With the stock market at the front of everyone’s minds, it’s important to be educated on the best ways to spend your money.
We sat down with Adam Smith, CEO of Saxo Markets Australia, to talk about the best opportunities for investment, and the impacts of inflation. Saxo is a multi-asset trading and investing company which provides clients with support in investment opportunities. Adam offered a lot of useful tricks, and alleviated fear about the future of our market.
What is the state of investment in Australia at the moment?
So I think at the moment, there’s a lot of trepidation around what a good investment looks like. People are asking where to put their capital, and where the best returns are going to be delivered. And they’re also nervous about inflation. People are sitting on the sidelines waiting for inflation to start subsiding. My own view is more positive, I think that in six to twelve months things will be much better than they are at the moment. So it’s actually not a bad opportunity to be investing if you’ve got some extra money. There are still stocks that can make you money.
Right now, we’re seeing some positive returns for energy companies, logistics companies, cyber security companies. These are areas where inflation isn’t going to play such a significant part in valuing those assets in the future. So, there’s always opportunities to invest in the market.
How can we adapt to these new conditions?
With higher interest rates comes opportunity. Right now, the bond markets have rates around zero or near zero. If you’re an income or yield investor, that’s really attractive, because at the end of the day you can be pretty confident that none of the Big Four are going to crash anytime soon. An investment in ANZ and CPA is pretty assured no matter what the state of the market is.
By the same token, now that rates have gone up, you can invest in companies like ours and get four or five per cent yield. Similarly, you can go and buy those bank bonds I mentioned. There’s definitely opportunity beyond just investing in stocks. Stock prices move up and down, which means capital can be at risk. Whereas, if you go for companies like Apple, or Microsoft, which have consistent cash flows, that investment is much more stable.
What’s the best way to invest at a low risk and build a strong portfolio?
There are a couple of ways to do it. If you have the time and the inclination to do your own homework, then a diversified portfolio of single stock names, whether that’s the in the banking sector or energy, can work over the long term.
But ETFs are also a really good way for people to invest in a diversified basket of stocks, and these days, there’s pretty much an ETF for anything that you like. So you’ll find something that satisfies your investment criteria. It’s a cheap way to invest in a broader part of the market, since they don’t cost as much and you’re still getting a really competitive exposure to the market.
Whether you’re doing your own research on where to invest, or outsourcing to bigger investment managers, building a model portfolio and maximising returns is the way to go.
If you’re looking to invest, how do you keep track of market cycles and figure out when the best time to jump in would be?
It’s hard to choose when the perfect time is. If you’re looking for a longer term investment, then market cycles are less of an issue. By contributing every month for twelve months, for example, you’re going to ride the ups and downs nicely. Taking this sort of risk averse, diversified approach will definitely make a positive impact. By investing in the cycle over a longer period, you’re reducing your risk.
Having a strategy and a plan to invest is the most important thing. Invest in your portfolio in a small way every month, since timeframe is a really good way to ride out those bumps in the market.
Where do companies like Saxo come in? How can they help individuals who are looking for smarter investments?
Saxo provides access to global share markets for our clients, meaning it’s as easy to invest in a Commonwealth Bank share as it is to buy an Apple share on our platform. So if you’ve got a particular interest in a particular stock or industry, you’ll be able to find that stock on our platform.
We also provide education and trade inspiration. That includes curated education, giving clients the tools, the technology and the research skills to make better decisions. A lot of clients really enjoy the flexibility of the platform, since all their shares can be on the same platform under a single account. And so that works for self managed super funds, it works for individual accounts, and it works for corporate trusts.
Should everyone be investing?
Yes – the right time to start is yesterday! My kids are teenagers, and they’ve got the benefit of the time value of investing, which is a real asset. If you start now, then you can grow your wealth significantly over time, but you need to start, you need to have a bit of a plan, and you need to do a bit of research. At Saxo, we cater to all different levels of sophistication, and there’s something for everyone, which can help you find the right support for your investment journey.
What’s next for Saxo?
In the next few months we’re rolling out a product called Saxo Select, which is a managed portfolio solution. We partner with firms like BlackRock, who are internationally renowned asset managers, and build model portfolios which will be accessible to clients on the platform. For anyone who wants to try investing, but isn’t quite sure how, they’ll be able to access a variety of portfolios. It’s a great way to start the journey.
To learn more about finance and inflation, click here.