Market Update – November 201813/11/2018
Market Update – December 201817/12/2018
As Christmas approaches, it is an ideal time for reflection. When thinking about 2018, I agree with the often-repeated sentiment of our most recent ex-prime minister, Malcolm Turnbull, that there has never been a better time to be alive.
We have access to almost all the music ever recorded, can explore the treasures of the world’s greatest libraries, museums and art galleries from the comfort of our home. We take for granted the ability to consult the collective human intelligence at any time of day or night, for free, from a device small enough to fit in our pocket. As Steven Pinker demonstrates in his wonderful book Enlightenment Now published this year, health, prosperity, safety, peace, knowledge and happiness are all increasing, not just in the West, but worldwide.
As investors, we focus much of our time and energy assessing whether now is a good time to invest, losing sight of the fact that it has never been a better time to be an investor. Here are some of the big changes that have revolutionised personal investment.
Collapse of brokerage costs
When I started work in financial services in the early 1990s, buying and selling shares was still an activity for the exclusive few. Trades needed to be conducted via a stockbroker with costs well over 1 per cent per trade.
The advent of online brokers has democratised share investing with brokerage as low as $10 a trade, and an easy online application process means almost anyone can try their hand at equity investing.
The speed, efficiency and safety of trading has also dramatically improved at the same time that costs have collapsed. Gone are the days of exchanging physical share certificates and long settlement times, with the automated trading system, SEATS, delivering proceeds to your bank account within two days of trading. While there are legitimate concerns about high frequency and algorithmic trading, wonderfully captured in Michael Lewis’ book Flash Boys, for most investors the world of equity investing has never been so accessible.
Access to the world’s great companies
Australians have long had an insatiable appetite for goods and services from overseas. However, there was a time when we were unable to own the companies that make the brands we love.
Specialist international fund managers have transformed our ability to invest in some of the world’s best companies on an informed basis. The size and quality of successful managers such as Magellan and Platinum allows access to management of the world’s biggest and fastest growing companies, putting Australian investors on par with investors anywhere in the world.
In addition, the difference between wholesale and retail has largely disappeared with smaller investors often enjoying the same competitive investment management fees as big institutions, without the entry and exit fees that presented significant impediments to individual investors 20-30 years ago. This fee compression has been accelerated by the rapid uptake of index investing, with investors embracing the cost savings and broad diversification of this alternative to active investment management.
We sometimes rile against the 24-hour news cycle and feel there is so much information it is like trying to get a drink of water directly from a fire hydrant. However, not long ago financial information was an asset of privileged insiders. Not only are valuable documents like annual reports and company financial statements available online, as financial blogs, podcasts and videos have proliferated, quality research and analysis are available in a format to suit almost any taste.
Despite the daily gyrations of the market, stepping back and being grateful for our enhanced capability to participate in the wealth creation that they offer, is a positive way to finish the year.
Article by Catherine Robson. Published by The Sydney Morning Herald, December 9, 2018.