Top investment ideas for 2016

Australians experienced a tricky 2015 amid seesawing sharemarkets, shrinking interest rates on savings accounts and property prices heading in different directions. Analysts expect more of the same this year, with subdued growth at best for shares and property prices, and term deposit interest rates likely to drop further.

Baillieu Holst chief economist and financial adviser Darryl Gobbett said last year’s key themes of a slowing Chinese economy and rising US interest rates would affect investors again this year. “The changing Chinese economy will continue to drag on the resources sector,” he said.

A good investment often starts with a good idea, and while nobody can predict the future of financial markets, there are a few key ideas floating around as we head into 2016. Here are some of them.

1. SHARE THE LOVE AND REDUCE RISK

DIVERSIFYING investments is more important than ever amid volatility on financial markets.

Superannuation funds invest their members’ money across a wide range of Australian and international shares, commercial and residential property, cash, infrastructure, fixed interest and alternative investments, and that can be a good strategy for others to follow.

Mr Gobbett said choosing quality investments was important, but that did not just mean sticking with the big banks and big retailers as many people had done in the past.

“The investor needs to take an overall view of what is happening in the economy and different industries, and determine if the future prospects of the company remain positive. If not, then perhaps it is best to look at other investment opportunities.”

Middletons Securities adviser David Middleton said people should make their investments “bullet-proof” by having enough conservative assets — such as cash and fixed interest — to avoid becoming a forced seller if markets went bad.

“Be prepared to increase your defensive exposure when you can’t see value — it will protect your gains, and funds will be available for investment if prices fall,” he said.

2.POPULATION POTENTIAL

“KEEP an eye out for investments that will benefit from the rising population and the 2.5 billion more middle-class consumers in the world in the next 10 years,” Mr Middleton said.

“Some possible investment targets can include successful Australian multi-nationals, food and agriculture, tourism, pharmaceuticals, and eventually the resources sector — but not quite yet.”

3. AVOID BEING SEDUCED BY INCOME

EARLY in 2015, investors flocked to stocks that paid high dividend incomes, then lost a lot of their capital when the sharemarket headed south. Mr Gobbett said a high dividend yield was only part of the picture.

“While it is a key determinant of how people are able to live off their investments, paying inflated prices for income makes no sense,” he said.

Sometimes a high dividend yield suggests a looming share price collapse because the market knows a company’s future dividend and profits are likely to fall.

4. WHERE’S MITCH?

THE Australian cricket team had lots of Mitches last year, and that might be a good strategy for investors too.

Mr Gobbett said “MITCH” stocks — media, information, telecommunications, consumer and health — had growth potential aligned to technology improvements.

“MITCH stocks are expected to continue to outperform the market. The innovation plans by the major political parties will continue to improve tech business sentiment, while the lower Australian dollar will attract overseas investors trying to grow by mergers and acquisitions,” he said.

“Companies to watch in this space include Computershare, Ansell, Flight Centre, REA Group, Resmed, Carsales and Telstra.”

5. PROPERTY PLACEMENT

INTERSTATE cities and regions may provide potential for property gains in 2016 for people willing to invest in real estate outside their comfort zone. This strategy can reduce risk and lower land tax bills.

WBP Property Group chairman Greville Pabst said Sydney’s hot property market was showing signs of cooling, Perth prices might fall further, Adelaide should remain stable, and Melbourne and Brisbane would deliver the strongest growth.

He said record low interest rates and strong demand were contributing to stability in the national property market.

6.SUPER STRATEGIES

MR Middleton said the government’s renewed tax debate could lead to changes in the way superannuation was taxed.

“Maximise concessional (such as salary sacrifice) and non-concessional contributions to super while the current arrangements apply,” he said.

“If you are over 56 and still working, commence a transition to retirement pension to take advantage of any grandfathering that may apply.”

7.FUN WITH FEES

IN today’s low-interest and lower-return world, every percentage point counts. Super funds and investment funds have been lowering management fees as a result of technology improvements and government rule changes.

Stockspot CEO Chris Brycki said Australians were paying more than $23.5 billion each year in superannuation fees. He said someone who switched from a fund charging 2 per cent a year on a $100,000 super balance to a fund charging 0.5 per cent could improve their investment return by more than $1500 a year.

“Superannuation and investment fees provide you with one of the biggest opportunities to save money in 2016,” Mr Brycki said.

8. DON’T FOLLOW MINERS DOWN A HOLE

WHEN the world’s largest and strongest resources company, BHP Billion, loses more than half its value in less than 18 months, you know that miners are struggling.

Plunging commodity prices have smashed resources stocks and not every company is expected to survive. While the big guns such as BHP and Rio Tinto look safe, further price falls are possible.

“Eventually, there will be good time to invest in the resources sector, but now isn’t the right time,” Mr Middleton said.

“The markets are oversupplied and it will likely take some years for the outlook to be attractive.”

 

[Souce:- news.com.au]