Uncategorized Archives - Page 33 of 53 - Raiz Invest

If you’re starting out as an investor you may have heard about something called “liquidity”, but you may not be exactly sure what it is or what the term refers to.

That’s totally understandable as there are lots of concepts to come to grips with when you’re getting investing and it takes time to figure them all out.

The concept of liquidity is an important one to understand because in the context of financial markets it affects many aspects of how markets operate.

What is liquidity?

Simply put, liquidity refers to how easily an asset or security, such as shares, can be bought or sold in the market at a price reflecting its true worth, or in other words, its intrinsic value.

In a practical sense, this means that liquidity can be thought of as how easy it is to convert an asset to cash, which is considered the most liquid asset of all.

Assets can be placed on a scale from liquid to illiquid, depending on how easily they can be converted to cash. So-called tangible assets, like collectibles (cars, rare books etc) property and fine art, are considered relatively illiquid, while stocks are considered rather liquid.

Meanwhile, the liquidity of other assets such as contracts, currencies, commodities and derivatives commonly depends on how many players are in the market, their size and the amount of assets listed.

Characteristics of a liquid asset

Cash is considered the most liquid asset as it can be exchanged for goods and services instantly with no loss of value. In other words, you don’t have to wait for a suitable buyer of the cash and it can instantaneously be used to do things like selling, buying or paying down debt.

This contrasts with an illiquid asset that’s tough to sell unless you drop the price significantly. This could be to a lack of market actors (buyers and sellers) or to scepticism about the asset’s underlying value.

What’s market liquidity?

So, we’ve covered liquidity generally, but what about liquidity as it relates to the share market, or other financial markets. This is what’s generally known as market liquidity and it refers to how easy or hard it is for assets in a particular market to be bought and sold at stable prices reflective of true value.

The stock market is generally characterised by higher market liquidity meaning that, unless it is uncharacteristically dominated by selling, the bid price (the price a buyer offers per share) and the ask price (the price the seller is willing to accept) will be pretty close. One of the advantages of ETFs is their liquidity.

Watch out for illiquid markets

Liquid markets are usually a good thing. High levels of liquidity occur when there is a lot of trading activity and both high supply and demand for an asset, leading to less risk. But even in share markets, remember that some shares trade more actively than others on, meaning there is more of a market for them and they are more liquid than other, less traded, stocks.

By contrast, in an illiquid market, there may be only a few market participants and trading is infrequent, meaning that they carry higher risks. This is known as liquidity risk and becomes more prominent during times of market turmoil when holders of illiquid assets may find it hard to sell without losing a substantial amount of money.

The most widely known illiquid investments include hedge funds, property, private equity and infrastructure, and investing in these types of assets is usually not done by newbies.

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Download it for free in the App store or the Webapp below:

Important Information

The information on this website is general advice only. This means it does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the product.

A Product Disclosure Statement for Raiz Invest and/or Raiz Invest Super are available on the Raiz Invest website and App. A person must read and consider the Product Disclosure Statement in deciding whether, or not, to acquire and continue to hold interests in the product. The risks of investing in this product are fully set out in the Product Disclosure Statement and include the risks that would ordinarily apply to investing.

The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.

Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.

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14-04-20

From George Lucas, Raiz CEO

Global COVID-19 emergency rolls on

This week COVID-19 continued to cause upheaval across the globe. In the US, another $2.3 trillion was added to stimulus measures aimed at softening the virus’ impact on the US economy. This time, the focus of the stimulus was corporates, giving the US Federal Reserve more fire power in buying up US corporate debt. Asian markets reacted well to this new stimulus.

More broadly, the size of the stimulus packages coming out of the US, Europe, UK and Australia dwarf the stimulus packages that were rolled out during the global financial crisis and indicate how significant the economic effect of COVID-19 will be on output and unemployment worldwide.

Stocks rally despite coronavirus pandemic

The unprecedented global impact of COVID-19 makes last week’s rebound in equity markets so surprising. On the plus side, the rally partly reflects hopes that the peak in pandemic may be close. On the other hand, large increases in equity prices are quite common after major corrections.

In short, it’s hard to read much into the rally. That’s because it’s difficult to determine how much economic bad news is currently priced into the market given the unprecedented fiscal stimulus currently propping up the global economy. Indeed, governments themselves are finding it hard to forecast the pandemic’s economic impact as the multiple rounds of stimulus being rolled out makes clear. Governments around the world are all playing catch up with COVID-19 at the moment.

When will the global economy recover?

Ultimately, COVID-19’s full economic impact will become clearer when social-distancing restrictions are wound back and business starts to get back to normal. It’s hard to predict when this will be.

Air travel provides a case in point. With airlines grounded due to COVID-19, the International Air Transport Association (IATA) has projected a possible hit to worldwide revenues of up to $113bn this year – 20 per cent of 2019’s total revenues. It’s far from certain when things will return to normal.

However, what is clear is that air travel will not return to anything resembling business as usual until a vaccine is readily available in 12 to 18 months’ time. Until that point, this will have flow-on effects for domestic airlines, hotels, restaurants, bars and any tourist related industry linked to international air travel.

Govts need to get COVID-19 response right

With so much uncertainty, the recent market rebound relies on the belief that governments are getting it right with their stimulus packages. That’s what largely occurred during the GFC.

But there’s no guarantee they are getting it right. This economic downturn is not a financial crisis, but a shut down in consumer ability to buy and travel.

Important Note: The information on this website is provided for the use of licensed financial advisers only. The information is general advice and does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this website.

Investors only: The information in this Document is confidential it must not be reproduced, distributed or disclosed to any other person unless it is part of their statement of advice. The information may be based on assumptions or market conditions and may change without notice. This may impact the accuracy of the information. In no circumstances is the information in this Document to be used by, or presented to, a person for the purposes of making a decision about a financial product or class of products.

General advice warning: The information contained in this Document is general information only. It has been prepared without taking account any potential investors’ financial situation, objectives or needs and the appropriateness of this information needs to be considered in that context. No responsibility or liability is accepted by Instreet or any third party who has contributed to this Document for any of the information contained herein or for any action taken by you or any of your officers, employees, agents or associates.

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“Live long and prosper” are the words often spoken by Star Trek’s fictional character Spock, the half human, half Vulcan science officer aboard the USS Enterprise.

Now you may be wondering why we’re mentioning Star Trek in this blog article.

Is it because as a species, Vulcans have perfected the art of suppressing emotions, and maybe we all need to be a little more ‘Vulcan like’ to keep a steady nerve as we watch our investment balances decline?

Well yes, that’s a good reasons, but we mentioned Star Trek because one of the most endearing qualities of that TV show is its ability to frame its episodes in an allegory. Telling stories, which upon reflection, can readily illustrate and convey a complex concept in a more comprehensible way to the viewer.

Now for a moment, come on a journey with us. Let us take you back in time a few years ago. A time when the Australian housing market bubble had ‘burst’.

The housing market ‘burst’

Can you remember the influx of real estate that came onto the market? Owners that were falling over themselves to put their properties up for sale? No, we don’t remember that happening either!

Obviously, some people had no choice to sell, but as evidenced by the lack of properties for sale and the mass crowds of bargain hunter investors at every open house at the time, most owners had no intention of selling. First time home buyers and property investors saw it as an opportunity to buy at a “bargain price” but choice was limited as owners chose to simply wait it out and hope for the housing market to improve. Fast forward 12 months and sure enough most major cities were reporting modest property price increases.

If you were fortunate enough to own a property during that time and did not sell it, in real terms how much did you lose when the bubble burst? Well the answer is nothing. After all, it was only the current market value of your real estate that had changed, and you still owned the original investment. Therefore, the current market price is only ‘relevant’ if you want, or need, to sell your investment.

The example of the property market can equally be applied to other types of investments.

Applying this example to Raiz

When you make a deposit into Raiz, that money is fully invested into Exchange Traded Funds (ETFs) which are effectively baskets of shares that are traded on the ASX. You own ‘units’ in these ETFs, and depending on your portfolio choice, your portfolio is made up of either 4 or 7 different ETFs. The balance you see within your Raiz account is the current market value of all the units you own as part of your portfolio, and at no time is cash held as part of your balance. For more information on Raiz fees, click here.

In reality, the price of units in each of the ETFs will have a different current market price, but to simplify things, let’s just assume there is one unit price for a moment.

Say for example, you decided to invest $100, and the current unit price is $0.50. When you make that investment, your $100 would buy you 200 units.

Now say that unfortunately there is a downturn in the market, and the unit value is now only $0.40. Your 200 units would now have an investment balance of $80. So, you have lost $20, yes?

Well, yes and no! You see, you still have 200 units, like you still had your real estate investment in the example above. You only really lose $20 if you sell your units because at this point in time their value is currently less than it was when you bought them. However, if you don’t sell you still have the 200 units, and you have not realised the loss.

Keep in mind that the reverse is also true. If the market has an upturn, and the unit value is now $0.60, your 200 units would now have an investment balance of $120, so you are in profit by $20. Well again, that is only true if you sell, because from an investment perspective you still only have 200 units – and markets go up and down!

Sometimes we refer to this $20 profit or $20 loss as a ‘paper gain/loss’ because it does not become real until you sell. Every time you put money into Raiz, you are buying units, and every time you request a withdrawal you are selling units. It is only when you sell an investment that you ‘crystallise’ the profit or loss from having owned it.

It’s good to remember that when it comes to investing, there are only two key points in the whole investment cycle that really matter. The price you paid at the time that you bought the investment, and the price you get when you decide to sell it.

At the end of the day, every price your investment is “worth” between those two points is effectively just noise and is just a part of the roller-coaster ride of investing, which inevitably has highs and lows along the way.

Peace and long life. 🖖

Don’t have the Raiz App?

Download it for free in the App store or the Webapp below:

Important Information

The information on this website is general advice only. This means it does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the product.

A Product Disclosure Statement for Raiz Invest and/or Raiz Invest Super are available on the Raiz Invest website and App. A person must read and consider the Product Disclosure Statement in deciding whether, or not, to acquire and continue to hold interests in the product. The risks of investing in this product are fully set out in the Product Disclosure Statement and include the risks that would ordinarily apply to investing.

The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.

Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.

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30-03-20

From George Lucas, Raiz CEO

Governments globally ramp up response to pandemic

Over the last week we have witnessed the roll-out of government stimulus packages around the world aimed at supporting the global economy amid the COVID-19 pandemic.

Health impacts aside, governments are currently facing an economic emergency larger than the 2008 global financial crisis. Unlike that crisis, where banks stop dealing with other banks, COVID-19 has caused corporates to stop dealing with other corporates in a large and unexpected way.

Given the gravity of the crisis, government responses have been both on the fiscal and monetary sides, with the fiscal policies being slower to be enacted as some have been delayed by politics of the day.

Trump approves US$2 trillion stimulus package

In the US, President Donald Trump signed the largest stimulus package in that nation’s history, approving a US$2 trillion bill intended to buoy the coronavirus-hit economy where the number of cases continues to rise.

Despite the package, worth over 10 per cent of their GDP, it will not be enough to stop a sharp fall in US economic growth in coming months as the restrictions being imposed mean that fewer people will be on the streets buying essentials items or spending on entertainment or luxury goods.

On the monetary policy side, the US Federal Reserve also announced unlimited support for the US treasury market and the purchase of corporate bonds.  This too is their largest response to an emergency.

Australia announces major stimulus packages

In Australia, it’s a similar situation as the federal government tries to insulate the domestic economy from the worst impacts of the pandemic.

The Morrison Government has announced two major stimulus packages, worth around AUD$189 billion.

In total, the Australian stimulus package is in line with other global governments — almost 10 per cent of GDP — and there will be more to come aimed at ensuring businesses can resume trade quickly and re-employ workers when the crisis resolves.

Elsewhere, Japan is also planning a stimulus package of around 10 per cent of GDP with details yet to be finalised. This is the same in Europe where nations are still working through the politics.

The global economy

Globally, the biggest problem faced by all economies is that while coronavirus restrictions remain in place people are not doing business with shops, shops are not doing business with suppliers, and suppliers are not doing business with other companies.

This is known as the velocity of money, which describes the rate at which money is exchanged in an economy. The challenge right now is that the velocity of money in economies worldwide has fallen off a cliff and will not come back until the restrictions are removed.

So, despite fiscal and monetary stimulus, we all must prepare for a drop in GDP over the coming months due to layoffs, huge reductions in revenue for companies, and the shutting down of many companies.

Stimulus plans, both monetary and fiscal, take time to work and stabilise markets. It is not an instant cure. Although it may not be until next week, or next month, that they begin to work, governments are now in the process of doing all they can to ensure that the global economy can weather the current crisis, and recover as quickly as possible when it ends.

Important Note: The information on this website is provided for the use of licensed financial advisers only. The information is general advice and does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this website.

Investors only: The information in this Document is confidential it must not be reproduced, distributed or disclosed to any other person unless it is part of their statement of advice. The information may be based on assumptions or market conditions and may change without notice. This may impact the accuracy of the information. In no circumstances is the information in this Document to be used by, or presented to, a person for the purposes of making a decision about a financial product or class of products.

General advice warning: The information contained in this Document is general information only. It has been prepared without taking account any potential investors’ financial situation, objectives or needs and the appropriateness of this information needs to be considered in that context. No responsibility or liability is accepted by Instreet or any third party who has contributed to this Document for any of the information contained herein or for any action taken by you or any of your officers, employees, agents or associates.

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23-03-20

From George Lucas, Raiz CEO

I have been frequently asked in recent days how long this market volatility will last. The past two weeks have seen extreme volatility in equity markets, with moves (up and down) of up to 7% a day (and greater) compared with last year when a 1.5% move would have captured newspaper headlines. Now, if the market only moves 2% or 3%, it’s no longer newsworthy.

Make no mistake. If the current market volatility is not unprecedented, it’s rarely seen on this scale.  But it has happened before.

It’s not just equity markets. Market volatility can be highly infectious. Although most commentary has understandably been about the share market, it’s worth noting that this extreme volatility started in the oil market.

Two weeks ago, Russia and Saudi Arabia shocked markets globally when they could not agree on production cuts to help prop up prices, prompting Saudi Arabia, the world’s largest producer, to flood production, causing a huge decline in the price of oil.

So, at the very time the global economy is slumping in the wake of COVID-19, two major oil producers flood the market. The inevitable result saw the oil prices crash 30% in a day, sparking market volatility not only in equities, but in the currency and fixed income markets too.

In the foreign exchange (FX) market, the Aussie dollar last week fell as low as 55 cents against the greenback (US dollar) before rallying to close on Friday at around 58 cents. These are large moves for our currency.

In the three-year Australian Government bond market, yields on this government debt last week started at 0.85%, rallied up to as high as 1.60% and has fallen back by the end of last week to about 1.15%.

Certainly, this is not my first rodeo. I’ve been riding these extreme market selloffs and volatility events since the 1987 share market crash, so I know there’s no short-term remedy and it takes time for markets to calm again. Like everyone else, I wish there was a short-term fix.

That said, experience also tells me that the markets will recover in the long-term, that the record share market high of 20 February 2020 will be overtaken. I just don’t know when.

In what feels like unprecedented days, it’s worth reminding ourselves that other upheavals, global wars, September 11, even pandemics, such as the 1918-19 Spanish flu outbreak, has never stopped economic activity picking up and markets recovering.

As Douglas Adams (Hitchhiker’s Guide to the Galaxy) tells us, “don’t panic”. For many, this will not be the last market meltdown in your lifetime. Although, if you have a long-term plan that involves investing small amounts regularly, then you are on the right track.

Right now, I know it’s hard to focus on the long-term when the immediate future looks so bleak.

And it’s easy for me to write about how you should stick to your investment/savings. I know it’s hard to execute at the moment, but I firmly believe that if you do, it will be worth it in the long run.

Important Information

The information on this website is general advice only. This means it does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the product.

A Product Disclosure Statement for Raiz Invest and/or Raiz Invest Super are available on the Raiz Invest website and App. A person must read and consider the Product Disclosure Statement in deciding whether, or not, to acquire and continue to hold interests in the product. The risks of investing in this product are fully set out in the Product Disclosure Statement and include the risks that would ordinarily apply to investing.

The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.

Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.

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On 20 February, the bellwether ASX200 index closed at 7162 – a record high. On the 19th of March , its close at 4747 points represented a drop of 2415 points or 33.7% from this high point. To state the obvious, the actual and potential economic impact of COVID-19 (coronavirus), globally and locally, has markets spooked.

It’s the very unknowns about this virus, when coupled with the fact there is no vaccine, and lack of clear global government action, that is fuelling public anxiety and investor panic.

In this volatile investment environment, investors need to take a deep breath and hold their nerve. Like all crises that afflict the markets, such as the Global Financial Crisis, the dot.com crash, or the Black Monday 1987 crash (Tuesday in Australia), it will pass, and markets will recover.

Many of the companies listed on the stock exchange have sound fundamentals that will not be significantly impacted by COVID-19.

Companies that are well-managed, hold cash reserves, have revenue streams largely immune to the economic fallout from COVID-19 and with strong growth prospects had those qualities on 20 February – and still have them today.

In fact, there will be companies that could benefit from the changes in consumer behaviour due to the virus.

At Raiz, we completed a capital raise in December 2019, so have a strong cash position and are well funded. Our flat monthly fee model means our revenue stream is largely immune to the market fallout.

The systems and processes we have put in place at Raiz would allow us to serve our users even if there were a Government decision to effectively lock down the country.

We have taken all possible steps to ensure the business can operate normally with all staff capable of working remotely to maintain the highest level of service.

None of this is to minimise what is happening, or the real economic consequences it’s having and the hardship it could cause to employees in certain sectors such as hospitality or tourism.

Indeed, what is happening is a reminder that humans are not invincible, and that a microbe can have a huge impact on the world we live in.

Markets, unfortunately, do fall when such uncertainty takes place – sometimes sharply – and the worst possible response is a knee jerk reaction. Investment is a long-term game, and the events of recent weeks are a sober reminder of this.

Remember, investing small amounts regularly, over time, consistently, and no matter the market conditions, could help you gain financial experience and build a savings base.

Important Information

The information on this website is general advice only. This means it does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the product.

A Product Disclosure Statement for Raiz Invest and/or Raiz Invest Super are available on the Raiz Invest website and App. A person must read and consider the Product Disclosure Statement in deciding whether, or not, to acquire and continue to hold interests in the product. The risks of investing in this product are fully set out in the Product Disclosure Statement and include the risks that would ordinarily apply to investing.

The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.

Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.

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The disruption to the markets and our lives has continued due to the spreading global coronavirus outbreak.

The Australian equity market and the Australian dollar are not holding up well as the impacts of the virus are felt globally. Oil prices have also fallen dramatically as Saudi Arabia and Russia were unable to come up with a deal to support oil prices. Oil prices had already been falling due to expectations of slower global growth caused by the coronavirus.

I have no idea when the threat will end, but it now appears far from a short-term event, with the markets yet to be convinced that the stimulus and actions from governments will be enough to offset the spread of the virus and the economic issues it is causing.

Despite growing fear, it is unlikely that the virus will bring the world to a standstill as it seems to have mild effects on most infected people while having the most impact on the elderly. The 1918 Spanish flu, which was far more deadly, also failed to bring the world to a standstill.

Even so, given the fear around coronavirus, or COVID-19 as it is also known, people and markets are currently not acting rationally. Which is not surprising based on the number of unknowns. Indeed, the recent rush on toilet paper at supermarkets across Australia is a good illustration of how irrational people can become when mass fear sets in.

When it comes to the markets, it should be noted that given the strong global market rally over the last few years without a correction, especially in the US, a correction was going to occur at some point. The coronavirus and the short-term effects on the global economy has been the catalyst for this correction.

Given the current irrationality of the markets, it’s my view that long-term investors are best served sticking to their investment strategy. Specifically, I believe that the Raiz philosophy of investing small amounts regularly is the best way to go to assist in managing the current uncertainties associated with the markets.

Long term coronavirus impact still unclear

On the outlook, there is currently no vaccine for the virus, and it is unlikely that one will be available for at least 12 months. However, looking further ahead, the virus is likely to have significant long-term effects on our behaviour and communities.

The Spanish flu, for instance, had a large impact on social justice in the Western world and eventually led to socialised medicine, paid sick leave and many other benefits for communities now seen as unquestionable rights in many countries across the globe.

Going forward, while the long-term impacts of the coronavirus are yet to be seen, it’s likely to affect the way we save, invest, travel and our approach to social justice for many years to come.

I wish I had more insight into the short-term effects on markets. I understand that it’s easier to talk the talk about sticking to a philosophy of regular investing, but harder to walk to walk when it is your own money and markets are falling. I do however know that in the long-term the markets will recover, but I just can’t say when and how quickly.

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Market figures accurate as of 02/03/2020

When investing, it’s important to keep the big picture in mind. Even after a 10% drop in the last week of February, the ASX 200 Total Returns Index is still up 113% over the past 10 years.

However, we know it is difficult when it’s your own money, and seeing the big picture is not always easy as your goals may not be long term.

When stock prices are plunging over a matter of days, it can test anyone’s resolve. But periods of turbulence can be good for long-term investors. For long term investors, sometimes the best advice is: “Buy stocks.”

The market has always bounced back

While the ASX 200 Total Returns Index is down 3% this year, it’s still up almost 9% in the past 12 months, and a solid 35% in the past five years. This is substantial when compared to interest rates.

For old experienced investors, who have lived through many stock market corrections, a 3% decline in one day is just a blip; stock market corrections happen.

Now coronavirus is front and centre. Something else will be front and centre six months from now and a year from now and two years from now. Rather than trying to predict that market’s moves in the short term, investors can be better off by remaining disciplined and sticking to their strategy.

The market is correcting for more reasons than the coronavirus. Another driving factor in this correction is the strong rally we have had in the market over the last 12 months.  That is why the market is still up almost 9% over the last 12 months.

The 20- and 30-year outlook for markets is not changed by the coronavirus.

How to take advantage of market dips

Given that the market will eventually bounce back, there is the potential to seize the opportunity and buy more when prices are lower. You can take advantage of these declines in two ways: by dollar-cost averaging and by lump-sum investing.

With dollar-cost averaging, you regularly add money to your portfolio over time. The automatic features of Raiz; Round-Ups and Recurring investments, ensure that you buy at a variety of prices, regardless of whether the market is tumbling or soaring. That is, you will invest small amounts of money on a regular basis.

Doing so simplifies the investing process, removes the temptation to try to time the market by predicting when prices will be higher or lower, and can help manage risk for long term investors.

With lump-sum investing, you take a more tactical approach, which is also usually driven by emotion. If you see that the market has fallen by a certain amount, you’ll dive in with money you’ve been saving up for this exact purpose.

For example, if you receive a tax refund, a smart way to use that money is to invest it in the market. The goal here is to buy at the lowest possible price.

The same logic applies for withdrawing your money in a lumpsum, it is a tactical approach, usually driven by emotion rather than sticking to your investment saving strategy.

Research shows dollar-cost averaging minimises the potential for regret. And it’s rare that most people have the skill to make timing a lump-sum investment attractive.  It is all about time in the market not timing the market.

“Successful investing takes time, discipline and patience.” – Warren Buffett

Important Information

The information on this website is general advice only. This means it does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the product.

A Product Disclosure Statement for Raiz Invest and/or Raiz Invest Super are available on the Raiz Invest website and App. A person must read and consider the Product Disclosure Statement in deciding whether, or not, to acquire and continue to hold interests in the product. The risks of investing in this product are fully set out in the Product Disclosure Statement and include the risks that would ordinarily apply to investing.

The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.

Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.

Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.

Read Post

25/02/20

From George Lucas, Raiz CEO 

Soft Aussie jobs data hits AUD

This week saw the Australian dollar hit its lowest level against the US dollar since March 2009, while the yield of Australia’s 10-year government bonds fell below 1 per cent on Thursday.

The trigger for the slide in the local currency appears to have been weak jobs data, which showed the unemployment rate climbing to 5.3 per cent in January, up from 5.1 per cent in the previous month. However, it should be noted that the jobless rate rose because more people were looking for work, not because jobs were being cut, with total employment rising by 13,500.

RBA keeping close eye on labour market

Given the recent fall in the AUD, it’s unlikely that the Reserve Bank of Australia (RBA) will loosen monetary policy any further from its historically low level of 0.75 per cent.

However, given the uptick in the unemployment rate, RBA Governor Philip Lowe will be keeping a close eye on the labour market after flagging that an unemployment rate trending higher could justify another rate cut.  January’s increase does not signify a trend yet.

The RBA, in its considerations, would also be monitoring inflation as well as the effect on the economy of the sharp fall in the AUD this year.  This cannot be measured in one month of data.

Coronavirus impact on Aus economy unclear

Turning to the global coronavirus emergency,  experts are warning that the spread of the virus is outpacing efforts to contain it, with recent notable outbreaks in Italy and South Korea.

Regarding the virus’ impact on the Australian economy, the effect will depend on how quickly it is brought under control worldwide and especially in China, which is the epicentre of the emergency. That’s because Australia is exposed to both a sharp fall in Chinese tourism spending and prolonged factory closures in China flowing from efforts to contain the coronavirus.

I believe that the effect of the coronavirus may be short lived and in the near future we could see a rebound in the Australian dollar, but unfortunately also in inflation.

Bushfires likely to dent economic growth

While the impact of the coronavirus on Australia is still to play out,  the adverse impact of the recent bushfire emergency on growth will likely see the economy contract by 0.1 per cent this quarter.

Looking ahead, the news is better as we will see the bushfires add to the growth of the Australian economy in the next 36 months as the country begins to rebuild after the crisis.

Big 5 tech companies driving US stocks higher

In the US, the shares of the five big US tech firms — Facebook, Amazon, Apple, Microsoft and Alphabet — have done a lot of the heavy lifting in seeing the US stock market rise to a record high.

This begs the question, should we be concerned about a tech bubble? There are some obvious differences between today and the 1990s, with most of the modern tech stars hugely profitable.

However, the combined price/earnings ratio of the tech titans is now 60 per cent higher than that of the rest of the market, with tech stocks also the “most crowded trade” across global markets.

Rapid earnings growth behind tech stock valuations

Looking at the drivers for what’s going on with tech stocks, the story appears to be expectations of extremely rapid earnings growth fuelling high valuations. According to Bloomberg, analysts forecast that the big five will see double-digit earnings growth over the next three to five years, and a more than 20 per cent annualised rate in a couple of cases.

That’s far faster than analysts’ projections for the median firm in the S&P 500, and well above any reasonable estimate of US nominal GDP growth. On this basis, the tech rally amounts to a bet that the largest listed firms will become even more dominant in time.

However, downside risks remain. These stocks are exposed to political risk especially if Democrats win the presidential election. Indeed, big tech’s sheer size makes it most exposed to the tougher anti-trust enforcement supported by most Democratic candidates.

There’s also the risk that future US corporate tax reform may impact the tech giants’ earning, since their effective tax rates are generally lower than average. The EU is already taking a more proactive stance, with new digital services taxes a key threat.

Gold rises on coronavirus fears

Meanwhile, the price of gold rose above $1,600 per ounce for the first time since 2013 last week. While the drivers for this remain unclear, the jump may be linked to investors rushing to the precious metal’s safety due to fears over the global fallout from the ongoing coronavirus crisis.

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