Our Wealth of Experience podcast welcomes a special guest this week - Morningstar Global CIO Dan Kemp. It also features Graham on the capital gains tax, the impact of the Reserve Bank Review and whether the Governor will keep his job, as well as Peter outlining four of his favourite long-term market themes.
On a visit to Australia from his home base of London, Kemp says many investors remain pessimistic about market prospects despite indices having sharply recovered from 2022’s fall. And that it’s a dangerous time for these investors because if markets drop again, they may not be prepared for it and may sell their investments at the wrong time.
Kemp believes that investors need to be prepared for whatever direction the market takes. To do that, he advocates three things:
- The right portfolio
- Good advice
- Staying the course
Some notable quotes from the interview include:
1. On true diversification in a portfolio:
“Sometimes, you’ll find that there are fault lines that run through the portfolio. You might have lots of different managers, but if they’re all focused on the same theme … then there’s probably what we call a lot of correlation there – they act very similarly to each other. So, you don’t have genuine diversification.”
2. On why trying to forecast the future isn't worth the effort:
“As human beings we see this thread of history behind us, and history looks like it proceeds in logical steps. The danger is that when we look at the future, we assume that there’s a thread of history in front of us which if we dig enough, if we do enough analysis, do enough thinking, that we can uncover this single thread of history in front of us. That the future is as deterministic as the past.”
3. On the importance of paying the right price for an asset:
“Let’s say, economists are forecasting a recession, but if the impact of that recession is already priced into assets, then if you actually have a recession, then you may not get the return from those recession focused assets that you’re expecting, because it’s already priced in.”
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Grab a cuppa and settle in for our chat.
James Gruber
Editorial, Firstlinks and Morningstar
