Understanding your financial position and investment profile in depth is fundamental to the quality and relevance of our advice.
We regularly check your current investment profile to ensure our advice remains suitable amidst changing circumstances.
This fact sheet provides additional information to help you understand the investment, tax, and other financial planning concepts we discussed with you or included in your Statement of Advice.
Please get in touch with your adviser if there is any aspect on which you need further information or clarification.
What is your investment profile?
Your investment profile has three components:
- Investment Objective
- Risk Profile
- Investment Strategy
Please remember that specific institutions, such as your superannuation fund, may have distinctive investment objectives and risk characteristics that do not precisely correlate with those below.
Primary Investment Objective
The primary investment objective captures a preliminary understanding of your intentions and goals for wealth and may differ between different elements, e.g., retirement and non-retirement savings.
Capital preservation
You want to preserve your capital with the least possible risk and high liquidity. You recognise that this offers minimal growth potential.
Balanced growth
You want to earn regular interest and dividends, which you may reinvest or require for living expenses, and generate modest capital growth. You prefer medium-risk investments but recognise that there may be limited growth potential and are willing to accept some risk of capital loss.
Dynamic Growth
You want to grow the value of your investments and accumulate wealth over time through price appreciation. You prefer medium to high-risk investments, recognising that the potential to accumulate wealth is much greater. You are willing to accept more risk, short-term unrealised loss of a higher magnitude and more significant variance in annual returns to achieve above-average growth.
Risk Profile
Your risk profile primarily estimates your willingness to accept fluctuations in your investment values over time. We consider your ability to bear financial risks when determining an appropriate level of risk exposure.
For example, while you may be comfortable with taking the risk of a 33% fall in your portfolio, your need for income, high debt levels, a short investment horizon or large pending capital expenditures may mean you cannot bear that risk.
Secure
Investors with a Secure risk profile typically seek to generate income and preserve the nominal value of their assets. They are only willing or able to accept minimal fluctuations in the value of their portfolio and expect to be able to realise their investment at short notice.
A portfolio suitable for an investor with a Secure risk profile produces regular interest income with minimal capital volatility. It usually contains around 100% in defensive assets such as online savings accounts and bank term deposits. Exposure to high-quality fixed-income instruments, such as government bonds, may also be incorporated.
As at 31 August 2022, the long-term absolute return objective for the Secure asset allocation is 2.40% pa, commensurate with cash products such as savings accounts and term deposits.
The minimum suggested investment timeframe is less than one year.
Defensive
Investors with a Defensive risk profile typically seek to generate income and preserve the nominal value of their assets. They are more concerned with potential losses than potential gains. Still, they are willing and able to accept occasional short-term losses in the value of their investment in return for some protection against the effects of inflation.
A portfolio suitable for an investor with a Defensive risk profile generates interest, dividend and rental income, modest capital growth and minimal volatility in capital values.
The portfolio will usually invest 80% in defensive assets such as fixed income and cash, with the remaining 20% allocated to growth-oriented investments such as shares or property. Other assets that exhibit both growth and defensive characteristics may be included, including infrastructure and hedge funds.
As of 31 August 2022, the long-term absolute return objective for the Defensive asset allocation is 3.20% pa, or 0.8% above expected returns on cash.
In the twenty years to 30 June 2024, the maximum peak-to-trough fall on the Lonsec 20% Growth index has been 7.47%, reached in September 2022 following 13 months of declines and ongoing.
The minimum suggested investment timeframe is two years.
Conservative
Investors with a Conservative risk profile are typically seeking to generate income and some capital growth, aiming to preserve the inflation-adjusted value of their assets. They are willing and able to accept some investment risk for potentially higher capital growth and income returns.
A portfolio suitable for an investor with a Conservative risk profile generates a mix of both capital growth and income, with a moderate level of expected volatility and return.
The portfolio will usually contain around 60% in defensive assets such as fixed-interest and cash, with the remaining 40% allocated to growth-oriented investments such as shares or property. Other assets that exhibit both growth and defensive characteristics may be included, including infrastructure and hedge funds.
As at 31 August 2022, the long-term absolute return objective for the Conservative asset allocation is 4.00% pa, or 1.60% above expected returns on cash.
In the twenty years to 30 September 2022, the maximum peak to trough fall on the Lonsec 40% Growth index was 15.71%, reached in February 2009 following 16 months of declines. It took 18 months for the index to regain its previous peak.
The minimum suggested investment timeframe is three years.
Balanced
Investors with a Balanced risk profile typically seek to generate capital growth and income, which they may reinvest or withdraw. A balanced risk portfolio suitable for an investor produces both capital growth and income, with above-average expected return and volatility.
The portfolio will usually contain around 40% in defensive assets such as fixed-interest and cash, with the remaining 60% allocated to growth-oriented investments such as shares or property. Other assets that exhibit both growth and defensive characteristics may be included, including infrastructure and hedge funds.
As at 31 August 2022, the long-term absolute return objective for the Balanced asset allocation is 4.80% pa, or 2.40% above expected returns on cash.
In the twenty years to 30 September 2022, the maximum peak to trough fall on the Lonsec 60% Growth index was 24.65%, reached in February 2009 following 16 months of declines. It took 37 months for the index to regain its previous peak.
The minimum suggested investment timeframe is five years.
Growth
Investors with a Growth risk profile are typically seeking to generate capital growth. They are less concerned with potential losses than with potential gains.
A portfolio suitable for an investor with a Growth risk profile generates capital growth, with some incidental income that is typically available for reinvestment. Expected levels of volatility and return are high.
The portfolio will usually contain around 20% in defensive assets such as fixed-interest and cash as well as riskier defensive assets such as high-yield credit, with the remaining 80% allocated to growth-oriented investments such as shares or property.
Other assets that exhibit both growth and defensive characteristics, including high yield and emerging market debt, infrastructure and hedge funds may be included in the portfolio.
As at 31 August 2022, the long-term absolute return objective for the Growth asset allocation is 5.60% pa, or 3.20% above expected returns on cash.
In the twenty years to 30 September 2022, the maximum peak to trough fall on the Lonsec 80% Growth index was 32.63%, reached in February 2009 following 16 months of declines. It took 47 months for the index to regain its previous peak.
The minimum suggested investment timeframe is six years.
High Growth
Investors with a High Growth risk profile seek to generate capital growth. They are significantly less concerned with potential losses than gains, and able to accept significant risk, including the permanent loss of principal, to maximise long-term returns.
A portfolio suitable for an investor with a High Growth risk profile aims to produce capital gains, with some incidental income from growth asset classes and expectations of very high volatility.
The portfolio usually allocates 95% to 100% to growth-oriented investments such as shares or property. Other assets that exhibit both growth and defensive characteristics, such as high-yield and emerging market debt, infrastructure and hedge funds, may be included. The portfolio may contain a minimal cash allocation for operational reasons.
As at 31 August 2022, the long-term absolute return objective for the High Growth asset allocation is 6.40% pa, or 4.00% above expected returns on cash.
Over the twenty years to 30 September 2022, the maximum peak to trough fall on the Lonsec 100% Growth index was 42.30%, reached in February 2009 after 16 months of declines. It took 54 months for the index to regain its previous peak.
The minimum suggested investment timeframe is seven years.
Summary
Determining a suitable investment strategy relies on multiple factors, including your overall investment objectives and risk profile.
Personal circumstances also mean that your investment strategy and the risks you bear may differ between portfolios and investment structures.
Risk profiling tools, such as questionnaires, should not be used in isolation. When setting and reviewing your investment profile, your adviser will always consider results from these tools alongside your broader objectives and financial circumstances.
Please let us know if you have any questions or if your financial goals or circumstances change, which may impact your current investment profile.
