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Antares Equities Does company size matter when it comes to investment returns? Antares Equities explains. A commonly held perception in investing is that small companies provide the best exposure to growth and hence capital appreciation in the investment universe. Is this really the case? This article looks at the returns from three sub-indices across the Australian share market – large companies (eg our big banks and BHP), mid-sized (eg Seek or REA) and small companies (eg Mantra or iSelect). Which of these provides the best returns to investors? We find that while size does matter, it is actually the mid-sized companies that in recent years have consistently delivered higher returns for investors than smaller companies and better capital returns than both large and small companies. This result is supported by the fact that, on average, through nearly all time periods and in all major share markets around the world, earnings per share growth for midsized companies is stronger than for either large or small companies. While this might seem surprising at first, we think there are several good reasons why this is the case. Firstly, mid-sized companies can grow in their various industries as they are typically younger companies in younger industries. Younger industries usually experience rapid growth but as an industry matures, the rate of growth reduces. This means mid-sized companies are generally less exposed to disruption than companies in the larger cap market. Further, they are more established than smaller companies, hence they are more self-reliant for capital to grow. They do not need new equity to generate growth, and so returns are better. Also, unlike many smaller companies, the business model has generally proven its durability and is less likely to fail. Chart 1 highlights the total shareholder return (TSR) of mid-sized companies relative to both larger and smaller companies since mid-2005.1 Source: Bloomberg, data to 30 June 2017. Past performance is not indicative of future performance. Chart 1 shows that while mid-sized companies have provided returns commensurate with their larger peers, both mid-sized and large companies have delivered materially better returns than an equivalent investment in small companies. This outperformance is apparent in all time periods – from the last twelve months to the full twelve years measured here. The reason is simple: mid-sized companies have consistently provided better earnings per share (EPS) growth than larger and smaller companies. We have discussed reasons for this outperformance above: namely that midsized companies have proven business models, with ample scope for growth and generally mature capital structures that provide investors with positive leverage to profit growth. Chart 2 shows that while mid-sized companies grow earnings faster than large ones, the TSR is similar for both segments. This is a function of franking, which encourages mature Australian companies to pay larger dividends to shareholders. Looking at returns excluding dividends (Chart 3) shows that mid-sized companies have delivered better capital returns than either small or large companies. Chart 2: Relative earnings per share growth of Australian mid-sized companies Source: Bloomberg, data to 30 June 2017. Past performance is not indicative of future performance. Chart 3: Australian mid-sized companies’ relative share price performance   Source: Bloomberg, data to 30 June 2017. Past performance is not indicative of future performance. Australia is not isolated in this experience. Chart 4 highlights that Australia’s experience is consistent in other major markets such as the United States. Indeed, not only is the earnings per share growth profile better than other sub-sectors, so too is the total shareholder return. Chart 4: US share market – large, mid and small cap TSR and EPS   Source: Bloomberg, data as at 30 June 2017. Past performance is not indicative of future performance. In conclusion, the evidence suggests that mid-sized companies have performed substantially better on average in Australia than smaller companies – both from an EPS and a TSR perspective. In the US, while small caps have had a good 12 months due to surging business confidence following Donald Trump’s election, the same is also true for mid caps over more realistic investment periods. This challenges well held perspectives about allocating money to small companies for capital growth. In terms of risk, common volatility measures of risk highlight that mid-size companies exhibit lower levels of volatility than smaller companies, further enhancing their appeal. The same is also true of other major markets like the United States. Of course, large companies continue to appeal to investors due to their apparent “quality” characteristics and historically lower volatility than mid and small caps. However, in an era where disruptive technologies are able to swiftly cut the earnings of mature businesses, earnings quality is at risk for companies no matter what their size. So if mid-sized companies have provided better capital returns than either larger or smaller companies and have done so with lower risk than small companies, it would appear mid-sized companies are an investment opportunity that may be under appreciated by investors in our market. 1. Total shareholder return (TSR) is any change in capital value plus any dividends received, assumed to be reinvested. For comparison, we have used the following accumulation indices to measure performance: for larger companies, S&P/ASX 20 Leaders Index, for mid-sized companies, the S&P/ASX Mid Cap 50 Index and the S&P/ASX Small Ordinaries Index for small companies. Data commences 30 June 2005, the oldest period consistently available from our source: Bloomberg.  Source : NAB Asset Management October 2017 Important information This publication is provided by Antares Capital Partners Limited (ABN 85 066 081 114, AFSL 234483) (ACP) a member of the group of companies comprised of National Australia Bank Limited (ABN 12 004 044 937, AFSL 230686), its related companies, associated entities and any officer, employee, agent, adviser or contractor (‘NAB Group’). Any references to “we” include members of the NAB Group. An investment in any product or service referred to in this publication does not represent a deposit or liability of, and is not guaranteed by NAB or any other member of the NAB Group. This information may constitute general advice. It has been prepared without taking account your objectives, financial situation or needs and because of that you should, before acting on the advice, consider the appropriateness of the advice having regard to your personal objectives, financial situation and needs. Any opinions expressed in publication constitute our judgement at the time of issue and are subject to change. Neither ACP nor any member of the NAB Group, nor their employees or directors give any warranty of accuracy, not accept any responsibility for errors or omissions in this publication. Examples are for illustrative purposes only. Bloomberg Finance L.P. and its affiliates (collectively, “Bloomberg”) do not approve or endorse any information included in this material and disclaim all liability for any loss or damage of any kind arising out of the use of all or any part of this material. This information is directed to and prepared for Australian residents only.

Whether it's snorkelling on the Great Barrier Reef or going on safari in the Serengeti, your next holiday will cost money. It's much better to save as much as you can before you leave, so you don't rely entirely on your credit card. You don't want to spend the next year paying off your trip debts. Work out your holiday costs The cost of your holiday depends on where you go and how you like to travel. Some costs to consider include: Airfares or transport costs Visa and passport charges Travel insurance Transport at your destination e.g. hire car Accommodation Food Entry fees to sights and activities Souvenirs Entertainment costs Extra money in case of emergencies Charges for using your phone for calls while you're overseas Smart tip If you are exchanging money here or overseas shop around with a few different operators. Different fees and charges can have a big impact on how much cash you receive. Accessing money Think about how you are going to access money while overseas. If you carry lots of cash around, you risk losing it. You could get a travel prepaid card or you could talk to your bank about how you can access your money overseas without paying high fees. For more information on travelling and safety precautions, see the Australian Government's Smart traveller website. Australians and travel insurance Our Australians and travel insurance infographic explains why Australians travel, where they go, what is covered and isn't covered by travel insurance and how to get the best policy for you. Save as much as you can Budgeting Cut back on spending before you go and you'll have more money to spend on your trip. See where your money goes and find ways to spend less on non-essential items. budget planner For example, Paul is going to Mexico and decided to save money by not going out for dinner for 2 months. He saved $300, which he put towards dining out on his Mexican trip. Look for savings in your: Entertainment costs Restaurant meals Clothes Takeaway lunches and coffees Growing your savings Once you've cut back on your spending, you should make the most of your savings. Think about putting your money where it will earn interest, such as a term deposit or a savings account. These accounts will give you a higher rate of interest than transaction accounts. Learn more about the compound interest you could earn in a savings account. Work out how much you will earn in interest if your savings are put in a savings account or term deposit. savings goals calculator It might also help to visualise your holiday so you keep in mind what you are saving for. Our app will help visualise your progress towards achieving your goals. Track your savings goals on the go with our free app. TrackMyGOALS Case study: Laura and Kaz save up for Europe Laura and Kaz dream of backpacking around Europe. They have only 18 months to save as much money as they can for their trip. Laura opens an online savings account with an interest rate of 3% and deposits $500 every fortnight. She resists the temptation to dip into the money as she knows she will lose some of her interest if she does. Kaz saves $500 of her pay every fortnight in her everyday transaction account that has an interest rate of 1.5%. She tries not to use the money but regularly takes out $50 a fortnight to get her through to the next pay day. Eighteen months later, Laura has saved more than $18,400, while Kaz has only $16,394. Hard-to-access, high interest accounts can make a big difference. The more money you can save before a holiday, the better. Start saving now by opening a savings account. Source:  Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at www.moneysmart.gov.au Important note: This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.  Past performance is not a reliable guide to future returns. Important:Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide.  Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

We tend to take shortcuts when making numerous decisions in our lives, such as choosing a restaurant or when buying a new car. But don't take shortcuts with investment decisions. As a recent Vanguard research paper* observes, a common decision-making shortcut is to use a rating system based on the assumption that past performance will continue in the future. It is hardly surprising that as this approach may seem to work for most everyday choices, investors are tempted to follow a similar decision-making process. However, it is a fundamental trap to assume that past performance of an investment – whether good or bad – will continue. The widespread reliance on past performance for making investment decisions is encouraged by the ready availability of past-performance data, often highlighted by commentators and fund managers. And then there is the undue focus of many investors on short-term returns of individual investments and asset classes. The flows of capital in and out of investments suggest that a high proportion of investment cash flow is driven by past performance data, including data entrenched in fund rating systems. So, how can investors make better investment decisions? The research paper's authors, who are members of Vanguard's Investment Strategy Group, put forward a four-part approach that moves away from a reliance on past performance to long-term planning. Investors using this four-part approach to their decision making would: Develop a financial plan to reach "clear and appropriate" goals. Select a broadly-diversified portfolio across asset classes. Minimise investment costs. Periodically rebalancing their portfolio to keep it in line with its target or strategic asset allocation. By taking this disciplined approach to making investment decisions, investors should become less vulnerable to being caught up with the prevailing investment moods that typically leads to buying when prices are high and selling when prices are low. Financial planners can make a valuable contribution to the quality of investment decisions by encouraging investors to concentrate on long-term portfolio construction and goal setting – rather than on past performance. Further reading: Vanguard's principles for investing success (recently updated). * Reframing investor choices: Right mindset, wrong market by Francis Kinniry, Colleen Jaconetti, Donald Bennyhoff and Michael DiJoseph. Source : Vanguard 3 October 2017 Written by Robin Bowerman, Head of Market Strategy and Communications at Vanguard. Reproduced with permission of Vanguard Investments Australia Ltd Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients' circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.  © 2017 Vanguard Investments Australia Ltd. All rights reserved. Important: Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

A recent Vanguard research paper, Retirement transitions in four countries, found that that 59 per cent of Australia's recent retirees surveyed believe they are highly satisfied with their current financial situation. This compares with 24 per cent with a medium level of satisfaction and 32 per cent with a low satisfaction level. In surveys of thousands of pre-retirees and recent retirees in Australia, US, UK and Canada, researchers recorded a marked improvement in financial satisfaction upon retirement. In short, recent retirees tended to be more confident and less anxious about their financial positions. It would be worthwhile revisiting this research project in a few years' time given reducing home ownership among Australians, particularly younger ones, together with rising mortgage debt among older homebuyers. Unfortunately, many more future retirees will begin their retirement with rent or outstanding mortgages to pay from their retirement savings and Aged pensions. Thorough long-term planning for retirement should take into account whether you are buying a home or if you are intending to do so – and how you intend to achieve those ownership goals. Ideally, any mortgage debt should be repaid along with other debts before retirement – hopefully well before. In theory, this will leave your retirement income to pay for your retirement living costs. And those who are not aiming to become home owners should take this into account when determining how much they need to save for retirement. Key research increasing highlights the relationship between financial wellbeing in retirement and home ownership. For instance, economist Saul Eslake wrote in a paper, No place like home – The impact of declining home ownership on retirement*, that Australia's retirement income system had long taken for granted that the vast majority of retirees would have very low housing costs. This was based on a presumption that most would own their own homes and have fully repaid their mortgages. However, Eslake believed this presumption had become increasingly doubtful. His paper pointed to the declining home ownership among people of working age, "especially those in their late 20s and early 30s". This trend was accompanied by the rising proportion of home owners in their late 50s and early 60s with outstanding mortgages. The latest Retirement expectations and spending profiles, from actuaries and consultants Milliman-Australia, calculates that retirees who rent privately will have to save much more superannuation to live the same lifestyle as retirees who own their homes outright. While only a relatively small percentage of current Australian retirees rent privately, Milliman also expects this to markedly change as levels of home ownership fall across age groups. The latest Household Income and Labour Dynamics in Australia (HILDA) survey from the Melbourne Institute shows that home ownership among people aged 18 to 39 years is down from 36 per cent in 2002 to 25 per cent in 2014. The decline in home ownership is largest among families with young children. Yet the levels of mortgage debt for this age group has almost doubled in that time, according to the HILDA survey, as housing prices have sharply risen and low interest rates have enabled buyers to take bigger mortgages. It would be difficult to understate the need to include retirement housing costs into your planning for retirement in order to avoid a future shock. Please call us on |PHONE| if you would like to discuss.   * No place like home – The impact of declining home ownership on retirement, published in March by the Australian Institute of Superannuation Trustees. Written by Robin Bowerman, Head of Market Strategy and Communications at Vanguard. Source: Reproduced with permission of Vanguard Investments Australia Ltd Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients' circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance. © 2017 Vanguard Investments Australia Ltd. All rights reserved. Important: Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page. 

Young investors can fall into the trap of being too conservative for their own good, forfeiting compounding long-term returns from growth assets. This can lead to the question: How do we tend to invest at different ages? Of course, a higher percentage of Australians hold much of their investment savings in the default diversified portfolios of the big super funds – often with extra savings invested outside super. And the way that investments held outside the big super funds' default portfolios are allocated in different asset classes provides a useful insight into personal investment preferences by age. Independent consultants Rice Warner includes a look at investor preferences by age and wealth in its Personal Investments Market Projections 2016 report. This report broadly defines the personal non-super investments market to include all investment assets held by investors in their own names or through trusts and companies. It does not include family homes and personal effects. Rice Warner' discussion of asset allocation of personal non-super assets by age begins with investors aged 15-24. Parents and grandparents often have made investments on their behalf; and this appears to show up in their asset allocations. Half of the personal investment assets of investors aged 15-24 are in cash and term deposits – second only to investors aged over 75 – and 27 per cent is allocated to life products, investment platforms and managed funds. Interestingly, 22 per cent of the personal, non-super assets of these investors under 24 are in direct property. Young people generally would not have the money to invest in property by themselves; this percentage suggests plenty of parental help. And they have almost no investments in direct equities. A point worth noting is that the personal, non-super investment patterns of these young investors seem to setup a broad path for their investing at older ages– yet with some key variations in asset allocations with age. Consider these for asset allocations of personal, non-super investments at different ages shown in the Rice Warner report: Cash and term deposits: aged 15-24 (50 per cent of their assets), aged 25-34 (46 per cent), aged 35-44 (37 per cent), aged 45-54 (38 per cent), aged 55-64 (43 per cent), aged 65-74 (46 per cent) and aged 75-plus (52 per cent). Direct investment property: aged 15-24 (22 per cent of their assets), aged 25-34 (47 per cent), aged 35-44 (50 per cent), aged 45-54 (47 per cent), aged 55-64 (43 per cent), aged 65-74 (38 per cent) and aged 75-plus (17 per cent). Life products, investment platforms and managed funds: aged 15-24 (27 per cent of their assets), aged 25-34 (3 per cent), aged 35-44 (7 per cent), aged 45-54 (7 per cent), aged 55-64 (6 per cent), aged 65-74 (7 per cent) and aged 75-plus (14 per cent). Equities: aged 15-24 (1 per cent of their assets), aged 25-34 (5 per cent), aged 35-44 (6 per cent), aged 45-54 (9 per cent), aged 55-64 (8 per cent), aged 65-74 (9 per cent) and aged 75-plus (16 per cent). Keep in mind that some investors may decide to have well-diversified portfolios for their savings in large super funds and self-managed super funds while taking a different approach for their personal, non-super holdings. For instance, many investors choose to hold direct property in their own names and perhaps with some cash, fixed-interest, selected direct shares and managed funds. The appropriate course for the asset allocation of personal, non-super investments will depending much on personal circumstances, including professional advice received. It can be a pitfall for an investor to look at their personal, non-super portfolio or their super portfolio in isolation when considering the appropriateness of their asset allocations. Consider taking professional advice on this point if you haven't already. Some investment habits – good and bad – tend to be set at a young age. It is vital to get on the right path at the beginning of your investing life. Please call us on |PHONE| if you would like to discuss. Written by Robin Bowerman, Head of Market Strategy and Communications at Vanguard. Source: Reproduced with permission of Vanguard Investments Australia Ltd Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients' circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance. © 2017 Vanguard Investments Australia Ltd. All rights reserved. Important:Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.