Is it time to increase Investment Risk?

06th Dec, 2012

With many investors moving out of growth assets over the past two years and placing their funds in cash, term deposits and fixed interest funds (bonds, credit and hybrids), now might be time to reassess one’s appetite for risk and start to considering re-allocating to growth assets (shares, property etc).

With interest rates at all time lows in most of the world’s leading economies, the risks building in to so called defensive assets could give rise to the next investment “bubble” sometime over the next 3/5 years. 

But how risk free are some of these investments?  For example we have seen income on term deposits fall from around 7% in 2009 to 4% (or less following the recent reduction in interest rates).  This represents a 42% reduction in income over the last three years. And, if you rely on that income to live, the only option you have will be draw down capital to make ends meet. Does this investment approach really achieve capital preservation?

Consequently, one needs to question whether the risk assessment of these defensive assets is really well understood in the current economic/investment climate.

Yes, risk and uncertainty remain on the high side, but risk is generally well off the highs of the 2008/2009 period and we need to once again look to take a more balanced approach to the competing demands of investment: risk (capital preservation) and return (longer term capital growth). The fact is no one single approach to investment will guarantee capital preservation.

We are not suggesting that people make a radical change to their investment strategy, but we do strongly believe that it is time that everyone re-assesses their strategy and consider increasing their exposure to longer term growth assets.

At The Wealth Creation Group, we will step you through the process and help you develop an investment strategy that balances the need for capital preservation and longer term capital growth.

Ours is a strategy and advice investment model, not a product centric model.  Give us a call to experience the difference.

 

Disclaimer

This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.  Opinions constitute our judgments at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Nathan Griffith and  Samina Yip of The Wealth Creation Group Pty Limited are Authorised Representatives ofApogee Financial Planning Limited ABN 28 056 426 932, an Australian Financial Services Licensee, Registered office at 105 –153 Miller St North Sydney NSW 2060 and a member of the National Australia group of companies. 

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The Wealth Creation Group and its Financial Advisers are Authorised Representatives of WCG Financial Solutions Limited, Australian Financial Services Licensee 481610, Registered Office at 351 Moorabool Street, Geelong VIC 3220.
Disclaimer: The information contained in this website is of a general nature and has been sourced on good faith as such it should not be construed as personal advice. Whilst the writer has adopted care, diligence and competence, the information has not been prepared taking into account any particular investment objectives, financial situation or particular needs. The Wealth Creation Group and WCG Financial Solutions Pty Limited accept no responsibility for any content contained in external links on other company websites or externally sourced information.