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Successful investment
Investment Strategy

MEDIA RELEASE – Successful investing requires a sound investment strategy – 15 August 2008

John Hewison
Founder and Director
15 Aug 2008

Successful investment requires good quality research, constant attention and the determination to stick to a sound investment strategy according to John Hewison, CEO of leading independent wealth management firm Hewison & Associates.

Mr Hewison’s tips for sound investment include:

  • Define your objectives both short and long-term and choose investments that will achieve those objectives
  • Underpin value with reliable income performance
  • Re-balance the portfolio sector weighting each six months or as necessary.
  • Don’t invest in anything you don’t understand
  • Resist the temptation to panic when things are bad
  • Resist the temptation to change strategy when markets run hot.
  • Retain long-term focus and stick to the strategy

Mr Hewison points out that investment markets constantly go through positive and negative cycles and the biggest problem for investors is to ignore the negative noise and to retain faith in their investment strategy.

Be wary of market trends

“You need have a strategic plan that specifically addresses your situation and then you need to keep faith with the plan”, says Mr Hewison.

“Nothing investors can do will have any influence on macro-economic factors or general market trends. So, on the basis that you can’t control it, don’t worry about it. Investors get hurt when they react to market trends, which ultimately lead to selling when they should be buying, or vice versa.

“The natural reaction is for investors to want to buy when markets are up and sell when they are down. In fact the opposite is true – that is, buy low and sell high”, adds Mr Hewison.

“But in reality, long-term investors should not be trying to time the markets, because invariably they will get it wrong. Given that investors hold quality assets that continue to meet their short-term income objectives, they should simply hold them for the long-term.”

Investing in tough markets

So how does the public avoid making poor decisions and achieve peace of mind? 

“Investment is not necessarily the complex and mysterious minefield that it is sometimes made out to be”, claims Mr Hewison.

“The structures within which investments are made can be complex in regard to the regulations that govern them, but the investments themselves should not be that difficult to understand”

Mr Hewison outlines three rules for successful investment in tough markets.

His first rule is “Develop a sound strategy and stick to it.”

The first thing is to set your goals. Investors must first determine what they need their investment to achieve – whether it is income or long-term increase in value (capital growth) or a mixture of both.

All these things need to be taken into account to determine their suitability for an individual investor.

A financial strategy needs to include basic factors such as income, taxation efficiency and the potential for capital growth. at least at the rate of inflation. Only after these factors have been determined can an appropriate investment strategy be developed.

Key issues, which should be addressed in developing a strategy, include:

Short-term goals

  • Income
  • Peace of mind  the ability to cope with market volatility.

Medium term goals:

  • Capital expenditure like kids education, travel, home ownership / renovation

Long-term goals

  • Preserve capital value against inflation
  • Survival – ability to sustain life style in retirement
  • Estate planning – leaving something for the kids or maybe not?


Mr Hewison’s second rule is “If you don’t understand it. Don’t invest in it”.

Investments consist of three basic sectors – Equity, Property and Cash. There are various configurations, but essentially those are the basic sectors, says Mr Hewison.

An investment strategy can have a number of aims:

Investing for income

“Income is usually easy to quantify. But long-term sustainability of income is the issue that needs to be addressed”, says Mr Hewison.

“Investors often fail to appreciate that investing in fixed-interest securities such as term deposits will result in the gradual loss of capital. When capital does not increase in value at the rate of inflation it effectively loses value at that rate.

“This is particularly relevant when the investor requires the investment income for their living needs. Investors must therefore be careful to have some capital growth potential in their overall strategy or a conscious awareness and acceptance that the value of their capital is going to diminish in real terms, if not dollar terms, over time”

Investing for growth

Growth investment entails asset ownership, according to Mr Hewison.

“Investing in assets usually consists of real estate or shares to most investors but can also include collectables such as art and antiques”, he says.

“For most investors, growth investments will also generate income like dividends from shares and rent from property.”


Studies have proven that diversification across the three major asset sectors should achieve a smoothing of volatility and consistency of returns, points out Mr Hewison.

“My original point was that investors need to structure their investments to achieve their goals, which may dictate the nature of diversification”, he says.

Hewison & Associates utilise direct investment into Australian company shares, fixed interest securities and real estate based investment for their clients.

Hewison explains: “We generally believe that clients should know and understand what assets they own and retain control. There are also the important considerations of cash flow management and taxation which are fundamentally important to our philosophy, and the issue of investment cost.”

Re-balancing your portfolio

As Mr Hewison has already noted, investment markets go through cycles. Usually when one market rises the others are comparatively flat.

He suggests that when the asset sectors become out of balance (which will occur when one sector outperforms the others), the asset weighting needs to be adjusted to retain faith with your investment strategy.

By utilising this strategy, investors effectively take profits from surging markets, at the same time ensuring that their strategy remains focussed on its objective.

Mr Hewison’s third rule is “Ignore the noise”.

“When markets fall, the temptation is to panic and sell”, claims Mr. Hewison.

“Generally speaking short-term market values are driven by fear and greed, and long-term market values relate to fundamental pricing.

“Whilst no-one is immune to market corrections like the one we are currently experiencing, the question is simply this are you satisfied that you hold quality assets and can your strategy survive and retain its short-term income values whilst regaining its longer-term growth potential when the markets recover?”

Mr Hewison recommends that investors should retain faith with their investment strategy.

“If you retain faith with your strategy, there should be no need to panic or change direction, because markets always recover. And in the meantime, your short-term income needs should be satisfied”, he says.

“History has proven time and again that quality companies with quality management will survive market corrections with little, if any, impact on shareholder dividends throughout. The same generally applies to quality real estate properties.”

“Investors also need to appreciate the long-term influence of income relative to the purchase price of the investment”, says Mr. Hewison.

“Take for example investors who bought Commonwealth Bank shares for $5.40 in the public float in 1991. CBA currently pays a fully franked annual dividend of $2.62 per share or $3.74 gross per annum.

“This equates to an income return of 69.3% per annum on the cost price. In addition, CBA shares have increased in value to $40.17 having traded as high as $61 per share. So, whilst the recent fall in share price has been dramatic, is there any reason for a long-term CBA shareholder to be concerned with an income return like this? I think not”.

A final word

Mr. Hewison’s final word of advice: “Financial structuring can be complex and sometimes the strategy itself is more powerful than the investment within.

“I suggest that quality professional advice is essential in constructing an appropriate financial strategy and then developing and managing an investment strategy.”

John Hewison CFP, FFPA, MFinPlan, JP is CEO of Hewison & Associates, a Melbourne-based private client wealth management firm operating since 1985. He is a former Chairman of the Financial Planners Association of Australia and a vocal advocate for reform in the financial planning advisory industry.


Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.