Financial Planning

At a time when almost all investment markets have been experiencing negative returns including mainstream Australian Shares/International Shares/Bonds/Residential Property (bar Cash Based Accounts) it is appropriate to consider diversity of investments and hopefully less investment risk.

Traditionally there are Defensive Assets and Growth Assets in our portfolios;

• Superannuation Fund investments
• Superannuation Allocated Pension investments
• Ordinary investments (taxed at our marginal tax rates)
• Investment Trusts
• Investment Bonds (taxed at 30%)

Investments can be classified as the following:

DEFENSIVE ASSETS

Cash – Transaction Accounts, Cash Management Accounts and other Internet Based Savings Accounts.

Fixed Interest

• Term Deposits
• Government Bonds
• Corporate Bonds
• Hybrid Securities
• Mortgage-Backed Fixed Term investments
• Funeral Bonds
• Annuities

GROWTH ASSETS

Shares

• Australian shares
• International shares
• Small or large companies – shares
• Geographical – regional/country exposure
• Technology companies
• Financial companies
• Mining and energy companies
• Retail companies etc.
• US dollar invested or Australian dollar

Property

• Residential investment property
• Commercial
• Retail
• Industrial
• Houses/businesses or units

And even more diversity for areas of the above by way of:

• Range of terms to maturity of fixed interest investments.
• Different residential investment properties in different locations
• Style of any active Fund Manager – growth or value orientated
• Index following or active management
• Less concentration

One of the better outcomes of having a wide range of investments is the reduction of specific risk, of having a heavily weighted portfolio in any one type of investment.

Conversely, one of the lesser outcomes could be a reduced likelihood of outperformance in one’s overall portfolio as no one particular investment has a significant exposure to influence your overall total return. This being the price of less volatility, or perhaps less deviation from an average total return.  

In practice, if you were physically able to have all the above in one’s portfolio, even if only a small percentage in each investment, then the majority of any risk would essentially not be due to lack of diversity. However, a big element of one sort of risk has been removed.

The majority of this wide range of investment types can be accessed either directly or indirectly by way of Managed Funds or Exchange Traded Funds. Moreover, the specific investments can be spread across a sophisticated Platform Service provider for ease of administration, record keeping, income and capital gains tax recording and all associated reporting or held by Custodians or Trustees.

This can be for:

• Superannuation Fund investments
• Superannuation Allocated Pension investments
• Ordinary investments (taxed at our marginal tax rates) 

Clearly, with the advent and rise of the power, and ease of the use of data within computers there are mechanisms available to address a desire for aiming close to having the ultimate diversified investment portfolio. 

At Plus1 we are available at any time to discuss issues of this nature with due regard to your investments or any financial planning matter.