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Appropriate asset class allocation is the foundation
of a successful investment strategy
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A strategic approach to building wealth

The creation of a successful investment strategy begins by developing a thorough understanding of your personal goals, situation and tolerance to risk. From that baseline, your Adviser can design a personally tailored portfolio with a thoughtful mix of investments diversified across, and within, asset classes. This approach can help minimise the impact of short-term swings in any one asset class and can help build your wealth over the long term. To keep you on track, your Adviser can formally review your investment strategy and portfolio performance with you, at an agreed frequency, to proactively identify and discuss any adjustments that need to be made. 

Strategic Asset Class Allocation

The starting point for Asset Allocation decisions is in determining what proportion of a portfolio should be allocated to Defensive Assets and what proportion should be allocated to Growth Assets. Defensive Assets tend to carry lower levels of risk, are generally less volatile and are associated with lower returns over the long-term. These assets include Cash, Fixed Interest and Bonds. Growth Assets tend to have higher levels of risk, are generally more volatile, particularly in the short-term, and are associated with higher returns. These assets include Domestic and International Shares, Listed Property, Infrastructure, Commodities and Alternatives.

Why Asset Class Allocation is Important

Asset Allocation is one of the most important decisions that investors make. Empirical research has shown that when it comes to the principle determinants of investment returns, over time, the selection of individual securities is secondary to the way that assets are allocated across asset classes, such as equities, fixed interest securities and cash.

The Power of Diversification

Looking at the performance of the various asset classes over the past 30 years one thing is clear - no one asset class is able to generate consistent outperformance year in, year out. An investor who holds a mix of investments across multiple asset classes diversifies their risk of any one asset class underperforming from year to year. Over the longer term, sticking to a diversified strategic allocation investment strategy can potentially enhance returns, especially when compared to making asset allocation decisions based on last year’s performance.

Our Approach

Over the long term, strategic asset allocation is quite rigid. Using a tactical asset allocation approach allows investors to determine a range of percentages that they are prepared to invest in certain assets within their investment portfolio. Our strategic asset allocation model has a recommended benchmark asset allocation from which we then apply a valuation and tactical positioning overlay to determine the appropriate weighting in each asset class; this is tactical asset allocation. Within investment portfolios, actual asset allocations have scope to vary by up to +/-15% around benchmark allocations. The advantage of this approach is that it allows for much greater variations in portfolios between investors to suit their particular objectives, situation and needs.