Australian Government Bonds (AGBs), or Australian treasuries, are debt securities issued by the Australian government. By issuing these bonds, the government essentially borrows money from investors, promising to return the principal amount at maturity, along with periodic interest payments. AGBs serve as a viable investment vehicle for varied portfolios. Australia has an excellent sovereign credit rating. Currently, it enjoys the highest sovereign credit ratings in the world, along with few other countries, with major credit rating agencies such as Standard & Poor’s, Moody’s and Fitch as ..read more

An essential aspect to understand about bonds is their maturity period. The bond’s maturity period can influence its yield, price volatility, and role in an investment portfolio. Let’s discuss bond maturity periods and their significance for investors. Bond maturity refers to the date when the bond’s principal amount (or face value) is scheduled to be repaid to the bondholder. Till the maturity date, the issuer pays periodic interest, known as the coupon, to the bondholder. At maturity, the issuer repays the principal amount in full. The general guideline used to classify bonds by their matur ..read more

One popular term that has emerged since 2010 from the increasing adoption of automation in the financial world is ‘robo advisor’. The term is now synonymous with automated personalised investment advice and optional automated discretionary investment management. The expansive use of this term in various fields reflects its widespread acceptance, although, interestingly, when it comes to investments, we don’t specify it as an “investment robo advisor.” It’s simply known as a “robo advisor.” We must observe that every other type of automated advice doesn’t have the power to simply term itself a ..read more

A Total Return Bond ETF is an exchange-traded fund that invests in a diversified set of bonds, seeking to offer investors the total economic return of the underlying bonds. The total return includes interest income, capital gains or losses, and currency gains or losses. To detail more, these ETFs accrue returns from diverse sources, including coupon payments, bond price changes due to market movements, and any realised gains or losses from the trading of bonds within the fund. The underlying bonds of a Total Return Bond ETF can comprise government bonds, corporate bonds, municipal bonds, and ..read more

Bond ETFs (Exchange-Traded Funds) are versatile investment vehicles, and for good reason. Diversified bond ETFs comprise an array of bonds varying from short-term to long-term maturity periods and spanning different types, such as government and corporate bonds. Among the various types of bond ETFs available, those focusing on long-term government bonds are often considered a stable and secure choice. However, the fixed-income landscape isn’t static; it is heavily influenced by various macroeconomic factors, one of the most crucial being interest rates. Let us discuss the impact of rising int ..read more

All independent robo advisors are standalone, but not all standalone robo advisors are independent. An independent robo advisor is standalone by nature because it operates on its own. In contrast, a standalone robo advisor doesn’t necessarily have to be independent — a robo advisor that a larger financial institution owns could operate as a separate brand or subsidiary, that is, as a standalone. An investment product issuer (such as an ETF issuer), brokerage firm, bank or traditional financial advisory firm are the typical larger financial institutions we refer to here. Our firm QuietGrowth i ..read more

The Efficient Market Hypothesis (EMH) is a financial theory that posits that financial markets are “efficient”, meaning that prices reflect all available information at any given time. Developed by economist Eugene Fama in the 1960s, the hypothesis states that it’s impossible to “beat the market” because the stock market efficiency causes existing share prices always to incorporate and reflect all relevant information. The fundamental implication of EMH is that barring insider trading, no amount of analysis can give an investor an edge over other investors. It’s a principle that puts every in ..read more

We hope to provide a clearer understanding of Modern Portfolio Theory by answering common questions.. 1. Does MPT consider taxes and transaction costs? In its purest form, MPT does not consider taxes or transaction costs, as it assumes a world of frictionless trading. However, these factors can significantly impact investment returns when applied in the real world. Therefore, many portfolio managers that use MPT principles also incorporate strategies to manage taxes and minimise transaction costs. This might involve favouring investments that offer favourable tax treatment, such as tax-effici ..read more

When exploring the world of finance and investing, you might encounter various myths and misconceptions about Modern Portfolio Theory (MPT). So let’s debunk some of these myths. Myth 1: MPT only works in bull markets Fact: MPT is designed to optimise portfolios for any market condition, not just bull markets. The theory encourages diversification, which means spreading investments across various asset classes. The aim is to balance risk and return, regardless of market conditions. However, MPT can face challenges during times of extreme market stress or crisis when correlations between assets ..read more

Modern Portfolio Theory (MPT) is an investment theory developed by Harry Markowitz in 1952. He was later awarded a Nobel Prize in Economics for his work in this area. The theory attempts to maximise portfolio expected return for a given amount of portfolio risk, or equivalently minimise risk for a given level of expected return. The investor can attempt this by carefully choosing the proportions of various assets. The key concepts of Modern Portfolio Theory include: Diversification: At the heart of MPT lies the concept of diversification. This refers to spreading investments across various a ..read more