Ask Fear & Greed: What is the make-up of the ASX200?

With the banks doing so well, and miners not so well over the past couple of years, what is the make-up of the ASX200 by sector? Does it matter that the banks are dominant?

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Episode Transcript

Speaker 1 (00:03):
Welcome to Ask Fear and Greed, where we answer questions
about business, investing, economics, politics, and sometimes so much more.
I'm Adam Lang and hello Sean Almer.

Speaker 2 (00:13):
Hello Adam.

Speaker 1 (00:15):
Right, today's question. With the banks doing so well Sean
and minus not so well over the past couple of years,
what is the makeup of the ASEX two hundred by sector?
And does it matter that the banks are dominant? So
this is a very good question.

Speaker 2 (00:34):
Yes, the certain of the banks have become more dominant.
So there's eleven sub indices of the ASEX two hundred,
and financial services makes up thirty two to thirty three
percent of it. Call it a third. A third, let's
call it a third. Third of the ASEX two hundred
is financials. And the problem is when you just have
an ETF or you invest passively, just flow the ASX

(00:55):
two hundred, your fortunes are overly tied to financials because
you end up having a third of your money in financials.
That's really the problem. The next bigger sector is basic materials,
and that includes a bunch of the big miners and
a lot of mining stocks, including the big miners healthcare.

(01:17):
That's nine percent of our market healthcare. We sort of
don't talk a lot about healthcare. We have some incredibly
successful healthcare companies. Now CSL, I suppose is the most
obvious one, but you know, I mean great name, great history,
great name, great history. I don't know that it hasn't
had such good share market returns unfortunately recently.

Speaker 1 (01:38):
Cochlear.

Speaker 2 (01:39):
Yeah, so Anthony Ibnezi yesterday was talking about Cochlear, and
that's an incredibly successful Australian company. But there's a huge
amount of sort of bio farmer stocks and pro Medicus
Promedicus is one of the big ones. Seema Healthcare is
another really big one nowadays since it's gone onto it Res.

(02:00):
They had Fisher and Pay called Sonic Healthcare Ramsey, So
you know a stack of those healthcare companies. They actually
haven't performed very well, but they're a big part of
the index. I'm going way off the question here, So
it is about banks. The next big sector is industrials,
consumers sick. I've got real estates. It's communication services, technology,
consumer defensive, which are the big retailers, energy and utilities.

(02:23):
I suppose the moral of it, if you're going to
invest in an ETF or you want to invest in
the market, and you're going to be heavy financials. If
you actually understand what you're investing in, though, then I
don't know that it's good all bad. I don't think
it's a right or wrong. So if I said the
financial sectors, the big four banks, it also includes the

(02:46):
mac quarry, Yeah, it also includes the insurers IAGQB.

Speaker 1 (02:51):
Right.

Speaker 2 (02:51):
The best performing stocks in the financials haven't been the
bank though, so Hub twenty four, the Wealth Platform, the
Fundamentager Generation Development Group. They're the two best performers in
the financial index. So I think it's just more a
matter of kind of understanding what's in the index and
using a financial advisor. We're not an investing podcast, and

(03:15):
that's how you think about it. Like the basic materials,
so you say, well, the big minus haven't done very well,
the basic materials have gone backwards, but that also includes
the gold companies, and the gold companies in the last
telve months have been the best performance stocks, but none.
So it's really if you're investing, it's worth looking behind
the indices. You know. I always think it's so Telco.
You think, well, what's Telco? It's Telstra, sure, but it's

(03:37):
also Aria, it's Car, it's Seek, it's the media companies.
So I think mostly I don't think it's right or wrong.
I mean, you don't get diversification if you're buying ASX
two hundred ETF that's overly reliant on financials. But if
you're just kind of looking beyond it, I don't think

(03:57):
you can say having financials.

Speaker 1 (03:59):
Is necessarily a bad thing.

Speaker 2 (04:02):
No. No, you kind of need to make decisions about
the stocks you want to buy or sell.

Speaker 1 (04:07):
I'm just looking at this list as you've done, it
shown financial services roughly a third. I know it's a
bit over this, but if you then add up basic materials,
healthcare and industrials, that's a bit over a third thirty
six percent. So you've got roughly financial services a third,
basic materials, healthcare and industrials a bit over a third,
and the other third is the rest. And so they're
really concentrated the asex two hundred. So you make a

(04:31):
great point. It really depends on what you regard as
good use of your dollars and cents.

Speaker 2 (04:36):
Yeah, you might not want a basic material You might
think basic materials did really poorly last year because BHP
RIO and Forskew Metals went backwards. Yeah, but it also
includes the gold stocks and they had a cracking year. Yeah,
So you really have to understand what you're investing in
usuppose the moral of the story.

Speaker 1 (04:51):
Is great advice and then get a good financial advisor.
Absolutelyize on your investments.

Speaker 2 (04:56):
Absolutely.

Speaker 1 (04:57):
Thank you very much, Sean.

Speaker 2 (04:58):
Thanks Adam.

Speaker 1 (04:59):
If you have your own question for Fear and Greed,
please jump onto the website Fearangreed dot com dot au
or send it through on any of our social media
platforms and we'd love to answer it. I'm Adam Lange
and this is ask Fear and Greed