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Hewison Private Wealth - Insights
Hewison Insights
Portfolio Management

Keep the faith – reap the reward

John Hewison
Founder and Director
28 Sep 2012

With over more than 25 years of successful portfolio management experience, I am amazed that, in the wake of recent market turmoil, financial planners appear to have abandoned the principles of asset allocation. 

Asset allocation is about developing a portfolio strategy containing a mix of asset sectors based on achieving outcomes for a client. By disciplined and continuous re-balancing back to these pre-set levels, the characteristics of the strategy are maintained. In turn, this entails continuously taking profits from outperforming sectors and reinvesting into under-performing sectors – or selling at the top and buying at the bottom.

The past five years have been tough, but surely it is times like this that professional advisers need to stand up and be counted with courage in their beliefs. This is when clients really need wise counselling and cool heads – not a universal “run for the hills” attitude.

If clients’ equity investment values fell in 2008-09, they are not going to recover value by investing in fixed interest. In fact, under the principles of re-balancing they should have been buying quality equities at cheap prices so that they could recoup value as markets recover – as they always do. This would have also resulted in them buying robust income streams from share dividends, which have been ridiculously high in some sectors.

Investors are now faced with a dilemma of being over-weight to fixed interest securities in a declining interest rate market. If they are relying on investment income to live, this could be disastrous. By waiting for the market to recover and the greed factor to click back in, the opportunity has been lost. The ASX All Ords index gained 33.5% in the 2009 calendar year and has been edging up further over recent months. If you weren’t invested, you missed out.

Disciplined re-balancing of asset sectors ultimately cannot lose – so why abandon the principle for the sake of short-termism. Where is the commitment to the clients who rely on us for guidance and cool heads in a crisis?


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.