I got up early last Saturday morning and started my usual weekend routine. Made myself a cup of coffee, a piece of toast and logged on to the AFR.
Reading through the headlines, I came across many investment themes and ideas and couldn’t help thinking to myself “There’s an ETF for that!”
Now this wasn’t always the case for the Australian market. I came to Sydney from Toronto in 2010 and whilst the North American market had over 200 ETFs then, the ASX had only 38 ETFs that were trading at the time. My how the landscape has changed! It is now possible to construct a full investment portfolio with exposure to every major asset class just by purchasing ETFs that trade on the ASX.
Now back to my weekend reading – some of last weekend’s AFR Headlines read:
“Australian shares poised to rally on Wall St, commodities –
Australian shares are set to reclaim the 6000-point mark to start the week on the strength of a Wall Street rally and gains in gold, oil and base metals.”
Commodities or alternative assets are starting to look attractive as markets move to a maturing business cycle and central banks tighten interest rates. WTI (Oil) is also currently in “backwardation” which is when the current futures contracts trade at a premium to longer dated contracts. This usually occurs as inventories decline, making it less costly to store oil. In general, backwardation acts as a net benefit to an investor.
For those looking to take a position on gold or commodities, BetaShares offers:
QAU – Gold Bullion ETF – a Fund designed to track the performance of the price of gold bullion, with a currency hedge against movements in the AUD/USD exchange rate (before fees and expenses).
OOO – Crude Oil Index ETF (synthetic) – a Fund designed to track the performance of an index (before fees and expenses), that provides exposure to crude oil futures, with a currency hedge against movements in the AUD/USD exchange rate.
QCB – Commodities Basket ETF (synthetic) – a Fund designed to track the performance of an index (before fees and expenses), comprised of commodities futures, with a currency hedge against movements in the AUD/USD exchange rate.
Onto the next headline…
“Fraud and identity theft ‘growing threat’ to $1.7 trillion real estate business –
Mis-selling, fraud, ‘out of control’ identity theft and hacking are a growing threat to the nation’s $1.7 trillion real estate sector, according to analysis by banking and technology specialists. A mix of antiquated and inadequate digital processing, regulatory gaps, sophisticated hackers, fraud and absence of manual systems are creating unprecedented levels of risk to borrowers and lenders, they claim.”
Cybersecurity is not just a technology issue, it is also a business and government one as well. The growing threat of data breaches and hacks has forced governments globally and many companies to focus on boosting their cybersecurity defences and spending money to ensure their online presence is secure. This has created an opportunity for investors looking to take advantage of this emerging theme. There are possibly large profits to be made by companies that offer cybersecurity solutions as companies pour billions into upgrading internal systems. For those looking to take advantage of this growing trend, BetaShares offers:
HACK – Global Cybersecurity ETF – A Fund that aims to track the performance of the Nasdaq Consumer Technology Association Cybersecurity Index, before fees and expenses.
Incidentally, HACK has performed well since its inception in August 2016 to end February 2018, returning 16.98% p.a.
And now to the final newspaper headline…
“JPMorgan’s Daniel Pinto sees ‘deep correction’ for equities –
JPMorgan Chase executive Daniel Pinto warned equity markets could fall as much as 40 per cent in the next two to three years. His comments come as investors worry over the effect of central banks raising interest rates and rising inflation. “It could be a deep correction,” said Pinto, the bank’s co-president, in an interview. “It could be between 20 per cent to 40 per cent depending on the valuation.”
The bull market turns nine years old on Friday and appears poised to set the record as the longest in history, buoyed by global economic growth and strong company earnings. Bull markets don’t just die from old age and whilst equity markets seem to look OK for the near term, the risk of a major correction is increasing.
If your portfolio has benefitted from these gains, it may be prudent to consider shifting some of your portfolio into risk managed strategies that seek to defend against a prolonged drawdown in the market, whilst still offering some of the upside if the bull keeps running.
For risk managed strategies, BetaShares offers:
AUST – Managed Risk Australian Share Fund (managed fund) – A Fund that aims to provide exposure to a broadly diversified portfolio of Australian shares, while seeking to reduce the volatility of the equity investment returns and defending against losses in declining markets.
WRLD – Managed Risk Global Share Fund (managed fund) – A Fund that aims to provide exposure to a broadly diversified portfolio of global shares, while seeking to reduce the volatility of the equity investment returns and defending against losses in declining markets.
(I note that, strictly speaking, these ASX-traded funds are not “ETFs” as their risk management strategies mean they do not passively track an index).
For my own portfolio, I look to take advantage of emerging themes and trends whether it’s equities, alternatives or risk managed strategies. It is now easier than ever to invest in this way using ETPs, which can be used to express these views without having to worry about which specific stock will or won’t do well, instead allowing you to focus on selecting an appropriate asset mix for the portfolio.