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News Bulletin : ADA News Bulletin July 2011
53 July 2011 Helping you work out where the pieces go. Proud ADA Partner Service since 1997 Managed funds | Superannuation | Pensions | Wrap accounts | ADA BlueChip Series This advertisement has been prepared by 2020 Funds Management Limited trading as 2020 DIRECTINVEST, ABN 89 069 774 456, AFSL 244249. 2020 DIRECTINVEST is an ADA Partner Service specialising in the provision of DIY financial services. Managing your own investment portfolio is more than just deciding what to invest in. 2020 DIRECTINVEST’s DIY Portfolio Service will: • Help you to understand your personal risk tolerance • Show you how to construct a risk-appropriate portfolio • Allow you to efficiently monitor how you are doing • Offer exclusive access to share market information and investment insights from industry experts. We will help you gain the confidence you need to make better investment decisions. Discover how we can help you successfully put the pieces together, with the good value you’ve come to expect from us. Contact 2020 DIRECTINVEST on 1800 352 021 or visit www.2020directinvest.com.au/portfolio Compiled by Michael Lannon investment insight DiY inVeSting Putting the pieces of the puzzle together www.2020directinvest.com.au/ada | 1800 352 021 100% entry fee rebate on managed funds Welcome to a new financial year. Like the beginning of any new calendar year, it is time to make some resolutions for 2011–2012 regarding your investments and superannuation. Recently, I have been talking to clients about the types of tools and information they want and need to develop their investment knowledge to become better DIY investors. Australians are becoming DIY investors as a result of an increasing level of distrust in the financial services industry. Many investors feel that the advice and products being offered are not necessarily in their best interests. This month’s article will outline the key criteria for successful investing and show how the various pieces of the puzzle fit together so members can become more confident in managing their own investments. Many clients continue to find DIY investing a daunting task. Although much of the information is available via the Internet, questions like where to start, what to buy, when to buy are very common. fInAnCIAL SERvICES REfORM The Federal government is currently trying to enact new legislation known as the Future of Financial Advice Reforms. In the aftermath of Storm Financial and Westpoint collapses and the global financial crisis, it is proposed that these reforms will give more control to the investor and provide better investor protection. In my opinion, this will not resolve the issue of ‘independent advice’. Table 1 illustrates the inherent bias that continues to exist in the advice market. IS fInAnCIAL AdvICE IndEPEndEnT? If your current adviser works for one of these advisory groups chances are you will be sold a product manufactured by your adviser’s employer, which begs the question – ‘Is that product the best product for you?’ Introduction of these new reforms will lead to further consolidation in the industry. Although designed to protect investors, the reforms will not benefit investors unless they are willing to take the steps required to redefine the relationship with their adviser and take more control over investments. Table 1. Percentage of superannuation products obtained through a financial planner also with the same manager. ADVICE GROUP % AMP 82% ANZ/ING 47% AXA 75% CBA/Colonial FS 74% NAB/MLC 68% Westpac/BT 73% Total Big 6 73% Source: Roy Morgan Research, Superannuation and Wealth Management in Australia, May 2010. Data period: January 2009–December 2009; sample n = 1,350. Work based or personal superannuation products obtained through six major planning groups. fIGURInG OUT WHERE THE PIECES GO DIY investing has become a very popular idea – some might go so far as to say it is ‘fashionable’. Many people who have set up a DIY super fund say ‘now what’? Faced with investment decisions and limited knowledge many people simply choose to do nothing, invest in cash and term deposits or simply invest their money in whatever asset class had the best return over the last year. Most investors want investments that provide a high return with low risk. Unfortunately, this type of investment does not exist. The most important decision an investor makes is the asset allocation decision, i.e., the mix of assets or the percentage allocated to each asset class (shares, property, fixed interest, etc.), as this has the most significant impact on investment outcome. Looking at historical returns, the top performing asset class tends to vary from year to year. One year it might be shares and the next property and then maybe fixed interest. The point is that you can’t keep chasing last year’s best performing asset, nor can you stick to one asset type as the only way to achieve consistent returns is with a diversified portfolio. The key question is what mix of assets is suitable for your investment portfolio?
ADA News Bulletin June 2011
ADA News Bulletin August 2011