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Blog | Investing with intent

As a long-term investor, one of the most important parts of your financial plan will be putting in place the right strategy. This should cover off all personal and financial aspects of your life such as cash flow, super and insurance. A good strategy will always be centred around your personal goals and objectives. This has been written about before but this week I go a little deeper.

Once you have your strategic roadmap, you then need to determine how you are going to invest your asset base and any future savings. At a top-level, you first determine your spread of assets (also known as your asset allocation) which determines how much you should invest in the various asset classes such as cash, fixed interest, property and shares. So, what now? 

Investment selection 

A good portfolio will have the right asset allocation, but a great portfolio will ensure that each investment that falls under the different asset classes will have a specific role to play in your portfolio. Some investors, like retirees, will need their portfolio to generate regular income to fund their living needs and some investors will only want to focus on growing their asset base for the future.  

The following examples will help you understand how to invest with intent, and while it outlines different investment characteristics, it is important to note that the key to long-term wealth creation is diversification and investing in quality investments. 

Gaining exposure to different sectors in the market means you are not putting all your eggs in one basket which should assist in providing a much smoother long-term return. 

Property 

Quality residential properties have performed incredibly well in the past and have helped many people accumulate wealth. It is important to remember that while you expect to generate strong capital growth with residential property, they do not usually pay high levels of income (usually 2% to 3% depending on the location). Residential property may be more suited to people looking to grow the value of their asset base. 

Quality commercial properties may not be expected to achieve the same levels of capital growth as residential properties, however, they usually pay higher levels of income (around 5% to 8%). If you are looking to generate a higher level of income from your assets, you may choose to focus more on commercial property.  

Quality commercial properties are generally accessed via a syndicate as they can cost in excess of $100 million. This can provide diversification benefits as you are able to invest smaller amounts across a wide range of properties. 

Shares 

Every business is different from the next, meaning the way they perform and choose to deal with profits will also differ. Some companies, like major banks, choose to pay a large portion of the profit out to shareholders as dividends. This means they can be attractive to those needing income.  

Other companies, like technology and medical businesses, may choose to retain a large portion of their profits so that they can continue to develop and innovate their products. While this would mean you do not receive much income from these types of assets, you would also expect the value of your shares to increase as they are finding ways to generate more profit in the future. 

Fixed interest 

While fixed interest assets are not expected to provide capital growth, they do provide a reliable income. Getting the right mix of fixed interest assets can provide significant benefits depending on what you are trying to achieve. If you agree to invest your money without access for a predetermined time, like how a term deposit works, you can generally produce high levels of income (around 7%).  

If you choose to invest with greater access to the capital, then you generally receive lower rates of income. When focusing on growing your asset base, exposure to fixed interest assets that you can access quickly can provide opportunity when markets are volatile, like they are right now.  

If your entire asset base is invested in property and shares, you have no flexibility when markets are volatile – you just need to ride out the storm. However, holding a portion of your assets in fixed interest investments which you can access quickly means that when shares and property drop in value, you can exit some of those fixed interest investments to take advantage of the market conditions by purchasing quality companies/properties ‘at a discount’. 

Where to from here? 

If you’re a client of Hewison Private Wealth, then you can rest easy knowing that your portfolio has been designed to meet your goals and objectives, and every investment plays a role in your future. We are also continuing to review the suitability of your asset allocation overtime to make sure it adapts to any changes in your circumstances.  

If you aren’t a client of ours then all you need to do is get in touch with us HERE so that we can help you make the most of your financial resources, review your current portfolio, and help you invest with intent. 

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.au

Please 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.