INVESTMENTS

Establishing a sound financial plan is a major step toward securing the lifestyle that you wish to lead. However, true security comes with the knowledge that, as the world around you changes, your financial plan will evolve too - not simply to include those changes, but to benefit from them wherever possible. In this way, your financial plan becomes a living, breathing program that helps you to achieve a more rewarding lifestyle.

Through our Ongoing Service Program, our advisory team can help you to approach your future with confidence. You will still be in control of your finances, but you’ll have the safeguard of a personal caretaker to ensure that you remain on track to achieving your goals. In turn, managing your finances will become easier and less time consuming for you.

A personal service

For our part, we’ll take a pro-active approach, helping you to adapt to changes in legislation, investment markets, economic conditions and your own circumstances. Your advisory team will have the full support of All Financial Services' extensive research capability and will apply this to your own unique circumstances. We will treat you as an individual, and you’ll be free to call your advisory team at any time.

Your advisory team will also:

Provide you with streamlined reports at regular intervals, clearly showing your progress toward achieving your objectives;
Act as a sounding board for your major financial decisions, so that you can make the right choices with confidence;
Alert you to new or better financial services that may assist you to reach your goals;
Advise you on day-to-day issues such as budgeting and managing your cash flow, which helps your ongoing money management to support your longer-term plan;
Help you with estate planning, insurance, structuring debt and ownership structures (such as self-managed superannuation funds); and more.

Of course, you still retain control of your own finances. All of your investments are registered in your own name, and no-one can make changes to your portfolio without your written approval.

Regular investment reporting and communications

Our ongoing service helps you to stay in control of your portfolio, and one of the ways we do this is by communicating with you regularly. This starts from day one and includes:
First review meeting: to ensure we have a mutual understanding of what has been implemented and to present your interim Investment Valuation Statement;
Annual planning conference: each year we will review your entire financial position, your objectives and strategy to make sure you’re on target - you will also receive an additional Investment Valuation Statement at this conference;
Investment valuation statements twice a year;
Annual tax report in August;
Regular newsletters and interpretation of market events.

Investment - Risk and Return

The concept of risk may have various connotations amongst investors, such as the risk of losing capital, the risk of not receiving an appropriate level of income, or the risk of not achieving a desired level of growth. Investment risk is often defined as the variability or volatility in the level of investment returns. What is imperative in managing investment risk is that an investor’s time horizon be determined, and because fluctuations over short time periods may occur, investors must focus on their strategic time horizon. Then, an appropriate asset mix can be agreed which has a reasonable chance of achieving the investment returns sought, in that time frame, with the levels of volatility each individual is prepared to accept.

It is important to understand the risks associated with the investments that are chosen as part of a portfolio. Investment risk can be defined as the variability, or volatility, in the level of investment returns. In general, cash is regarded as a low risk investment because investment returns are relatively stable. By contrast, shares and property are considered to be higher risk because investment returns frequently move up and down and investors are less certain of the return that they will receive.

Risk and return are closely related. The higher the degree of risk associated with an investment, the higher the return required by investors if they are to accept the risk. This fundamental investment principle is called the risk/return trade-off, and is used as a guide to the appropriate asset allocation, or diversification, for you.

The long term risk/return trade off between different asset allocations is illustrated in the following graph:

Income or Capital Growth

Income producing investments include bank deposits, cash management trusts, debentures and mortgage trusts. These investments have the advantages of capital security and a regular income stream but do not provide capital growth or the tax advantages that can be associated with share and property investments.

Capital growth investments such as shares and property provide potential for capital growth as well as income returns. Shares provide income in the form of dividends paid by the company and property investments provide income returns in the form of rent. The capital growth of an investment portfolio is critical in providing a hedge against inflation over the longer term. The returns on shares and property tend to be more volatile than cash and fixed interest but they have historically outperformed the other asset groups over the long term.

In constructing an investment portfolio, one of the most important concepts to be considered is what combination of income and capital growth you require. The chosen combination for any particular investor will depend on a number of factors, including time horizon and your attitude to risk.

Investment diversification

Diversification works to reduce the impact of ups and downs in the value of your investments, and works in a number of ways:

Investment diversification across asset classes

Many successful investors diversify their portfolios by investing across the four major asset classes. Shares have historically produced higher long term returns than the other asset classes, but in the short term the price of shares has fluctuated considerably. Property has also tended to fluctuate in value in the short term, but has generally produced good returns over the long term. Bonds have been less volatile than shares and property, but have historically generated lower long term returns. Cash has been the least volatile asset class in both the short and long term, but has also generated the lowest returns.

Investment diversification within asset classes

You can also diversify within each asset class, which means your portfolio is less reliant on the performance of particular investments or sectors within the asset class.

Diversification across countries or regions

By holding both Australian and international assets, you reduce your exposure to regional factors, for example the poor economic performance of a particular country. Global share funds and global bond funds make it easy to diversify your portfolio across different countries and regions.

Diversification across management styles

You can add an additional layer of diversification to your portfolio by using a range of specialist investment managers. Different investment managers use different investment styles to make their investment decisions. As a result, investment managers, like asset classes, perform differently at different times. And no single investment manager is going to get it right all the time. In our recommendations we have endeavoured to ensure that your portfolio is diversified in accordance with your objectives, investment timeframe, liquidity requirements, and tolerance to volatility.

All Financial Services are your investment advice specialists.

ENQUIRE HERE FOR INVESTMENT ADVICE