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Thursday, 28 October 2021
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Active rebalancing is vital to prevent a portfolio drifting strongly away from its desired asset allocation. See how 60/40 can become 80/20, and is that the correct portfolio in the face of volatility and risk?
Financial advice has moved well beyond simply recommending investments, with five major components to quality advice. Helping clients avoid potentially disastrous mistakes is often underestimated.
An investment in gold without hedging the currency risk of the USD price can deliver portfolio diversification and protection, with the AUD price often rising when equity markets are falling.
Rebalacing can feel counterintuitive as you sell your winners and buy more losers. A reasonable compromise is to rebalance every 12 months, which might offer capital gains tax advantages.
In a time where advisers are under pressure to demonstrate their value, the latest Russell Investments ‘Value of an Adviser’ report reveals investors gain around 4.4% per year through a quality advice partnership.
Investors should consider rebalancing their portfolios, including SMSF trustees who must comply with an investment strategy. Regular rebalancing can reduce concentration risk and improve performance.
Investors should set a preferred asset allocation based on risk tolerance, but sticking to it through tough market conditions is a challenge. Yet most of an investor's return comes from asset class allocation.
Index and asset allocation specialists, Research Affiliates, have tested a theory they call the ‘Rip van Winkle’ approach. It uses a cap-weighted index portfolio drawing the data from 20 years earlier to prove a point.
We tend to forget that house prices often fall. Direct lending controls are more effective than rate rises because macroprudential limits affect the volume of money for housing leaving business rates untouched.
The survey drew a fantastic 2,000 responses with over 1,000 comments and polar opposite views on what is good policy. Do most people believe the home should be in the age pension asset test, and what do they say?
Any policy decision needs to recognise who is affected by a change. It pays to check the data on who pays taxes, who owns assets and who earns the income to ensure an equitable and efficient outcome.
With articles on the pensions assets test read about 40,000 times, 3,500 survey responses and thousands of comments, there was a lot of great reader participation. A few comments added extra insights.
It is hard to think of any area of widespread public concern where the same policies have been pursued for so long, in the face of such incontrovertible evidence that they have failed to achieve their objectives.
There are reasons to believe inflation will stay under control, and although we may see a slowing in the global economy, two companies should benefit from the themes of 'Stable Compounders' and 'Structural Winners'.