Active Asset Allocation Gains Popularity; Perth Financial Planners Urge Caution
Announcement posted by Approved Financial Planners 12 Oct 2015
Financial planners offering services in the Perth area reveals why it is important to allocate assets correctly.
Perth, WA, 12 October 2015 - In Perth, financial planners find themselves advising a growing number of investors who are using active asset allocation to grow their investments. Daniel Stevens, who provides financial services in a Perth area firm called Approved Financial Planners, cautions investors to be careful when allocating assets.
According to Mr Stevens: “While the low interest rate is great for many sectors of the economy, it is not favourable for those who have inordinate amounts of money in traditional cash investments such as term deposits, because low interest rates dictate low rates of return. Some of these investors are opting to invest their money in equities and bonds, which are more volatile than cash investments.”
Approved Financial Planners are located in the Perth area but are now backed by AMP Capital. That allows them to combine the customer service dynamic of a smaller firm with the resources of a large firm. One of those resources is Dr Shane Oliver, the Chief Economist for AMP Capital. Recently, Dr Oliver published an informative post on the AMP Capital Blog. The post was entitled, “The perils of switching–why active asset allocation makes sense but why it needs to be done properly.”
In the post, Dr Oliver revealed some surprising facts about how money grows in various investment vehicles. One graph tracked how much one dollar would be worth today if invested in three different investment vehicles in 1900. The numbers assume that the dollar would have made “average” earnings and all money would be compounded or “rolled over.”
A dollar put in cash investments and rolled over would be worth $224 today. The same dollar would have grown to $802 today if invested in bonds. However, if that dollar had been invested in Australian equities, it would now be worth $438,844.*
Since Dr Oliver’s intent was to illustrate the importance of putting a lot of thought into active asset allocation, he offered another set of statistics. In a balanced fund of 75% Australian Equities, 20% bonds and 5% cash, $100 invested in July 1928 would have compounded to $518,009 today. Meanwhile, if an investor had put the same $100 in a balanced fund in 1928, converted it to cash after every negative year for the balanced fund and put it back into the balanced fund after the next positive year, that fund would contain $173,656.*
According to Mr Stevens, “This illustrates how difficult it is to grow your money by allocating assets. Active asset allocation is a great way to grow your funds, but you have to know the market and your reactions have to be both fast and accurate.”
Mr Stevens concluded: “That is why so many people would rather contact a financial planner and let a professional help them with asset allocation.”
*AMP Capital: “The perils of switching–why active asset allocation makes sense but why it needs to be done properly.” Dr Shane Oliver.
Approved Financial Planners is a firm located in Ascot, WA. They have been serving the Perth area since 2005. They are backed by parent company AMP Capital. They offer a full range of financial services such as financial planning, investment planning, wealth protection and mortgage broking. Their financial planners have more than 80 years combined experience in the financial services industry. To contact a financial planner, call 1300 787 274 or visit their website: http://www.approvedfp.com.au/.
Approved Financial Planners
Daniel Stevens of Approved Financial Planners Pty Ltd ABN: 52 116 910 528, trading as Approved Financial Planners is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327 Australian Financial Services Licence 232706 and Australian Credit Licence 232706.
General Advice Warning
What you need to know.
Any advice contained in this Page is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regard to those matters.
According to Mr Stevens: “While the low interest rate is great for many sectors of the economy, it is not favourable for those who have inordinate amounts of money in traditional cash investments such as term deposits, because low interest rates dictate low rates of return. Some of these investors are opting to invest their money in equities and bonds, which are more volatile than cash investments.”
Approved Financial Planners are located in the Perth area but are now backed by AMP Capital. That allows them to combine the customer service dynamic of a smaller firm with the resources of a large firm. One of those resources is Dr Shane Oliver, the Chief Economist for AMP Capital. Recently, Dr Oliver published an informative post on the AMP Capital Blog. The post was entitled, “The perils of switching–why active asset allocation makes sense but why it needs to be done properly.”
In the post, Dr Oliver revealed some surprising facts about how money grows in various investment vehicles. One graph tracked how much one dollar would be worth today if invested in three different investment vehicles in 1900. The numbers assume that the dollar would have made “average” earnings and all money would be compounded or “rolled over.”
A dollar put in cash investments and rolled over would be worth $224 today. The same dollar would have grown to $802 today if invested in bonds. However, if that dollar had been invested in Australian equities, it would now be worth $438,844.*
Since Dr Oliver’s intent was to illustrate the importance of putting a lot of thought into active asset allocation, he offered another set of statistics. In a balanced fund of 75% Australian Equities, 20% bonds and 5% cash, $100 invested in July 1928 would have compounded to $518,009 today. Meanwhile, if an investor had put the same $100 in a balanced fund in 1928, converted it to cash after every negative year for the balanced fund and put it back into the balanced fund after the next positive year, that fund would contain $173,656.*
According to Mr Stevens, “This illustrates how difficult it is to grow your money by allocating assets. Active asset allocation is a great way to grow your funds, but you have to know the market and your reactions have to be both fast and accurate.”
Mr Stevens concluded: “That is why so many people would rather contact a financial planner and let a professional help them with asset allocation.”
*AMP Capital: “The perils of switching–why active asset allocation makes sense but why it needs to be done properly.” Dr Shane Oliver.
Approved Financial Planners is a firm located in Ascot, WA. They have been serving the Perth area since 2005. They are backed by parent company AMP Capital. They offer a full range of financial services such as financial planning, investment planning, wealth protection and mortgage broking. Their financial planners have more than 80 years combined experience in the financial services industry. To contact a financial planner, call 1300 787 274 or visit their website: http://www.approvedfp.com.au/.
Approved Financial Planners
Daniel Stevens of Approved Financial Planners Pty Ltd ABN: 52 116 910 528, trading as Approved Financial Planners is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327 Australian Financial Services Licence 232706 and Australian Credit Licence 232706.
General Advice Warning
What you need to know.
Any advice contained in this Page is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regard to those matters.