Sharemarket Game news

December 2021: Announcing the winners of Game 2

Join us in congratulating our Sharemarket Game winners – and learn more about their strategies.

Don’t forget to complete our survey. It only takes 5 minutes to do and it will help us make the next game even more interesting and insightful. 

How the market performed

Short-term volatility in the Sharemarket game can give players the chance to make some quick gains (or significant losses). And November, the last month of the 2021 Sharemarket Game, didn’t disappoint.

The first few days of the month saw the market drop as energy and finance stocks fell and iron ore prices declined. After rallying later in the week on the back of technology and finance stock gains, the market dipped again as the materials and energy sectors lost ground.

Mid-month stocks rose again, only to dip once more as the world focused on wages, inflation and monetary policy. In the final week of the game, the market fell amid fears about another wave of COVID-19 in Europe, but rose again mid-week as iron ore mine companies and energy companies regained ground.
 

What’s next on the horizon?

After a good start to the year, the Australian economy slowed in the third quarter of 2021 amid lockdowns in response to an outbreak of the Delta variant. But with Australia achieving high levels of vaccination, the Reserve Bank of Australia (RBA) expects the economy to get back on track from December onwards, as restrictions ease further and our borders open up.

In September, markets hit their lowest level for the year so far. BHP and Fortescue Metal stocks traded ex-dividend at start of month, central banks announced intentions to reign in their COVID-19 stimulus packages, and investors worried about the impact of the Delta outbreak on global growth. 

Meanwhile, China’s energy supply shortage pushed the prices of oil, gas and coal stocks up. While the energy sector benefited, materials lost ground as the Chinese government decided to limit steel production. 

By October, poor iron ore prices and global supply chain issues weighed even further on the market. Meanwhile, news of debt problems of China’s second largest property developer, Evergrande, also spooked investors. And energy stocks fell after their stellar rises in previous months.

There were some winners in October: tech, healthcare stocks, finance, consumer discretionary and real estate all gained. But overall, investors behaved cautiously as inflation rose and poor economic news out of China continued.

As you can see, it’s important to keep an eye on economic and political events and how they could impact the sharemarket in the near term, and to assess possible longer-term impacts. 

As we hit the home stretch of the Sharemarket Game, we check out our top players’ strategies, and find out what’s given our most improved player an edge.

Game 2 of the 2021 Sharemarket Game will end on November 25. Here are the two top players as at close of trade on Monday November 1, 2021:

Homeschooling Hero

If Homeschooling Hero’s name is anything to go by, they’ve been making the most of their time during lockdown. They’ve certainly put some thought into their investment strategy, taking a ‘buy and hold’ approach and diversifying across software and services, financials, mining and tech. 

The player has also chosen to invest in an ETF, giving them a broader exposure for their money than simply investing in direct shares. (Learn more about the history and outlook for ETFs here.)

Homeschooling Hero seems to have taken a thematic approach. They’ve invested in a company with a strong ethical profile, which is a high growth area as the world transitions to a low-carbon economy. They’ve also invested in cybersecurity – another area rising in value due to increasing cyber-threats and greater awareness by organisations about the importance of online safety.
 

dpstrade

Unlike Homeschooling Hero, dpstrade has chosen a ‘buy low, sell high’ strategy, buying multiple stocks and aiming to sell them when their price rises. While not a recommended strategy for long-term investing, in the context of the Sharemarket Game, trading like this allows players to take advantage of short-term volatility.

Dpstrade has created a portfolio that’s well diversified across sectors: diversified financials, energy, food, beverage and tobacco, materials, real estate, software and services. Interestingly, they’ve also used a falling sell order on one of their shares, which instructs ASX to sell these shares when its price falls to a set level. This is a really useful tool if you don’t have time to monitor the market, or you have a level at which you’d be happy to sell your shares.

Congratulations to our most improved player – Noklue

The name’s funny, but it belies the player – Noklue certainly isn’t clueless when it comes to the Sharemarket Game. They’ve chosen stock from consumer services, energy, pharmaceuticals and biotech, materials and the technology sector, giving them a well-diversified portfolio. This seems to be working nicely for them as they’re avoiding over-exposure to one sector.

Like dpstrade, Noklue has chosen a ‘buy low, sell high’ strategy. With all but one of their stocks they’ve managed to sell at a profit, which is pretty impressive.

While Homeschooling Hero has a comfortable lead of almost and $5,000 from Noklue (and a $3,000 lead from dpstrade) there’s still close to a month remaining in the Game. And remember, things can, and do, change quickly – so look out! 

To keep an eye on the movers and shakers, check out the Rankings box on your Sharemarket Game dashboard. 

Diversification is a risk management strategy that mixes a variety of investments within a portfolio. As an investor, it’s a way of spreading your money across different companies, sectors, markets and asset types, to protect against a downturn in performance by having a broader exposure. You can also diversify geographically, by investing in both domestic and foreign markets. 

The idea is that a positive performance in one area of your portfolio will outweigh the negatives in another, reducing the overall impact if one or more of your investments performs poorly. Diversification minimises your exposure to a single market to ensure a steady stream of returns from other high-performing investments.

For example, if your money was invested only in the tourism sector at the beginning of 2020, your portfolio would have been negatively impacted by the outbreak of Covid-19. But if you were also invested in other sectors that performed well during the pandemic, such as tech companies or delivery services, this would help compensate. 

An Exchange Traded Fund (ETF) is a type of security that tracks an index, sector, or asset – allowing you to buy a basket of shares or assets in a single trade. They can cover a whole range of markets and assets, both domestic and international, including:

• the Australian sharemarket 
• sectors of the Australian sharemarket, such as industry sectors  
• overseas sharemarkets 
• sectors of overseas sharemarkets, such as industry sectors or geographic sectors
• fixed income 
• foreign currencies
• commodities. 

ETFs work by pooling your money with other investors, similar to a managed fund, but you can trade them on the ASX like you do with shares. With an ETF, you’re able to track a range of indices and gain exposure to high-growth areas of the market – for example, by tracking a specific sector index. 

Investing in ETFs can not only save you time and effort in choosing shares, but they also offer a simple and cost-effective way to diversify your portfolio. This is because in each trade you get exposure to all the stocks in the index your ETF tracks while only paying brokerage on a single transaction. ETFs can also help you diversify your portfolio across asset classes and markets that would otherwise be difficult or expensive to access. 

Last month’s leader is still sitting near the top, while our most improved player has used a strategy to exploit short-term volatility.

Meet the top two players on the ASX Sharemarket Game leaderboard, as at close of trade on Monday 27 September:

Buy and hold – with a focus on airlines

This week’s top player, Dogan Fil, has taken a buy and hold approach. They’ve invested in pharmaceuticals and media and entertainment – but put most of their money into airline and travel stocks. 

Airline share prices fell considerably in 2020 when closed borders halted most international travel. But as more of the world gets vaccinated and borders slowly open, airline and travel stocks are likely to move higher. The pandemic far from over though, so they may have a bumpy ride on the way.

Dogan Fil purchased bought most of their stocks at the end of August and haven’t sold any stocks at this stage. This ‘buy and hold’ strategy has served them well. They haven’t tried to time the market, and haven’t been panicked by short-term fluctuations in share prices. 

Remember that over time, sharemarkets tend to outperform other investments over long periods of time. So it’s important to be able to ride out short-term volatility. 

That said, in the Sharemarket Game this strategy doesn’t always create winners. That’s because the short timeframe generally allows people to benefit from volatility. However, until now at least, buy and hold is working well for Dogan Fil.

Diversified portfolio still going strong

Bourse Bandit was on top of our leaderboard one month ago. They’re in second place now and have abandoned their buy and hold strategy, selling some banking and retail stocks. They’ve also bought some travel stocks and shares in another bank.

Bourse Bandit also benefited when one of their companies paid out a healthy dividend to investors in late August and early September.

Bourse Bandit may have switched their buy and hold strategy, but they’ve maintained a diversified portfolio, with investment in estate, consumer discretionary, financials and IT. 

OzTdog –most improved player

Our most improved player for this week, OzTdog, is focused predominantly on energy and pharmaceuticals. But in the past, they’ve bought and sold banking and diversified financials, food and beverage, healthcare, materials and utilities stocks.

OzTdog is using a ‘buy low/sell high’ strategy – attempting to purchase stocks at a relatively low price, then selling them when the price rises. They’re making the most of the Sharemarket Game’s short investment timeframe that makes it easier to gain from market volatility and short-term shifts in the market. 

In the real world investors this is a tough strategy to employ. Generally, people who focus on building a diversified portfolio of quality stocks and hold them for the long term (at least 10 years) tend to be the most successful investors.

2021’s results – and some insights

This August, 171 companies reported their earnings result and 82% reported a profit. In an average reporting season, about 88% of companies report a profit – so the 2021 reporting season was lower than usual. 

Interestingly though, those companies that did make a profit made more than on average, which has boosted their cash holdings. As a result, more companies have rewarded their shareholders by paying them dividends.

NOTE: dividends in the Game may not reflect market conditions and players should refer to the dividend information in the Game for more details.

Despite the positive results, companies expressed a very cautious outlook due to the ongoing pandemic. 
 

Who did well and why?

The 2020 lockdowns had a positive effect on some industries because consumers spent more on food and household goods. Supermarket retailers like Woolworths (ASX: WOW ) performed well, although profits decreased in the second half of the year as the economy began to open up. Online furniture retailer Temple and Webster saw revenues rise by 85%, electronics business JB Hi-Fi (ASX: JBH) reported a 60% lift in profits, and Bunnings owner Wesfarmers (ASX: WES) also performed strongly.

Healthcare companies that provided goods and services related to the pandemic outperformed this year. Ansell (ASX: ANN) prices rose on the back of high demand for PPE – although temporary supply chain issues in Asia may affect their future earnings. 

While travel and tourism have been heavily impacted by border closures, Flight Centre (ASX: FLT) has some recovery in North America and Europe as countries slowly open up. Whether that growth can be sustained will depend on how well the world contains the ongoing COVID-19 pandemic.

Other events besides the pandemic also affected companies’ earnings this year. Fintech company Afterpay’s (ASX: APT) sales increased by 90%, but its earnings fell and it posted a loss due to increased expenses as it focused on global growth. 

Mining company Fortescue Metals (ASX: FMG) posted record earnings, revenue, and profits – largely on the back of strong demand for steel from China, which boosted iron ore prices. As well as paying dividends, the profits are helping the miner decarbonise by producing green electricity, hydrogen, and other green industrial products. 

Meanwhile, China’s falling birth rate along with border closures weighed down on a2 Milk Company (ASX: A2M), whose net profit slumped by 79.1%.
 

Shares: risk and benefits

As an asset class, shares tend to perform very well over the long term. But individual shares come with many risks and benefits. Shares are:

• liquid – which means they’re easy to sell and turn into cash 
• comparatively cheap to buy – unlike (say) property, which requires a large deposit, stamp duty, conveyancing costs and other ongoing expenses
• tax efficient if you own them for more than 12 months – if you sell your shares after owning them for 12 months or more, you only have to declare half of any capital gains you make on your shares.

However, like any investment shares come with risks. These include the risk that:

• you may lose some or all of your investment
• your shares could be highly volatile, and the market may perform poorly just before you are ready to sell your shares
• your shares could be affected by changing legislation, or by moves in currency if you’ve bought international shares
• The advice you receive does not match your risk appetite or your strategies underperform. 

Women and investing    

While more women are turning to investing to build their financial future, men are still more likely to invest in the sharemarket. And in terms of the Sharemarket Game, the gender gap is very wide – men made up 80% of players in the first round of the 2021 Sharemarket Game. We also found that 67% of women said they were beginners, compared to 47% of men. 

Carmen, who played under the name Pilar, was one of the top women players in the previous round of the public Sharemarket Game. Here, she tells us about her experience of the Game, the strategies she used – and how she compares the Game to real-life investing.

Who’s winning or gaining momentum on the Sharemarket Game leaderboard – and why?

Meet the top two players on the ASX Sharemarket Game leaderboard, as at close of trade on Monday 30 August:

Buy and hold a winner – for now

Our top player for the week, Bourse Bandit, has adopted a buy and hold strategy so far. They’ve chosen to start off the game by investing in companies across a range of sectors including real estate, consumer discretionary, financials and IT. As at the close of trade on Monday, every single stock in Bourse Bandit’s portfolio was profitable.

So far, the competition leader has been happy to sit on their gains – but we’ll see if Bourse Bandit maintains their strategy. Buy and hold is often referred to as a ‘passive’ investment strategy. This means the investor holds stocks over a long period, aiming to ride out market volatility. This way, they avoid trying to time the market or make panicked decisions during volatile times. 

Coupled with genuine diversification, buy and hold is a sound long-term strategy. But in a short timeframe of the Sharemarket Game, it’s not always a winner – largely because it doesn’t allow you to make rapid gains during times of market volatility.
 

Picks of the pandemic

Dosh for Dosh is looking to invest a little more thematically than Bourse Bandit. Specifically, they’re targeting sectors that are performing well in the pandemic like food, pharmaceuticals and IT. 

As at the close of trade on Monday 30 August, Dosh for Dosh held stocks in a fast food franchiser, a biotech company that produces vaccines and a data centre operator. You can see how those companies might benefit in a lockdown caused by a pandemic – people are ordering food through the likes of Uber Eats, they’re lining up to get vaccinated and they’re spending lots of time online! 

Dosh for Dosh has further diversified by investing in the Vanguard Australian Shares Index ETF (VAS), which tracks the ASX 300 index. This is only the second round of the Sharemarket Game that has offered ETFs. You can find out more about the history and outlook for ETFs here.

Flying high – our most improved player

Our most improved player for this week, Kinfish, has also taken a thematic investment approach. They’re trading entirely in travel and airline stocks. They’ve also attempted a ‘buy low/sell high’ strategy – looking to buy stocks when the price is relatively low and then sell when it rises. 

Trading frequently in one sector can work over a short investment timeframe like the Sharemarket Game. That’s because it lets you exploit market volatility and short-term gains. 

On the downside, it can lead to overexposure to one sector. And trying to time the market’s ups and downs is really tricky because daily changes in prices are often based on investors’ emotions and ever-changing consumer sentiment.

At the time of our tally, Kinfish held their entire portfolio in cash. So whether they’re going to continue with the airline theme remains up in the air – for now, at least!

Growth versus income

Shares can offer two types of return:

• capital growth, when a share price increases, and
• income, when the company shares profits with shareholders by paying dividends. 

In real life, you’ll want to consider which is most important to you, depending on your personal situation and your investment goals. In the game, you may want to benefit from both, or to focus purely on growth.

To receive a dividend from a company, you need to buy its shares before the ex-dividend date, or “ex date”. Remember that a share price may fall by the dividend amount on or after the ex-date, since anyone buying the share after that date won’t receive the dividend.

Risk versus return

All investments carry some risk, but not all investments are equally risky. In general, the higher the potential return, the higher the risk. For example, a large, mature company paying regular dividends may have less growth potential than a small startup in an untested industry, but its share price is also likely to be more stable.

Only you can decide how much risk you’re comfortable with – both in the game, and in the real world. You also need to consider how to manage risk, and whether you will sell any shares that underperform. One of the most effective ways to manage risk is to diversify your portfolio across companies and sectors. 

The broader economy versus company specific factors

Next, you’ll want to think about economic trends and upcoming events that may affect a company’s performance during the life of the game. That includes both:

Broad economic factors, like changes in government policy, unemployment data, consumer and business confidence, retail sales trends, or changing commodity prices. Look out for upcoming announcements, and consider how they could affect your portfolio.

Company specific factors, like earnings and performance updates, dividend payments, new products or discoveries. A positive or negative announcement can lead to rapid changes in a company’s share price.