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<\/p>\nThere\u2019s a reason why lottery businesses are so profitable. We\u2019ve already spent the winnings in our heads \u2013 paying off debts, luxury items and holidays, perhaps helping family too. How many of us consider investing as part of those pipedreams?<\/p>\n
While it\u2019s unlikely any of us on this platform will hit the jackpot, what is more likely is that at some stage, we\u2019ll have some form of gain. Perhaps an inheritance, or a redundancy payout that we may want to invest for the future. A get rich slow scheme you could say.<\/p>\n
If you were starting fresh with a lump sum, where would you invest it if you wanted growth, safely in the current environment? After all, with markets at highs, should one be more conservative and hold dry powder \u2013 or go in aggressively\u2026<\/p>\n
This was the premise I presented to Viola Private Wealth\u2019s Charlie Viola with the arbitrary amount of $100k to invest. He also discussed how he is investing for high-net-worth clients with more flexibility to take on risk.<\/p>\n
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Viola Private Wealth’s Charlie VIola<\/p>\n
We’re in a unique environment where equities are at all-time highs, inflation may be returning, rate cuts and valuations look stretched. Generally speaking, how are your investors feeling and responding?<\/p>\n
The fact that markets are at all-time highs is not necessarily the real concern. Ultimately, markets have always been at highs over time, otherwise the client hasn\u2019t made any money.<\/p>\n
That said, domestic equities are looking stretched. Our multiples are really high. We\u2019ve got the most expensive banks in the world and the most expensive consumer staples. If you look at Coles (ASX: COL<\/a>)\u00a0 and Woolworths (ASX: WOW<\/a>), they are trading at 30x, whereas Marks & Spencers is at 11x.<\/p>\n These are still good quality companies that are well run, with good balance sheets and almost monopolistic positions. They continue to drive revenue into client portfolios so we still use them.<\/p>\n We are seeing that mega-tech companies have continued to gobble up their competitors and protect their margins. Positive news is floating up to the top and it continues to drive markets forward. <\/p>\n While markets do look stretched, some of the data looks ok. US job numbers and consumer numbers are positive and the VIX has fallen and is at 12-month lows.<\/p>\n What we\u2019re saying to clients now is that if you\u2019re invested in equities, we\u2019re not pulling that money out. <\/p>\n If we\u2019re investing new money for clients, we\u2019re probably keeping 50 or 60 cents of what we would otherwise be allocating to equities and keeping some powder dry.\u00a0 We\u2019re still an investor and we want to be prudent.<\/p>\n A few clients have asked about the conflict between Taiwan and China, and the impact to Australia but we encourage them to stay focused on the fundamentals and asset allocation.<\/p>\n We like disciplined parameter driven investing, where no one is overexposed to any particular asset class. We\u2019re happy to go overweight a certain asset class if they really like it or don\u2019t want to take gains, but we talk a lot to clients about how asset allocation makes up around 85% of total returns over time.<\/p>\n How are you responding pending whether a client is more cautious or more aggressive?<\/p>\n I don\u2019t fundamentally believe that anyone is ever cautious or aggressive, you should be playing the market on its merits to achieve the outcomes the client is seeking based on their situation.<\/p>\n For those able to take on more risk, we use the private markets space fairly extensively. We are 40-50% exposed to private markets compared to public markets. We like private equity, private debt, infrastructure and special situation style funds to try and generated outsized returns to people who are comfortable with the liquidity constraints and additional risk.<\/p>\n Over the last 10-15 years, public markets have done a lot of the heavy lifting in terms of returns. What that has taught us is to keep some powder dry. It doesn\u2019t matter how aggressive the client is, keep some powder dry so we can take opportunities when the market shows some weakness.<\/p>\n That weakness will come naturally. Trump may change policy. Rates might move in the opposite direction. Geopolitics could change sentiment. When we get a dislocation between what the noise is doing and what the signals are telling us, we want to take advantage of that.<\/p>\n If a client walked into your office tomorrow with $100k looking to invest for growth, what would the portfolio look like?<\/p>\n I\u2019d put $70,000 of that into a split between domestic and global large-cap equities which are all proven and have good balance sheets and good management because they sit in the top of the index. Then I\u2019d invest the remainder consistently and evenly into those over the next six months to take advantage of dollar-cost averaging.<\/p>\n For example, as a starting point\u2026<\/p>\n Domestic equities<\/p>\n Investment: $35,000<\/p>\n Fund:\u00a0SPDR S&P\/ASX200 ETF (ASX: STW<\/a>)<\/p>\n International equities<\/p>\n Investment: $35,000<\/p>\n Fund(s):\u00a0iShares Global 100 ETF (ASX: IOO<\/a>) or\u00a0Vanguard US Total Market Shares Index ETF (ASX: VTS<\/a>)<\/p>\n Just go and buy good quality, top-of-the-index large-caps because ultimately, when economies do well, that stuff does well.<\/p>\n If history tells us anything, if all you had done over the last 30 years was to go and buy the top 100 global stocks and the ASX200, you would have done absolutely fine.<\/p>\n Why have you allocated that way?<\/p>\n We are a business that believes in asset allocation and genuine diversification. For this amount, I wouldn\u2019t look at private markets \u2013 you need significantly more to invest wholesale and adequately diversify in that sector. <\/p>\n There\u2019s not enough scope for other asset classes, nor could the portfolio handle the illiquidity that other asset classes produce. I think there\u2019s enough growth in public markets to do well over the medium to long term for an investment of $100K.<\/p>\n The only way to have genuine diversity when investing with $100K is using ETFs.<\/p>\n What is the game plan from here – do things change much if markets really sell off (20% plus) or keep rallying hard?<\/p>\n If markets sell off heavily, but some of the underlying data and underlying signals haven\u2019t changed \u2013 earnings are still strong, job numbers are strong, US consumption numbers are strong \u2013 then ultimately we\u2019ll take that opportunity to take further exposures to good quality assets.<\/p>\n A good example of that is when the market dipped on 9 April 2025, we reached out to virtually every client who had cash. We had around $300m in client money sitting in cash. We deployed around $150m over the four-day period.<\/p>\n Our biggest trading days and biggest activity days are when markets fall, not when they go up. If I look back over the last decade, we\u2019ve added way more value in periods of dislocation than we\u2019ve added when markets are just going up.<\/p>\n If markets keep rallying hard, we aim to be quite disciplined about our asset allocation. We will look to shave where we are considerably overweight any particular asset class, especially public equities. Then it forms some of the dry powder we might be carrying. They would have to rally much harder than where they are today.<\/p>\n We\u2019re not taking money out at this point in time. We\u2019re still comfortable to hold.<\/p>\n Never miss an update<\/p>\n
\nIt wouldn\u2019t take much for markets to take a leg down \u2013 think a bad result from the likes of Nvidia – and that would be an opportunity.<\/p>\n