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Here’s what you need to know today

• Australia’s share market hit a record high on Friday. This is despite Australia’s largest company, Commonwealth Bank, falling 4% over the week. The ASX 200 is now up 5% so far in 2025, and is up 17% since April’s post-Liberation Day lows. (AFR)
  
  

• A big reason for the rise in Australian shares last week was the increasing likelihood of another interest rate cut by the Reserve Bank of Australia. The RBA has cut rates twice this year, and will meet on Tuesday with markets giving a more than 90% probability we see another 25 basis point cut, which would take us to 3.6%. (Capital Brief)
  
  

• China’s demographic challenges continue to worsen. With a population pyramid inverted by the now-retired One Child policy, Chinese leaders are pulling out all stops to encourage more children. The government will provide 3,600 yuan ($764) a year for each child until they turn three. In 2024, China recorded 9.54 million new births, down from 18.8 million in 2016. (Bloomberg)
  
  

• US President Donald Trump got his wish. The US Senate and US House of Representatives both passed his ‘One Big Beautiful Bill’ last week meaning he was able to sign it into law on America’s Independence Day on the 4th July. The bill boosts immigration and defence spending, cuts taxes, is forecast to leave 17 million people without health insurance, and is estimated to add $3.3 trillion to America’s debt over 10 years. (NY Times)
  
  

• Elon Musk has followed through on his threat to start a new political party if the Republicans pass President Trump’s ‘One Big Beautiful Bill’. As Trump signed the bill into law, Musk announced he had started the America Party. While no official paperwork has been filed as of yet, Musk said the America Party would be active in America’s mid-term elections next year. (Reuters)
  
  

• Iran’s Supreme Leader has made his first public appearance since his country’s war with Israel. The 86-year-old Ayatollah Ali Khamenei attended a ceremony to mark Ashura, the holiest day of the Shiite Muslim calendar. (ABC News)

What the…?

The Trump-Musk has continued to deteriorate. As Elon continues criticising the ‘One Big Beautiful Bill’, the President is trying out a new threat: deporting Elon Musk.

Elon was born in South Africa and came to America via Canada, but it now a naturalised US citizen. However, last week Trump said his administration would “have to take a look” at whether they could deport the world’s richest person. (ABC News)

Investing is a lifelong journey

Here’s what you can learn today.

Getting diversification right

Community Question: What does “diversification” mean and why is it important?

We put this question to Luke Laretive, financial adviser and CEO of Seneca Financial Solutions.

Ideally, we’d just own one investment that we expected to generate the highest possible return across our investment time horizon. If we were certain that this was the best investment possible, adding additional, lower return investments to our portfolio would only reduce our returns.

Nobody is certain about any investment. Investments, by definition, are uncertain. Diversification is the idea that we can manage this uncertainty through increasing the number of investments we make. Assuming those investments are not perfectly correlated you reduce the expected returns, but you also reduce the potential cost of being ‘wrong’. Diversification at its best is asymmetric in this respect.

I see a lot of DIY-investors making the mistake of ’di-worsification’ - increasing the number of investments which reduces the expected return, without reducing the cost of your mistakes.

Diversification is important because nobody is correct all the time and in fact, most professional investors get around half of their calls wrong (they earn millions of dollars a year for their ability to lose less when they are wrong and make more when they are correct.) People often struggle with the idea because they always want to be ‘correct’ and only make good investments. In reality, the game is being correct in the aggregate and at any given point, that means being ‘incorrect’ about something.

Interested in speaking to Luke or another of our hand-picked financial advisers? Fill out the form on our website and we’ll put you in touch.

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