Jan 25, 2021
Investors may be feeling a cautious sense of optimism as we enter 2021 with global vaccine rollouts. Last year, technology companies and commodities were investment winners, so what will 2021 hold for investment markets? There are three trends we see influencing ETF investments in 2021: the movement to value, thematic investing and short & leveraged investing. Download the complete paper here Movement to value As news of vaccines hit markets in late 2020, investors started to shift their approach away from a pure growth focus and towards value investments such as banks and industrials. This trend is likely to continue in 2021 as investors anticipate a return to ‘normal’ and start to view growth stocks, particularly in the technology sector, as overpriced. The Australian sharemarket is strongly skewed towards financials and resources, including companies typically falling into value investments. Investors could consider tailored Australian exposures such as ETFS S&P/ASX 300 High Yield Plus ETF (ASX Code: ZYAU). Thematic investing with climate and biotechnology Investors are increasingly interested in tailored investments accessing the growth themes of the future, as well as being able to invest according to their views and values. ETFs targeting specific themes should continue to be prominent in the coming year and investors are becoming more aware of how to use these as part of their portfolios. While themes like virtual connectivity will continue to be popular, dynamics in the coming year should mean climate change and biotechnology will be focus points for investors. Investors considering thematic investing may wish to look at ETF Securities’ Future Present Range of ETFs. Those specifically interested in biotechnology may consider ETFS S&P Biotech ETF (ASX Code: CURE). Alternatively, investors focused on renewable energy may consider battery technology which is a key supporter for the viability of renewable energy. ETFS Battery Tech & Lithium ETF (ASX Code: ACDC) is the only Australian-listed ETF to offer exposure to the global battery technology supply chain. Short and leveraged investments Across the volatility of 2020, many self-directed sophisticated investors took a short-term approach to trading and embraced short & leveraged funds. As the world continues to recover from COVID-19 and manages the ongoing tension in global relationships, use of short and leveraged instruments is likely to continue along with continued bouts of volatility. Some sophisticated investors may anticipate changes in growth sectors like technology as the world opens again and choose short-term investments reflecting their views. For more information on the short & leveraged investments offered by ETF Securities, please click here. Moving forward in 2021 The last year was unexpected and has shifted global investment behaviour and dynamics. The Australian ETF market will continue to grow and evolve to meet the needs of investors and if the past year is any indication, investors are looking for opportunities and increasingly using ETFs for their market exposure.
Nov 03, 2020
Gold can seem like a mysterious asset, but data suggests it has a clear value in a portfolio. Setting the price Gold prices are set by the London Bullion Market Association (LBMA) which also incorporates specific global standards for gold sales and receipt. According to the World Gold Council, there are four broad sets of drivers to indicate gold’s performance1 which vary in their influence at different points in time. Economic expansion: gold is used in jewellery, technology and long-term savings. These are areas that experience a boost in times of economic growth. These are also periods where inflation and interest rates may rise, and gold is traditionally viewed as a hedge against inflation. Risk and uncertainty: gold has traditionally acted as a store of value in uncertain times and its demand can go up in market downturns, for example, demand increased in the early months of the global COVID-19 pandemic. Opportunity costs: the costs and returns of other assets, such as bonds and currencies, can increase or decrease investor interest in gold. Momentum: price trends, the use of riskier investments and general investment flows can direct demand for and therefore the price of gold. The investment value of gold Gold is included in portfolios for a myriad of reasons – diversification, growth, as a hedge against inflation, and for a volatility safe-haven. These reasons are backed by the data. Gold has a low (and at times, negative) correlation to other assets as shown in the following chart. This means it performs differently to other asset classes thus assisting with diversification and in volatile periods in other asset classes. Gold has also offered positive performance over the longer term against other asset classes as shown in the following chart: Allocating to gold in a portfolio Gold allocations traditionally spread from 2-10% of a portfolio depending on risk tolerance and market conditions. For many investors, taking a flexible approach may be the answer, dialling up or down allocations based on individual client portfolio needs and market activity. For example, some financial advice firms, like Stockspot, have used a slightly higher allocation of 12% in recent times. Using an ETF like ETFS Physical Gold (ASX Code: GOLD) may be a suitable option for many portfolios as it offers a low-cost, liquid and easy to use exposure without the need for physical storage. Contact us to find out more about GOLD and using gold in your portfolio. Client Services Phone +61 2 8311 3488 Email: infoAU@etfsecurities.com.au 1 https://www.gold.org/goldhub/research/relevance-of-gold-as-a-strategic-asset-2020-individual
Apr 02, 2020
From the current COVID-19 situation to the future, markets will always face periods of uncertainty and volatility. A measured approach to investment management can assist with supporting your investment portfolio in these periods. In this paper, we discuss four common approaches. Download now Market volatility refers to the magnitude of upward and downward movements in asset prices over a period of time. A company whose stock price moves up and down by 1% daily is considered less volatile than one with 5% daily moves. Investors tend to think of volatility in terms of downward market movements, as we are currently seeing, but it can equally relate to the pace of rising markets. Approaches to managing volatility 1. Diversification Different assets, regions and sectors may react differently to market events and perform better in certain market conditions. For example, travel and tourism are struggling in the current situation while supermarkets are thriving. For this reason, spreading your money across a range of investments can help balance your exposure to volatility experienced in different areas. 2. Incorporating more stable, less cyclical investments Some investments may not offer high growth but tend to be consistent across a range of markets. For example, essential services infrastructure is needed regardless of market conditions so can continue to offer stable performance in times of volatility. 3. Alternative investments Some investors seek out investments which specifically perform differently to share and bond markets. The aim of this strategy is to help neutralise any negative outcomes experienced in share and bond investments. One asset used in this way is gold which typically has a low or negative correlation with other asset classes. 4. Strategic tilts For certain investors, incorporating short-term investments during market volatility might be part of their strategy. This might mean temporarily adding defensive investments to help protect their portfolio or it might mean seeking out high growth (riskier) investments if they believe there may be opportunities from an eventual market recovery. ETFs can be an effective tool for investors in periods of market volatility. They can assist by offering broad exposure and instant diversification in a liquid and cost-effective manner. The wide range of specialised ETFs available on today’s stock exchanges also offer investors choice and flexibility in how to adapt to changing market conditions. Beyond these measures, it’s worthwhile stepping back to consider the what, why and how of your investments rather than simply following the crowds. It can also help to speak to a financial professional about your strategy and options. For more information on the solutions ETF Securities offers, please contact us on: Sales Trading Phone +61 2 8311 3488 Email: firstname.lastname@example.org Phone +61 2 8311 3483 Email: email@example.com