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AU Financial Review
2 hours ago
- Business
- AU Financial Review
Beyond big tech and into ‘beautiful compounders' universe
'These are businesses delivering around 10 per cent earnings growth, yet trading at long-term average valuations,' says Abela. This part of the market, he says, offers potential growth without the hype. Abela views the recent pullback in large-cap tech as part of a broader normalisation. The shift into large-scale AI infrastructure marks the start of a capex-heavy phase – one that could compress margins and weigh on returns over time. 'These are great businesses,' he says. 'But they're massive already, and the capex cycle is coming.' While optimism around AI continues, Abela believes its real-world rollout may take longer than anticipated. 'It will require a lot of capex, a lot of power, a lot of water for cooling,' he says. Fidelity's approach to global mid-caps is based on three pillars: viability, sustainability and credibility. 'Viability is about cash flow return on investment – looking at return level, direction and duration,' he says. 'Sustainability asks how long that return can last. Is it just a cycle, or something that can endure for 10 or 20 years? And credibility is about trust: trusting the management, the accounts, and verifying it yourself.' That framework allows the fund to identify what Abela calls 'beautiful compounders' – long-term holdings with strong fundamentals and consistent returns. While quality remains the core, the team also finds opportunities in cyclical rebounds and special situations where sentiment is low but improving. Abela believes the most compelling potential opportunities lie in industrials, particularly in the US, Europe and Japan. 'Most of our buying has been in industrials,' he says. 'They benefit from the recovery but they're not in those various coveted or hot sectors like tech and financials, which have been popular in the last couple of years.' The team's QVTM framework – balancing quality, value, transition and momentum – helps structure the portfolio to perform across different market conditions. 'That QVTM balance from a portfolio perspective has allowed us to navigate four very different sort of cycles or years,' says Abela. According to the firm, the strategy has helped deliver attractive upside capture (around 95 per cent) while limiting downside to 75 per cent. Tim Murphy, co-CEO and head of research at Genium Investment Partners, says recent equity concentration has prompted allocators to reassess risk – and to consider whether mid-caps deserve a more permanent place in global portfolios. 'They are coming to think of them as more part of a regular allocation in portfolios, where they might not have done historically,' says Murphy. 'Allocators are certainly keen to diversify some of that risk away.' Murphy points out that mid-caps are currently trading at 'much, much lower valuation levels than large caps at this point in the cycle'. That valuation gap, combined with the breadth and diversity of the mid-cap universe by geography, sector and company size, has made it an increasingly compelling area for long-term investors. 'By its nature, the market is much more diverse in terms of smaller size of stocks, number of stocks, spread of companies by both sector and geography,' he says. Murphy says his firm has been steadily increasing allocations to global mid-caps over the past year. 'For the past 12 months we've been increasing allocations of global mid-caps in most of our client portfolios,' he says. 'Largely through valuation ... but also because the global part of most people's allocation has become so concentrated in such a handful of names.' When it comes to sector exposure, Murphy sees common interest among managers in areas like US health care, particularly in specialist operators rather than large pharmaceutical names. 'Certainly, they're seeing good opportunities within that sphere,' he says. 'Especially in the US side of the market.' He also highlights industrials as a consistent potential opportunity. 'Sometimes the businesses are frankly a bit more boring,' Murphy says. 'But those steady compounders tend to be better longer-term investments.' Looking ahead, Murphy expects the valuation gap between mid- and large-caps to narrow over time. 'The timing of that is anyone's guess,' he says. 'But we would expect that valuation gap to narrow, and it's why we've been allocating more money into this segment of the market.' For both Abela and Murphy, the takeaway is clear: while headlines continue to focus on the mag seven, the next chapter of US market leadership may be forming quietly in the middle.
Yahoo
13 hours ago
- Business
- Yahoo
One of the most attractive — and sometimes secretive — ways the wealthy donate money could soon get even more popular
A provision in Trump's tax bill could make donor-advised funds an even more popular form of giving. DAFs are especially attractive to the ultrawealthy because of big tax advantages. Some experts told BI they're seeing DAF donations among the wealthy change in the post-Trump era. As President Donald Trump's "big beautiful bill" moves through Congress, a provision hiking taxes on private foundations could make another form of philanthropy even more attractive: donor-advised funds. Donor-advised funds, or DAFs, are accounts where donors can contribute funds, immediately get a tax deduction, and "advise" on where to donate — and they are becoming increasingly popular. As Daniel Heist, a professor at Brigham Young University and a lead researcher on the 2025 National Survey of DAF Donors, put it, "they're growing like crazy." Donors can contribute non-cash assets, like appreciated securities or crypto, to DAFs, and the funds grow over time. BI spoke with academics, DAF sponsors, and nonprofits about why major donors use DAFs, how the tax bill and Trump are changing the calculus, and the risks of the "opaque" form of philanthropy. Sponsoring organizations, which are themselves public charities, operate DAFs. Some of the largest are connected to investment firms like Fidelity, Vanguard, and Schwab, though others include community foundations or religious organizations. Technically, donors don't control the funds in their DAF, but practically speaking, they can direct the money to any accredited charity. "As long as you're following the rules of the DAF provider, you should always have those recommendations honored," Mitch Stein, the head of strategy at Chariot, a technology company focused on DAFs, said. Private foundations have to distribute at least 5% of their assets annually for charitable purposes, but DAFs don't have payout requirements. Donors also don't report their gifts to individual organizations on their taxes, and instead report that they gave to the DAF. If Trump's fiscal agenda passes in the Senate (it has already passed in the House of Representatives), it would raise the current 1.39% tax on private foundations' investment incomes. The rate would rise to 10% on foundations worth $5 billion or more, to 5% for those worth between $250 and $5 billion, and to 2.8% for those worth between $50 million and $250 million. It wouldn't change for foundations worth less than $50 million. "There already was a substantial amount of momentum toward donor-advised funds, and a bill like this would only magnify that," Brian Mittendorf, a professor at Ohio State University who has studied DAFs, told BI. Though people across net worths use DAFs — Heist called them a common "mid-range philanthropic tool" — they're particularly attractive to the rich. The 2025 survey of DAF donors found that of 2,100 respondents, who were surveyed between July to September 2024, 96% had a net worth of more than $1 million. "I definitely see a trend away from private foundations," Heist said. Rebecca Moffett, the president of Vanguard Charitable, a prominent DAF provider, said she's seeing the same pattern. The main draw has to do with taxes, according to data and the experts. In the 2025 survey, 62% of donors said tax advantages were a strong motivation for opening a DAF account. Jeffrey Correa, Senior Director of US philanthropy at the International Rescue Committee, told BI that there's been an "explosion" of major donors giving through DAFs. The ability to contribute non-cash assets is also a big factor. Donating appreciated assets lets the donor avoid paying capital gains taxes (in the 2025 survey, 51% of respondents said reducing capital gains taxes was a big consideration). Convenience is another benefit, experts said, since DAFs are more streamlined and cheap than private foundations. Then there's the question of privacy, beyond how DAF donations show up on tax filings. Donors can choose varying levels of anonymity when donating to recipient nonprofits. Only 4% of donors in the 2025 survey opted to be totally anonymous to the recipient organizations, most commonly to avoid public recognition or solicitation. Just 24% said they wanted to avoid scrutiny. Generally, the experts BI spoke with said they don't see confidentiality as the primary appeal of DAFs. Moffett and Correa said they haven't seen more major donors opt for anonymity or express concerns about confidentiality. Most of those BI spoke to were enthusiastic about DAFs, but some flagged risks. Mittendorf and Helen Flannery, an associate fellow at the Institute for Policy Studies, found through a study that DAFs distribute grants to politically engaged organizations 1.7 times more than other funders. "They can be great conduits for dark money because they're completely opaque," Flannery said, adding that the public doesn't always know where donors' DAF funds go. Risks aside, the wealthy seem as interested as ever in using DAFs — and in turn slowly eroding the private foundations that once defined the philanthropic world. Have a tip or something to share about your giving? Contact this reporter via email at atecotzky@ or Signal at alicetecotzky.05. Use a personal email address and a nonwork device; here's our guide to sharing information securely. Read the original article on Business Insider Sign in to access your portfolio
CNBC
2 days ago
- Business
- CNBC
How much you should have saved by age 50, according to financial experts—and 3 steps to take if you're behind
Many Americans are anxious about their savings, especially as they approach retirement age. Over half of Gen Xers, those aged 45 to 60, say they have no more than three times their current annual income saved for retirement, according to a study commissioned by life insurance and financial planning provider Northwestern Mutual. This is significantly less than a benchmark set by Fidelity, one of the largest retirement plan providers in the U.S., which advises accumulating six times your current annual income by age 50 if you anticipate retiring at 67. Other experts take a different view. There's no magic number when it comes to saving for retirement, says Nathan Sebesta, a certified financial planner and owner of Artesia, New Mexico-based financial services firm Access Wealth Strategies. How much you anticipate spending every year of retirement and when you decide to retire can greatly affect how much you should have saved, Sebesta says. For example, those who plan on retiring later, as well as downsizing and living more frugally, may need less than Fidelity's benchmark, the report said. Additionally, the baseline amount you need can vary by as much as $1.49 million depending on what state you decide to retire in, according to an analysis by GOBankingRates earlier this year. To figure out how much you need, Sebesta recommends working backward. Start by deciding how much annual income you'll want in retirement and estimate how long you'll need that yearly income for. After taking that total and adjusting for inflation, you can determine how much you need to save each year and how your investments need to grow to hit that goal. If you're still feeling behind, Sebesta says there are a few other strategies you can consider to catch up and retire comfortably. "Don't panic," Sebesta says. "Start where you are and as soon as you can." While you can start claiming Social Security benefits as early as age 62, doing so means you'll receive a permanently reduced benefit. Alternatively, if you delay claiming benefits beyond full retirement age — 67 for Americans born after 1960 — your monthly payments could increase significantly, Sebesta says. For every year you wait up to age 70, your benefit grows by about 8%. That means someone born after 1960 who waits until 70 could receive up to 24% more than they would at 67. Once you turn 50, the Internal Revenue Service allows you to contribute more to various retirement plans in catch-up contributions. If you have a workplace retirement plan like a 401(k) or 403(b), you can contribute an extra $7,500 beyond the standard limit of $23,500, for a total of $31,000 in 2025. For those with an individual retirement account, the 2025 contribution limit is $7,000, plus an extra $1,000 in catch-up contributions for those 50 and older. These extra contributions not only help boost retirement savings but can also reduce your taxable income, which is especially valuable during high earning years in your 50s and 60s, Sebesta adds. Catch-up contributions are "definitely a neat benefit for people looking for more savings," Sebesta says, but they won't work for everyone: "You've got to be willing to put the money into the plan as well." If you haven't consistently contributed over the years or are struggling to keep enough cash on hand, finding the extra money to take advantage of these higher limits may be difficult. While it's not the ideal scenario, if you're significantly behind on retirement savings and working on paying off debt, Sebesta says you may have to consider lowering your expected lifestyle in retirement. If you have 10 to 15 years left to plan, the focus may need to shift to paying off debt and getting to a point where you can live on less in retirement, Sebesta says. This may look like scaling back on expenses, downsizing your lifestyle or living in a more affordable area. The last option would be to continue working in retirement. "No one ever dreams of that goal," Sebesta says. "But if they do delay for so long and are not able to catch up completely, that might be, sadly, one of the realistic opportunities that they would have." ,
Yahoo
2 days ago
- Business
- Yahoo
Social Security: 4 Steps To Take Now If You Want To Retire Before Age 67
If you're a younger worker, or know someone who is, early retirement may be part of the plan. After all, lots of workers now want to retire at 40, 50 or 60. Check Out: Read More: As you're probably aware, when it comes to Social Security, the full retirement age is 67 for those born in 1960 or later. As noted by AARP, the changes in age requirements come from legislation signed by President Ronald Reagan. When it comes to waiting, age can make a big difference in how much you'll qualify for when it comes to Social Security. If you want to retire before you reach 67, here's a look at some steps to take now. According to Ramsey Solutions, one of the first things you need to do is to determine your goals for early retirement. Those goals will help guide your plan and financial strategy. In addition, you can create a mock retirement budget. This will give you a better idea of how much money you'll need each month to make the early retirement dream a reality. Learn More: Healthcare and taxes are two areas you specifically need to consider as you plan for early retirement. You want to determine how you're going to pay for health care after you leave full-time work. In addition, per Fidelity, you should also look into withdrawal strategies to help reduce the effects of taxes on your finances in retirement. In this case, 'get to work' means figure out how you're going to achieve your retirement goals and then taking action. According to Ramsey Solutions, you need to figure out ways to get out of debt and invest consistently. You may consider investing in a bridge account and real estate to help fill in the gap between early retirement and when you're able to start taking out money from retirement accounts without penalty. A brokerage account is an example of a bridge option to help with that gap. You don't need to do all of this by yourself. You may find it helpful to meet regularly with a financial advisor. This professional can help you make decisions that'll take you in the direction of your goals for early retirement. You may also find it helpful to look at online resources and apps designed for personal finance. More From GOBankingRates 7 Luxury SUVs That Will Become Affordable in 2025 This article originally appeared on Social Security: 4 Steps To Take Now If You Want To Retire Before Age 67 Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
2 days ago
- Business
- Yahoo
$85,000 Investment Mistake? Suze Orman Says This Listener Should Exit Her Annuity ASAP
When listener Portia asked a question on the "Women & Money" podcast about her variable annuity, Suze Orman didn't hold back. Based on the high fees Portia was paying and the surrender schedule she faced, Orman advised her to cut her losses — and fast. If you've ever wondered whether an annuity is right for your retirement funds, especially when it involves rolling over a 401(k), this is a story worth paying attention to. Portia explained that she transferred $85,000 from her previous employer's 401(k) into a variable annuity at Fidelity in 2022. She's currently paying around $380 per quarter in fees — more than $1,500 per year — and the annuity has a nine-year surrender period. If she waits it out, she avoids the surrender charge but continues paying hefty fees. If she exits now, she'll face a penalty of roughly 7%. Don't Miss: Deloitte's fastest-growing software company partners with Amazon, Walmart & Target – Hasbro, MGM, and Skechers trust this AI marketing firm — Orman did the math. If Portia sticks with the annuity until the ninth year, she'll end up paying approximately $9,120 in fees. In contrast, her surrender charge today would be around $6,300 to $6,900. 'Absolutely surrender it," Orman said. "It makes no sense for you to be in it." Orman has long warned against putting retirement savings into variable annuities, especially when they come from qualified accounts like a 401(k). In Portia's case, the high annual fees alone are reason enough to reconsider. According to Investopedia, variable annuities often charge 2% to 3% annually just for management and administrative costs. Add in surrender charges, possible sales commissions, and insurance fees, and you're looking at a serious drain on your retirement savings over time. Even though annuities offer the benefit of guaranteed income, that security comes at a price. "It makes no sense for you to be in it," Orman said. "You might even want to look at converting it little by little to a Roth IRA and really save money in the long run." Trending: Maximize saving for your retirement and cut down on taxes: . Rolling a 401(k) into an annuity can sound appealing — it promises stability and income in retirement. But the move can backfire if you're not fully informed. Here's why: No added tax benefit: A 401(k) is already tax-deferred, so moving it into an annuity doesn't give you extra tax savings. Limited flexibility: Annuities often lock you into fixed payment schedules, which can be a problem if your expenses vary month to month. Hefty fees: Fees can quietly eat away at your balance, reducing your future payouts. Inheritance issues: If you die prematurely, the remaining annuity funds may go to the insurance company — not your suggested that Portia surrender the annuity and reinvest the money in her IRA in a way that makes more financial sense. She also floated the idea of gradually converting the funds to a Roth IRA to reduce future tax burdens. If you're in a similar situation, consider seeking advice from a financial planner before making changes. Understanding your investment's fee structure, potential penalties, and tax implications is key to making the right decision. Read Next:'Scrolling To UBI' — Deloitte's #1 fastest-growing software company allows users to earn money on their phones. Image: Shutterstock UNLOCKED: 5 NEW TRADES EVERY WEEK. Click now to get top trade ideas daily, plus unlimited access to cutting-edge tools and strategies to gain an edge in the markets. Get the latest stock analysis from Benzinga? APPLE (AAPL): Free Stock Analysis Report TESLA (TSLA): Free Stock Analysis Report This article $85,000 Investment Mistake? Suze Orman Says This Listener Should Exit Her Annuity ASAP originally appeared on © 2025 Benzinga does not provide investment advice. All rights reserved. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
