Get off to a strong start as a sharemarket investor

WITH Michelle BALTAZAR

Editor-in-Chief • Money magazine

There’s a lot to love about shares – and if you’re keen to make your money work harder, the stockmarket looks set to deliver opportunities in 2023, despite its recent volatility.

Over the past 12 months, Aussie shares have notched up total returns (capital growth plus dividends) of 10.4%.

In the past decade, the Australian market has delivered total returns averaging 8.7%pa.

By comparison, you’ll be lucky to earn much more than 4% on cash and, unlike shares, those returns don’t come with potential tax savings.

Managed fund giant Vanguard expects Australian shares to deliver returns of between 4.5% and 6.5% in 2023, with global shares (excluding Australia) forecast to generate capital growth of 5.6% to 7.6%.

Ashley Glover, head of sales trading, APAC and Canada, at CMC Markets, believes these expectations are reasonable.

However, he cautions: “It’s likely shares may have a bumpy year ahead.

“We’ve seen a string of interest rate rises, and it takes time for these rate hikes to impact consumer spending, which can shape market sentiment.”

That said, Glover notes that with plenty of industry sectors to choose from, the Aussie sharemarket looks set to dish up opportunities.

New trends in ETFs

If you’re unsure about which shares to buy, or don’t have sufficient capital for a diverse portfolio, exchange traded funds (ETFs) are worth considering.

They are bought and sold in much the same way as shares.

However, with a large basket of underlying investments, they offer considerable diversification for low fees.

According to Vanguard, the rate rises that kicked off in 2022 have fuelled interest in fixedincome ETFs.

“In 2023, our return expecta- tions for fixed income have significantly increased compared to a year ago,” says Minh Tieu, Vanguard’s head of ETF capital markets, Asia Pacific.

“We forecast global bonds to return 3.9%-4.9% and domestic bonds to return 3.7%-4.7% over the next decade.”

Glover says themed ETFs are also appealing.

“In the wake of the Medibank, Optus and Latitude hacks, a themed ETF such as the BetaShares Global Cybersecurity ETF could attract investor interest,” he says.

With 2023 looking as though it could deliver a bumpy ride, it’s important to consider ways to navigate market volatility.

Stop-loss orders are a feature of many trading platforms and a popular risk management tool. They set parameters around buying or selling a share at a specific “trigger price”.

“Today’s ‘guaranteed’ stoploss orders ensure shares are sold at the price an investor specifies, regardless of market volatility,” says Glover.

This doesn’t just help investors manage a portfolio, it