Australian Value: S&P Australia BMI Value Index (AUD, gross div.), Global Large: MSCI World Index (net div., AUD), Global Small: MSCI World Small Cap Index (net div., AUD), Global Value: MSCI World Value Index (net div., AUD), Emerging Markets: MSCI Emerging Markets Index (net div., AUD), Property: S&P Global REIT Index (net div.), Cash: Bloomberg AusBond Bank Bill Index, Fixed Interest: Bloomberg Barclays Global Aggregate Bond Index (hedged to AUD). S&P/ASX data reproduced with the permission of S&P Index Services Australia. The S&P data are provided by Standard & Poor’s Index Services Group. MSCI data copyright MSCI 2017, all rights reserved. Bloomberg indices copyright Bloomberg 2017. Bloomberg Barclays data provided by Bloomberg. Indices are not available for direct investment. Past performance is not a guarantee of future results.

Exhibit 9: For illustrative purposes only. Assumes 6.5% annualised return over 30 years.