Looking Beyond Australia for Better Returns

The ASX represents just 2.3% of global share markets, according to the World Federation of Exchanges. That puts it in 14th place, in terms of market cap. Just behind the SIX Swiss Exchange, and above the Korea Exchange.

With Aussie stocks making up such a small percentage of world share markets, how much of your portfolio should be allocated to home-grown companies?

Not too many, if you believe former Australian treasurer Peter Costello.

Now, don’t get me wrong. Peter Costello hasn’t made any bearish declarations about the Aussie market. I’m referring to his actions, not his words. Specifically, as head of the government’s Future Fund.

That’s the public service’s private superannuation fund. As of June this year, the fund had only 6% of it’s investments in Australian stocks. Less than one-third of the amount it holds in international shares.

That may seem like an odd concept. Australians have a habit of investing heavily at home. We often have little, if any, exposure to international markets.

But it’s tough to argue with results. And since 2006, the Future Fund has returned more than 7.8% per annum. Well above its target. And even more impressive considering the Future Fund was born in 2006, and rode out the Global Financial Crisis on the way to making those returns.

That’s good news for you and I, as taxpayers. So long as the Future Fund keeps kicking goals, we aren’t on the hook for our public servants’ retirements.

But if you’re an income-focussed investor, that 7.8% past annual return may have your mouth watering just a bit. Unless you already work in government, you can’t put your money into the Future Fund. But there is a less direct way you can ‘piggyback’ on the its performance. And, thankfully, it doesn’t require you to join the bureaucracy. Check out our income specialist Matt Hibbard’s special report here for the details.

This week in Money Morning

The big end of town is buying into crypto. As of Monday, there were already 55 cryptocurrency-focussed hedge funds in existence. Interest in the sector is booming.

This growth in crypto funds shows that the big money is taking notice.

So what does this mean for you? If you’re a crypto investor — or thinking about becoming one — then you need to be aware of how the major investment funds will change the crypto landscape. For Ryan’s explanation, check out Monday’s Money Morning here.

Tuesday’s article also looked at the outstanding performance of the Future Fund. As mentioned above, the Fund’s stellar performance held up even during the GFC and the fearful years afterward. So it’s nothing to scoff at. Ryan took a look at the things that make the Future Fund unique, and may have contributed to its success. Read the details here.

Interest rates remained on hold once again this month. With no change for some time, and none in sight for the near future, it’s easy to switch off. But as Ryan wrote on Wednesday, that could be a mistake. Interest rates remain central to every aspect of our economy. Especially to our inflated housing market. And, as he explained, there may be a lot more room for the RBA to move on rates than many think there is. Read why here.

On Thursday, Ryan addressed fears about a possible crypto bubble. It’s true that crypto prices are volatile and come with plenty of risk. But Ryan argued that those calling it a bubble don’t fully understand what crypto is. He explains why, and outlines two strategies for investing in crypto, right here.

Friday’s article rounded out the week with a discussion of why sentiment in the market is so low, while prices are headed up. Ryan argues that fears of a crash are premature. He has his own reasons. But he also looked at another controversial economist, who has come to the same conclusion, but for very different reasons. To read what they are, check out Friday’s Money Morning here.


Tyler Jefferson,
Editor, Money Weekend

Tyler Jefferson joined Fat Tail Investment Research in 2012. With a background in publishing, he started out as part of the team working behind the scenes with your Editors to bring you Money Morning each day.

When he joined, Tyler was Fat Tail Investment Research’s 12th employee. Today that number has grown to over 50, as more and more readers turn to Money Morning as their source for independent financial analysis and ideas.

Today as Managing Editor, Tyler still edits the articles you read each day. Along with that, he occasionally contributes to Money Morning with his own irreverent take on the most interesting news and opportunities for you.

Money Morning Australia