Issue 16: The changing nature of Australian share indices

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Issue 16: The changing nature of Australian share indices

In our last instalment, we took a look at reporting season and asked how your SMSF portfolio survived? In that instalment, we looked at how there may be a two-tier reporting outcome for companies and sectors with some doing well and others not so well; introducing the concept of the ‘K’ shaped outcome.

By now reporting season is well and truly over and we are onto AGM season and the proof of the dividends and distributions announced through reporting season is in or in some cases is-not in the bank!

We said that in this edition, we’d take a look at how Australian share indices may have changed along with the companies now included within them in terms of what this means for income investors; those who rely upon Australian equities to deliver income to their SMSFs. In the past, we have discussed indices and benchmarks.  

At the end of September, global equity markets including Australia took a breather, however, since then have seen a return to continuing growth through early October, albeit choppy.

There remains a continuing focus and commentary in the short term, on the performance of the benchmark indices the All Ords and the S&P/ASX200 which continue to improve and, which at the time of writing, was sitting around 6400 and 6200 points respectively. My on-line broker is now telling me we are a little under 12% off the All Ords end of day high back in February this year.

So, while the recent growth story is looking good, what happens if we step back and look at what this means for the income derived from Australian equities? Is there a correlation between the growth in these indices and the income they have delivered? You may also wish to revisit our earlier discussion on growth and income investing.

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Ian Irvine - Guest Contributor

Ian has been a keen investor for over 40 years and can draw on his experiences from both investing on his own behalf and also having worked in financial services for more than 30 years. Over this time, he has seen many changes that impact investors’ attitudes to in what and how they invest.

He started his career in what is now referred to as fast moving consumer goods (FMCG) or grocery, working for an Australian margarine manufacturer. In 1986, he was recruited to Westpac around the time of deregulation of the sector, where he spent 10 years before taking a role at AMP and then with ASX for 14 years up to the end of 2017. He continues to be involved with ASX; working on their educational programs.

In 1996, he and his wife established their own SMSF and again the experience and lessons learned regarding managing an SMSF over the years have provided him with many insights and ideas. He enjoys sharing these with others where these are helpful and always suggest that if an investor or SMSF trustee is unsure, that they should seek appropriate advice from a licenced professional.

Ian holds a B. Com (UNSW), and lives in Sydney and enjoys travelling to and meeting investors and SMSF trustee at the educational events with which he has involvement with from time to time.