Investing

Is it time to take some risk off the table?

  • 15.APR.2019
  • Michael Rockliff,  XTB

If I said to you on New Year’s Eve that you could get a total return out of your equity portfolio of around 12% in 2019 would you take it? Well, to 9th April, the ASX 200 Accumulation Index returned 11.64%¹. Do you take your money out of the market and go to safety for the rest of the year? Lock in a safe and easy 14-15% total return for 2019?

I think this pretty much sums up markets at the moment. Do I continue to take risk? How much risk do I take? Do I take risk off the table?

Only when the tide goes out do you discover who's been swimming naked

This quote really resonates with me at this point in the cycle. There are so many geopolitical issues still going on:

  • We are still waiting for a Brexit solution
  • Trump’s trade wars with China and the rest of the world, plus
  • The IMF is reducing global growth forecasts.

 

In Australia, our economy is struggling. The chart below shows the market is pricing in two more rate cuts by the RBA to help stimulate our economy. In this environment, having transparency over what your clients are invested in has become even more important.

ASX Indicative Yield Curve: 11 April 2019

ASX Target Rate Tracker 11 April 2019

Spotlight on fixed income

In the ‘fixed income’ space, we have seen the emergence of a number of new products. Many of these seemingly give investors what they are looking for – a promise of high yield…but at what cost? The 3-year risk free rate (Australian Government Bonds) is currently trading at 1.39%.

So, if a ‘fixed income’ product is offering a 7% plus return, what are the risks involved with that product? If something were to go wrong, how would you explain the investment to your client?

Including quality names in your portfolio can provide you and your clients with a level of comfort in uncertain times. We can help you create a portfolio that gives you a known outcome for income and the value at maturity, with ASX 100 quality names, subject to there being no default.

XTB Update

We are approaching our four year trading anniversary on ASX. This year alone, we have seen four XTBs mature, returning over $10.5m of face value back to clients.

We currently have 48 XTBs, (12 floating and 36 fixed rate) ranging in maturities from 2019 through till 2027. Over the coming months, we intend to add more XTBs to our range.

XTB portfolios continue to perform

XTB portfolios and SMAs continue to outperform the other fixed income listed (and unlisted) investments. I have included a link below to a series of reports of the performance of our recommended portfolios and SMA after fees.

XTB PORTFOLIO / SMA TOTAL RETURN
(SINCE INCEPTION)²
TOTAL RETURN
(12 MONTH)²
Concentrated High Yield 7.14% p.a. 9.80% p.a.
Maturity Ladder
(series 1)
4.78% p.a. 3.86% p.a.
Maturity Ladder
(series 2)
4.98% p.a. 3.86% p.a.
Maturity Ladder
(series 3)
4.32% p.a. 4.64% p.a.
Monthly Income (Floating-rate) 2.99% p.a. 2.92% p.a.
High Yield 6.75% p.a. 8.78% p.a.
XTB No. 1 Model Portfolio SMA 5.56% p.a. 6.12% p.a.

More information on the ACBC Fixed Income No. 1 SMA or the ESG Fixed Income SMA.

View all performance reports

Call on 1800 995 993 to receive a portfolio cash flow sheet, customised for your clients.

¹ Bloomberg
² Australian Corporate Bond Company
Disclaimer
The information in this article is general in nature. It should not be the sole source of information. It does not take into account the investment objectives or circumstances of any particular investor. You should consider, with or without advice from a professional adviser, whether an investment is appropriate to your circumstances. Australian Corporate Bond Company Limited is the Securities Manager of XTBs and will earn fees in connection with an investment in XTBs. Past performance is not a guarantee of future performance.

Events

  • 23Apr 2019

    YTMSCG: Scentre 5.00% 23 OCT 2019

    This is the coupon date

  • 23Apr 2019

    YTMF06: Suncorp BBSW + 1.10% 23 APR 2019

    This is the coupon date

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