How to Avoid an Investment Train Wreck

Seek professional advice from a Financial Planner who is licensed and regulated with ASIC

The Post Global Financial Crisis landscape and trying to navigate through the cycles of pessimism and optimism is a dilemma for investors in deciding whether to be risk averse or get back into growth investments particularly those investments in Superannuation.

Europe is going to take a decade to get back to better times and has yet to make the economic policy changes to achieve this.  The USA and Japan have to deal with their large debt position and will need to reduce their government spending. The valuation of domestic residential property in Australia is at very high multiples of average incomes. Shares have been volatile and interest rates are coming down.

Setting a multi asset mix of investments in cash, fixed interest, shares and property and then forgetting about it is no longer good enough. Increased diversification is now needed.  Investments that have strong medium to long term growth prospects by the mere fact that their current valuations are fundamentally good value today is what investors should be looking for.

More and more players are coming into the investment advisory business. Some of these so called wealth creators that spruik their wisdom at seminars to the public. Generally they are not Financial Planner/Advisers and therefore not licensed or regulated under ASIC. These so called investment experts once the facade is stripped away are no more than glorified property sales people or property developers. These people are quick to say that they are not giving financial or investment advice but then sell you on the idea of a particular investment generally in direct residential property.

Buying one single asset as the main source of wealth creation is not diversification. If you’re primary investment is in say a direct residential property and you also borrow the funds for this investment to achieve some tax savings. Taking on new debt you also increase your investment risks. These include lack of investment diversification, lack of cash liquidity or part thereof. Also many unforeseen circumstances such as changes to employment, family situation and expenses, taxes can be impacted with property investment returns.

Human nature and emotional investing trends or fashions are like following a herd mentality. The herd follows what is fashionable or dressed up as the latest or best way to go….. but is it?

A true cost benefit analysis is needed to determine the most appropriate solution for the individual investor. This analysis must include all the advantages and disadvantages, what will be gained and what will be given up with a change strategy.

Only licensed Financial Planners/Advisers can provide this comprehensive analysis for investors. Yes this will require a payment of a fee for receiving this advice. Without proper analysis investors’ risks are increased even more and could result in a train wreck and financial loss. In most cases this could be their investments for their retirement.

We advise clients what is the most appropriate investments for them.  This doesn’t necessarily mean the cheapest option. Other considerations such as clients Goals, Objectives, Investments Risk Profile, Cashflow needs Personal and Family circumstances and Estate Planning all need to be considered.

Benchmark Consultants is a Corporate Representative of Australian Financial Services Ltd AFSL#297239.  For more information about how Benchmark Consultants can help you contact us today on 9293 2922.

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Russell Investment Summit – Melbourne 19 Jul 2012

Benchmark Consultants principal financial planner, Mr Peter Stewart, was lucky enough to attend the Russell Investment Summit in Melbourne today (Thu 19 Jul. 12).  The summit featured some notable international experts who spoke about the current investment climate.

Chris Corneil – CEO Australasia Russell Investment, says a retirement tsunami is coming to Australia with 5.5Million baby-boomers set to retire.  In the next 10 to 15 years it is expected that 40% of all retirement investments will need to be transferring from accumulation phase, to income phase.

Mr Alan DuPont, another key speaker at the Russell Investment Summit covered the topic: “Transitioning to a new world order. More turbulence ahead”

DuPont said, Geopolitical conditions are shaping the current economic conditions and volatility is the new normal. We are currently transitioning to a new world order.  Old templates will no longer work.  Pax Americans is unravelling. IMF, World Bank, USA.  Emerging economies and states have their own views on how the world should be ordered which is different to the Western Nations.  It is estimated that it will take more than 5 years to turn the economy around. It will be running $1Trillion annual deficits for next 8 years with a significantly large debt.

Japan is in bigger trouble with more debt and no GDP growth in the past 20 years.  Population is now in decline from 126m to 50m by end of century.

China and emerging nations will be 78% of world GDP in 25 years. The Financial Crisis is forcing major political change. There is a major risk of heightened strategic competition between the major powers, particularly the US and China.

It is estimated 40% of trade in world and 60% of energy is found in the Western Pacific thus creating an area of greater risk of potential conflict including key strategic islands.  China’s perception is that near these strategic islands are huge reserves of oil and gas with these islands being claimed by other Asian nations. There is a strong possibility that the US and China Navy’s may attempt to face-off each other over these strategic islands. USA is responding to this strategic risk by repositioning its military. Economic in-connectivity will be the potential peacemaker in Western Pacific as conflict would be a lose lose for all nations.

With Iran and other Middle East countries acquiring nuclear weapons, we expect the fallout will play out and come to a head in the next 18 months.

Andrew Pease – Global Head of Investment Strategist for Russell Investments said “Doubt is not a pleasant condition” the risk in risk of world will be around for a while, so we need strong investment processes.

The Share market is good value. Composite value Ind Undervalue USA 7%, emerging Markets 16%, Euro Markets 19% Australia and Japan 25%. The longer view rolling 5 to 10 years returns forecasts in Australia shares 8.5% pa and Fixed Interest 3.0% pa.

Finally, in today’s news: the Aussie Sharemarket SPI was up 35 points at opening today. The US housing market rebounds.  Corporate profits are continuing and the $AUD still remains strong.

If you want more information about personal financial advice, we urge you to speak to your local financial planner.  Call Benchmark on 08 92932922 to make an appointment with a Certified Financial Planner.

Benchmark Consultants is a corporate representative #289570 of Australian Financial Services Ltd AFSL #297239 AFS ABN #50116900362. Peter Stewart, is a CERTIFIED FINANCIAL PLANNER® professional, and a member of the Association of Financial Advisors Ltd and Financial Planning Association of Australia Ltd.