December has not been kind to the Australian banking sector. Scandals have plagued the Big Four, particularly at the Commonwealth Bank, as reported by the ABC, which is also reporting on the suggestions that ANZ senior managers were involved in rate rigging. The Age is reporting that Westpac’s shareholders aren’t happy with the bank’s remuneration report – specifically the executive bonuses. The Australian government’s Banking Royal Commission isn’t due to hand down its report until 2019, but it’s already uncovering misconduct issues “stemming from greed”.
Understanding Banking Shares
Banking shares have generally been a solid blue chip option for investors. Perhaps once the commission has done its work and, we assume, the banks have taken steps to address the issues affecting confidence in the sector, they will recover their once exalted position.
In the meantime, we’ve seen the Commonwealth Bank shares lose 18% since the beginning of 2018, while its annual turnover in the five years since 2013 has been only 3%, according to Motley Fool Chief Investment Officer, Scott Phillips.
It’s not clear if and when the banks will recover their status, but Mr Phillips believes that the potential future ‘blue chip’ companies can be found in the tech companies that are changing and disrupting how we make payments, the computer chip industry and other fields ripe for innovation: companies like Apple, Google, Amazon and Netflix.
What Is The Recommendation?
He recommends particularly the ASX’s Exchange Traded Fund Betashares NASDAQ 100 ETF [ASX:NDQ] as a long term option for exposure to these and to upcoming tech companies. In November, Motley Fool was reporting that ASX:NDQ had returned an average of 16.47% per annum for the last three years.
Given that the bad news for the banks is unlikely to stop – and may get worse in February 2019 when the Governor General gets the report – now seems like a good time to look for some alternatives to diversify your portfolio and potentially limit future banking losses.
If you would like to speak with a professional investment adviser about how your portfolio is positioned for the year ahead, contact United Global Capital today on 03 8657 7640 or email [email protected] for a no cost, no obligation consultation.