Financial advice for Australian investors in 2024

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With a rollercoaster economic ride experienced by Australians in 2023, many have put the past behind them and anticipate what 2024 has in store. As expected, investors should pay attention to where the money is to improve their financial standing.

However, one should be ready for the hard work of identifying the best opportunities. Let's look at these here and what the experts have to say.

Rising interest rates have defined Australia and remain the underlying factor when considering CFD trading or financial advice. Australia's gross domestic product grew 1.5 per cent from June 2023 to December 2023, much lower than the inflation rate of 4.5 per cent (according to data from the Reserve Bank of Australia).

In short, the economy was in a recession. However, the interest rate hikes present some opportunities. Peter Edwards, a chair executive of Victor Smorgon Group (a private family office), believes "the main force moving the economy seems to be government fiscal and monetary policy".

While rising rates are detrimental for borrowers, there is a flip side worth exploring. Vanguard Australia believes that hikes will continue (despite the rate recently dropping to 4.35 per cent). The investment service asserts that investors should focus on bond investments through fixed-income securities to capitalise on the higher yields.

Donahue D'Souza, head of investments at HSBC, echoes similar sentiments advising investors to "gain exposure via managed funds and ETFs that focus on fixed interest".

Alternatively, the most straightforward, least risky option is for Australians to save money in high-yielding bank accounts.

Australia boasts the second-highest gold mine production globally. Hence, a bet on commodities like gold is a no-brainer. "We are constantly talking about Red 5. It's a company trading on single-digit multiples, a new factory, and producing lots of cash," says Mr Edwards.

Yet, the Victor Smorgon Group is also exploring beyond gold into other commodities, such as zinc, by investing in companies like Altamin. With zinc being one "of the largest used metals in the world", it may be an exciting play for Australian investors.

All in all, commodities are necessary for a balanced portfolio with low correlation to other asset classes like fixed income and equities.

Speaking of the latter, Lindzi Caputo, the wealth management director at HLB Mann Judd, believes opportunities still exist in the shares market, specifically for small to mid-cap stocks.

Mega-cap equities have remained the focal point for stock investors across the globe. Yet, Ms Caputo suggests a look at their small to mid-cap counterparts can provide some surprising gems. One reason for paying attention to these stocks is that they are low-priced compared to the large-cap shares she considers near full-value pricing.

However, Donahue D'Souza is a little cautious. While implying "there is a place for small caps if your risk tolerance permits it", it should only be a relatively small exposure.

Linked to the narrative of stock investing is backing mining shares for companies producing gold, iron ore, and lithium. The Motley Fool Australia indicates the Australian Stock Exchange (ASX) should be the go-to platform, with names like BHP Group Ltd, Fortescue Ltd, and Northern Star Resources Ltd as considerable mining shares in the ASX.

Private equity or private markets sit on the opposite side of publicly traded markets. Analysts from Australian private equity firm Reach Alternative Investments assert that the former provides diversification benefits and higher returns.

Based on a study by PitchBook, private equity funds produced a median net internal rate of 11 per cent between 2000 and 2021. This trumps the annualised returns of the ASX 200, which have approximately been 4.45 per cent since 2006.

The ASX boasts fewer IPOs (initial public offerings) each year. According to Statista, these dropped 54% in 2022 with a total of 87, contrasting the 191 offerings experienced the previous year. Such a trend isn't exclusive to Australia but is occurring globally, demonstrating the shift for companies to pursue private instead of public listings.

The main downside for private equity funds is their high minimum investments. Companies like Hamilton Lane's Global Private Assets Fund require at least $25,000, which, while lower than ten years ago, is still out of reach for the average Australian.

Regardless, private markets are another alternative for Australian investors. The managing director of wealth management firm Pitcher Partners sums it up nicely: "Private equity forms part of a well-diversified portfolio that seeks to generate returns in a different way to listed companies."

2024 presents various opportunities for investors in Australia, including interest rates, commodities, certain stocks, and private markets. Needless to say, this selection is overwhelming for many people.

While a clichéd statement, never putting all your eggs in one basket remains critical. This is where diversification comes in. Although many argue there is no ''free lunch" in investing, diversification is naturally the simplest to minimise financial risks.

This information is of a general nature only and should not be regarded as specific to any particular situation. Readers are encouraged to seek appropriate professional advice based on their personal circumstances.