In an election with significant implications for investors, Republican presidential candidate Donald Trump has been declared the president-elect, signalling a potential continuation and expansion of policies from his first term. As the final votes are counted and the possibility of recounts looms, the focus shifts to the implications of a second Trump administration, particularly concerning tax policies, trade tariffs and deregulation efforts. Here’s what investors should be watching. 

Politics has been a focus for markets in 2024, with about 60% of the global population voting in elections in at least 76 countries. Of course, the big one is still to come. The US presidential election, scheduled for 5 November, is dominating headlines, prompting questions from investors in Australia and New Zealand about how they should respond.

Morningstar is a firm believer that a goals-based investment approach is the best way for investors to achieve their objectives.

Understanding what you are trying to achieve is a critical step in designing an investment strategy. It also allows you to track progress towards your goal and course correct as needed.

By the time you retire, you will have heard and read about all kinds of financial advice. Some tidbits of advice get repeated so frequently, you might believe they are true. The truth is, however, that following some of these rules could get you in trouble. Here are six financial myths you should ignore.

Household net worth is at all-time highs.

Housing prices are at all-time highs.

The stock market is near all-time highs.

But not everyone is feeling great about their finances.

There’s plenty of investment advice out there based on what one must do to be successful.

You don’t see many people who take the opposite approach and talk about what you shouldn’t do.

There are many ways to succeed as an investor but only a few avenues to failure.

Regular Olympic watchers will know the biggest medal hauls are traditionally won by one of a select few nations. Since 2004, for instance, our exhibit shows the USA has appeared at the top of the overall medal table on three occasions, and second or third on two occasions.  Other G7 nations and Russia usually feature near the top, although Australia has punched above its weight, placing in the top 10 in all the summer games in the past two decades.

Hendrik Bessembinder has produced some of my favorite stock market research.

Bessembinder discovered that four out of every seven stocks in the U.S. have underperformed cash (one-month T-bills) since 1926. And just 4% of companies accounted for all the wealth gains for the entire stock market in that time.

The stock market runs on power laws over the long run.

Of course, there are stocks that do well over short time frames, but Bessembinder’s research highlights the benefits of diversification to ensure you take part in those big winners over time.

The most motivated and successful people take a problem, outline a solution, and relentlessly pursue it. This is a good model to achieve success. And following it creates momentum. It provides a sense of empowerment as obstacles are overcome. It is self-motivating as each milestone is achieved and each new one appears on the horizon.

Chances are, you’re not putting enough money aside for the retirement you want.

A recent Retirement Commission paper noted that while the KiwiSaver scheme had seen many more people saving for their retirement, there was still room for improvement.

The Commission’s policy lead, Michelle Reyers, told Breakfast last week it was still early days as to whether KiwiSaver would mean people save the money they needed for retirement.

Today’s story looks at two key factors that determine the answers to the big questions when planning retirement finances: ‘How much do I need?’, and ‘How much can I afford to spend?’ - in order to have confidence that you can maintain your living standards, not run out of money, and not have to rely on welfare.

These two factors are: your current age, and your likely life span. In particular, we highlight the four big problems when relying on ‘life expectancy’ tables that are used throughout the financial advice and retirement industry.

Ben Carlson's straightforward no-nonsense approach is exactly what you need when it comes to money advice. And the admiration of his many fans stems from his ability to deftly combine investor psychology and data in his narratives.

This is part of a series where I attempt to understand the behavioural traits and mindset of money managers and investors. At the end of this (slightly edited) transcript, I have listed the 20 individuals interviewed for this series.

A reader asks:

I am 60, retired and have a substantial portfolio ($14M not to brag) invested in index funds 60/40 at the moment. I have enough money to live off from defined benefit pensions for the rest of my life, but I keep swinging from one view to another depending who I read. Some famous passive advisors say don’t take any risk unless you have to while others say you should be invested all in stocks because you don’t need the money anytime soon and should be leaving a legacy. Depending on how I feel and what the market is doing I target somewhere between a 50/50 portfolio and a 75/25. How do I square this circle?

That’s a lot of money.

Tune in to the podcast below where the hosts interview our Managing Director, Nick Crawford as he explains what to do and what not to do as a lotto winner.

From the IMF cutting global growth forecasts to central banks withdrawing stimulus to eye-popping inflation figures and the emergence of a new virulent strain of the coronavirus, the December quarter provided plenty of worrying headlines.

Yet investors with diversified exposure to global equity markets still experienced solid returns in that period. Global developed markets delivered a return for the three months of just over 7% in AUD terms and nearly 30% over the year.

Human beings dislike uncertainty. It’s an adaptive trait that has helped us to navigate complex environments, make safer choices, and foster social bonds, all of which have contributed to our species’ survival and success. But this dislike of uncertainty can be unhelpful in certain areas of life, and particularly in investing. As DAVID BOOTH, co-founder of Index Fund advisors explains, investors would be better off, financially and emotionally, if they could learn to embrace uncertainty instead of seeing it as a constant threat.

A reader asks:

I get all the stuff Ben has been saying about inflation — wages have kept pace, economic growth has been higher than the 2010s, wages have risen the most for lower income people, etc. I get all that. My husband and I own a house and own stocks so we’ve benefitted in recent years. Having said all of that, I STILL CAN’T GET OVER HOW HIGH PRICES ARE!!!

The grocery store, home/auto insurance, restaurants, babysitters for the kids…everything is more expensive.

So how do I get over the sticker shock? Will it just fade eventually as we get used to higher prices?

Graham Hand’s update last week, five months on from his cancer diagnosis, understandably struck a chord with readers. It wasn’t just his battle with brain cancer. It was also his revelations of struggling with not being able to work, and in some ways, of losing his personal identity.

It brought home that in debates about retirement or semi-retirement, there’s a lot of focus on the financial aspects: income, tax, estates, wills, superannuation, and the like. Less attention is paid to the psychological challenges of retirement, which can be even more demanding.

It’s my favorite time of year again: March Madness, the NCAA competition held each spring to determine the national champions of college basketball.

Many fans look forward to predicting who’s going to win the whole thing—what’s become known as “bracketology”—but not me. In my mind, March Madness is captivating because it’s completely unpredictable. What I love is witnessing an arena full of athletes trying their absolute hardest, working together to achieve a common goal. Watching college basketball provides clear evidence that we, as human beings, can do so much more together than we’re capable of on our own.

A lack of consistency by active fund managers in beating their respective indexes has been a constant theme of S&P Global's SPIVA U.S. Scorecard. With roots tracing back to 2002, this benchmarking series — formally titled the "S&P Indices Versus Active" report — semiannually reviews data tracking performance of active fund managers against their respective indexes.

A wealth of academic evidence — from Nobel laureates such as Eugene Fama and Harry Markowitz to William Sharpe and Merton Miller — warns that trying to time markets as a reaction to stock price fluctuations is a foolhardy endeavor.