THE RIGHT
BALANCEGo with the evidence
when it comes to invest-
ing, says FinaMetrica’s
Paul Resnik.“The evidence I can see is
that a well-diversified port-
folio that has relatively low
fees, that has relatively low
turnover so it reduces taxa-
tion and transaction fees, is
likely to give you the most
predictable and reasonable
return in the long term.“If the portfolio has taken
into account your risk profile,
thereislittlelikelihoodyou
will need to change it over
your lifetime. Because there
is no evidence that says try-
ingtopickthehighsandlows
ofthemarketaddsvalue.“Looking at the data,
you don’t want to be overly
exposed to equities because
youhavenowheretorebal-
ance.Whereasifyouhave
apositionwhereyoudon’t
go beyond 75/25, you have
a rebalancing capability that
is automatic. Equities have
boomed,let’stakesome
profit. Equities have correct-
ed, let’s buy some more.”In other words, a balanced
fund with 75% in growth
assets and 25% in cash
and fixed interest.WILLINGTOTAKEA
CALCULATED RISKAsaself-directedinvestor,VeronicaMarshan,
65, follows the sharemarket closely and reads
a variety of investment magazines and news-
letters. She also manages her husband’s law
firm, including its finances and accounts.
For the past 25 years she’s been running
their self-managed super fund (SMSF), stead-
ilybuildingadiversifiedshareportfolioand
enjoying the challenge. “I’ve got a portfolio of about
40 different shares which I’ve bought over the years
as well as some managed funds. More recently I’ve
invested in an international share fund and compa-
nies listed on the ASX that have overseas exposure.”
The portfolio also has an allocation to cash. “It
meansIdon’thavetosellshareswilly-nillyifIneed
to fund anything,” says Marshan. While her husband,
74,isstillworking,theydonotneedthedrawdown
fromtheirSMSFandre-contributemostofitback
into their fund.
Asisthecasewithsomanyboomers,theymissed
out on building retirement savings over a lifetime of
work.“Wedon’thavehugeamountsoffundsinour
SMSF because we didn’t start making contributions
until25yearsago.”
Latelyshe’sbeenturningherattentiontoacquiring
more income-producing shares. “My husband is not
interested in retiring yet. While he can, we continue
onandenjoywhatwecan,whenwecan.Wejust
hope nothing untoward happens and that our financ-
es continue happily along.”
When Marshan did the FPA’s risk tolerance test,
her profile came back as someone who is willing
to take calculated risks for significant gains, and is
focusedonsavingforthefuture.Shethoughtitwas
pretty “spot on”.
“I’mfairlycomfortablewithwhatI’vedone.I’mnot
a conservative investor. I’m prepared to take some
risks.Iknowthat,becauseweareatthestagewhere
weshouldbeveeringtowardsamoreconservative
approach. I haven’t used a financial adviser so far but
I’ve got to the point where I think we should.”
Find out more about your financial personality type
at myfinancepersonality.com.CASE STUDY
wantstosleepcomfortablyatnightknowing
their money is safe.”
The other aspect is when you are going to
needthemoney.“Imightbeareallyaggressive
investorbutifIneedthemoneyin12months
time,takingmynormallevelofrisk–going
all-out on the sharemarket – is way too much
risk based on the fact that I need the money in a year,”
says Marshan. “Conversely, if I’m only comfortable with
investingintermdepositsbutIneedtoinvestfor30to
40years,I’mgoingendupinamuchworsefinancial
positionthanifIinvestedinthesharemarket.”
Beforedoinganyrisk-profiletest,checkitssource
to establish that it is reputable and trustworthy.M