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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