Investment Opportunities Abundant, but None for Institutions

Some of us might trade stocks for fun. Others could be in equities for employment reasons i.e. stock options. But most of us are in stocks because we want to make money.

How much money do we want to make?

As much as possible of course.

You probably don’t want to bet on extremely risky investments. But you also likely want far more than a 10% return annually.

Investors, Get Used to Low Returns?

If that’s the case, brace yourself for some bad news. According to AMP’s Shane Oliver, investors might have to get used to low returns.

In a note to clients, Oliver said not to expect much more than 6.5% from local and global asset classes. That includes stocks, bonds and real estate.

As reported by the Australian Financial Review:

You can blame record low global interest rates for the lacklustre returns, even though the US Federal Reserve has been hiking its benchmark borrowing rate this year and is tipped to do so again next year.

Despite the prospect of higher interest rates around the world, they are still low by historical standards and that starting point suggests it’s going to be hard to generate a decent return over the next 12 months.

Combining growth and yield, Oliver has forecast a 7.5 per cent return from global shares, 7.6 per cent if you invest in emerging equities and 8.5 per cent, the highest return, for Asian equities ex Japan.

Unlisted infrastructure is tipped to return 8 per cent.

A further fall in investment yields across most major asset classes points to a constrained medium-term return outlook. For a diversified mix of assets, this has now fallen to around 6.5 per cent on our projections,’ Oliver said.

Gone are the days of double-digit returns? I doubt it.

Amazing Returns Still to Be Made in Stocks

While things aren’t looking the best for institutional investors, individual investors can still make amazing returns in the stock market.

Had you bought Qantas Airways Ltd [ASX:QAN] at the start of this year you would have made more than 80% on your money. Had you bought a2 Milk Company [ASX:A2M], you could have made more than 220% on your money.

I know I’m going for the low hanging fruit here. But there were many more opportunities like them that you could have jumped onto in 2017.

For institutional investors, returns like the above are beyond their wildest dreams. Without getting into too much detail, institutional investors are restricted by regulation, capital and agency problems to earn such high returns.

It’s why they more or less have to accept returns of 6.5%.

Of course, there are investment managers out there that can beat 6.5%. But it’s extremely hard to find these managers among the sea of underperformance.

You might as well just pick the investments yourself. To get started take a look at these top ten Aussie resource stocks.


Härje Ronngard,

Junior Analyst, Markets & Money

Harje Ronngard is a Junior Analyst at Markets and Money. With an academic background in finance and investments, Harje knows how simple, yet difficult investing can be. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation. It’s not good enough to be right on average when it comes to investing. The market is volatile and it only takes one bad day to ruin your portfolio. You don’t want to end up like the six foot man that drowned in the river that was five foot deep on average. It’s why Harje is constantly reminding investors of their downside risk here at Markets and Money. He does so by simply asking just two questions.  What is it worth? And how much does it cost? These two questions alone open up a world of investment opportunities which Harje shares with Markets and Money readers. Right now Harje is focused on managing research and investments over at the Legacy Portfolio. An investment publication designed to significantly grow investor’s wealth over time with deeply undervalued businesses. Harje also contributes his insights in Total Income, headed by income specialist Matt Hibbard. Harje loves cash-rich businesses, so he feels right at home amongst Matt’s high yielding income plays.

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