Invest
Bank stocks pose ‘worrying’ risk, investors warned
ASX large caps with heavy exposure to the financial sector pose a concentrated risk for portfolios, an investment manager has cautioned.
Bank stocks pose ‘worrying’ risk, investors warned
ASX large caps with heavy exposure to the financial sector pose a concentrated risk for portfolios, an investment manager has cautioned.
Boutique manager Avoca Investment Management says that while smaller caps have traditionally been perceived as a higher-risk investment, they may provide investors with a risk management tool.
“The oligopolistic big four Australian banks have been a great long-term investment and self-managed super funds in particular have been a major beneficiary. However, with ever increasing capital requirements, increasing government and APRA oversight, likely softening in mortgage lending and the spectre of encroaching fintech, it seems less likely that the returns of the past will be emulated going forward,” Avoca managing director John Campbell said.
“Financials represent around 40 per cent of the ASX S&P 100 benchmark, providing a worrying level of concentration risk.”
Instead, investors would be wise to carefully consider their index composition.
“Conversely, the composition of the S&P/ASX Small Ordinaries is much more balanced and aligned to the Australian economy,” Mr Campbell said.
Small caps’ previous under-diversification should serve as a cautionary tale for those overly invested in their larger counterparts, he added.
“Five years ago, with its absurd resources skew of 48 per cent, the S&P/ASX Small Ordinaries benchmark bore little resemblance to the Australian economy. This skew was completely at odds with the Australian economy and was a clear warning signal.
“It caused massive pain for investors when the inevitable happened in 20100-11 and the China economy started to slow, creating a knock-on effect to commodity prices.”
Now that smaller caps have diminished their concentration risk, they can be a promising opportunity for investors.
“Our view is that small caps are a good place to invest going forward given the better opportunity to grow that small companies, with generally smaller market shares, have over large companies ... the breadth of opportunity in stock selection and the greater likelihood of M&A activity benefiting smaller companies than top 100 companies,” Mr Campbell said.
Stock market
Could this bull market be losing steam?
There’s an old investment adage that bull markets never die of old age, with the current market showing signs of cracking just months after the recovery, an industry expert warns. ...Read more
Stock market
Super fund investors bid to acquire Sydney Airport
A group of super fund investors has lodged a non-binding takeover bid for Sydney Airport, valuing the company at over $22 billion. ...Read more
Stock market
10 most globally held stocks revealed
Australian investors remain bullish on electric vehicles and technology stocks, according to their long-term held positions, new research has shown. ...Read more
Stock market
How ‘gamer investors’ are pushing a new wave of social responsibility
A new generation of younger retail investors are pushing a new social movement, yielding a distributive impact on the markets, most notably through the GameStop saga, two researchers have revealed. ...Read more
Stock market
ASX tipped for record high despite inflation fears
The market is tipped to shake off fears of rising inflation, with the ASX 200 now tipped to close the year at a new record high, an economist has revealed. ...Read more
Stock market
‘Commission-free propaganda’: Warning issued for retail investors
The phrase “if you’re not paying for it, you’re the product” applies just as much to stock trading apps as it does to social media networks. ...Read more
Stock market
Is the tech sell-off creating opportunities for investors?
A tech sell-off sparked by inflation concerns has seen world markets crash. But is it creating an opportunity for investors to ‘buy the dip’? ...Read more
Stock market
Government opens arms to Wall Street
In its bid to maintain Australia’s global competitiveness, albeit its firmly shut borders, the Australian government has included a measure in its recent budget to allow foreign financial services p...Read more
The Olympic effect on property and equity investors; COVID-19 Disaster Payments and super
Listen now
Do lockdowns boost property prices? Are short-sellers levelling the playing field? Did you lodge your tax returns early?
Listen now
Will lockdowns halt the housing boom? Is the metaverse taking over? And the cons of lodging your tax returns early
Listen now
Are you being priced out of the market? Have you got the Tuesday blues? And are you ready for the upcoming super changes?
Listen now
Stock market
Could this bull market be losing steam?
There’s an old investment adage that bull markets never die of old age, with the current market showing signs of cracking just months after the recovery, an industry expert warns. ...Read more
Stock market
Super fund investors bid to acquire Sydney Airport
A group of super fund investors has lodged a non-binding takeover bid for Sydney Airport, valuing the company at over $22 billion. ...Read more
Stock market
10 most globally held stocks revealed
Australian investors remain bullish on electric vehicles and technology stocks, according to their long-term held positions, new research has shown. ...Read more
Stock market
How ‘gamer investors’ are pushing a new wave of social responsibility
A new generation of younger retail investors are pushing a new social movement, yielding a distributive impact on the markets, most notably through the GameStop saga, two researchers have revealed. ...Read more
Stock market
ASX tipped for record high despite inflation fears
The market is tipped to shake off fears of rising inflation, with the ASX 200 now tipped to close the year at a new record high, an economist has revealed. ...Read more
Stock market
‘Commission-free propaganda’: Warning issued for retail investors
The phrase “if you’re not paying for it, you’re the product” applies just as much to stock trading apps as it does to social media networks. ...Read more
Stock market
Is the tech sell-off creating opportunities for investors?
A tech sell-off sparked by inflation concerns has seen world markets crash. But is it creating an opportunity for investors to ‘buy the dip’? ...Read more
Stock market
Government opens arms to Wall Street
In its bid to maintain Australia’s global competitiveness, albeit its firmly shut borders, the Australian government has included a measure in its recent budget to allow foreign financial services p...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
