Franking credits explained
Franking credits explained
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Franking credits explained
In Australia, franking credits effectively eliminate double taxation for Australian resident investors in local companies by allowing companies to pass on a tax credit equal to the amount of tax the company has already paid on the dividend.
A franking credit is a tax credit paid by companies to their shareholders at the same time as dividends are paid. Since corporations have already paid taxes on the dividends they distribute to their shareholders, the franking credit allows them to allocate a tax credit to their shareholders. Depending on their tax situation, shareholders might then get a reduction in their income taxes or a tax refund.
The Australian Tax Office (ATO) website contains numerous articles of explanation for different Australian resident investor types.
Systematic investing explained
There’s an ongoing debate in the investment community over which approach to building a stock portfolio is best. Is it active or passive investing? Few investors realise there is a third option, which we believe is superior to either of the first two: systematic investing.
Systematic investing provides a perfect balance for investors. It allows investors to outperform the market while adhering to passive investing principles. Systematic investing is an approach that emphasises data and quantitative techniques to build portfolios — relying less on the discretionary decisions of individual portfolio managers.
At Hamilton12, we apply apply rigorous research and measurement techniques to all aspects of the investment process. Our portfolio construction approach is grounded on rigorous theory, supported by empirical evidence, market segmentation and the impact of taxation on investment returns.
Active v. Passive. SPIVA explained
SPIVA stands for 'S&P Indices Versus Active', and it is the name for a regular series of research reports that compare the performance of actively managed funds to appropriate benchmarks. The primary role of the SPIVA Scorecards is to help inform a sometimes unfortunately noisy debate over the relative merits of active and passive investing.
The scorecards do this by providing data on where (and when) actively managed funds have been performing well (or poorly), over both short and long-term horizons, in various markets arounds the world - as well as offering a range of deeper statistics and analysis on active fund performance.
The SPIVA reports stand in a long-running tradition of academic and practitioner commentary on the relative merits of active and passive investments. SPIVA data point to a number of conclusions;
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Most active managers underperform most of the time.
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This conclusion originally came from examining managed fund performance net of fees.
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Gross of fees, most active managers underperform most of the time.
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Most institutional managers underperform most of the time.
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After adjusting for risk, most active managers underperform most of the time.
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The tendency for underperformance typically rises as the observation period lengthens.
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These conclusions are robust across geographies.
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When good performance does occur, it tends not to persist. Above-average past performance does not predict above-average future performance.
Click on the S&P Dow Jones Indices logo to find out more.
Take a deep dive into the active v. passive debate as S&P DJI's Craig Lazzaro explores what two decades of SPIVA has to say about why active has historically tended to underperform passive around the world.