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Hewison Insights

In volatile times, income security matters

Chris Morcom
Partner/Private Client Adviser
28 Jun 2016

Volatile investment markets can be difficult for most people to cope with, and can shake the faith of even the longest term investors. At the risk of sounding like a broken record, it is worth revisiting this issue again.

From the start of this financial year to the time of writing this post, the Australian ASX 200 index shows a decrease of 3 per cent. And most investors who hold an exposure to energy and banking resource stocks have seen their portfolios down even more than the index.

Understandably, instability in asset prices can be concerning however, it is the long term reliability of investment income that will underpin the long term performance of an investment portfolio. Portfolios with exposures across different asset sectors generally maintain their income earnings throughout the year, regardless of macroeconomic conditions, and this is key.  

The spread of assets across different types of investments will dictate the income generated by an investment portfolio, at the same time as affecting the volatility of asset values.

Why is this important?

For those accumulating wealth, reliable investment income means additional cash to purchase more assets or reduce debt. For those reliant on their investments to meet income needs, the security of their investment income is most important, and the volatility in asset values should be secondary.  The security of knowing they are spending their investment earnings and not their capital should be a comfort.

Therefore, when your adviser is suggesting that it is time to rebalance your investment portfolio, they are often considering the future income earning potential of your overall assets, and not just the short term unpredictability of various investment markets. Meaning, there is no need to panic.

Any financial product advice provided is general in nature. It does not consider your needs, financial situation or objectives. You should consider the appropriateness of this advice to your circumstances before you act on it.


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.