Hi,

I have a mix of direct shares and managed funds in my super. The return for last year was 15% which was good, but our financial advisers has shared some concerns about the market and the potential for volatility. They’ve made a suggestion to consider a cash out strategy into a diversified portfolio of managed funds. The return may not be as high but there’s less risk. Is this considered a good strategy at this point of time?

Hi James,
I’m not an adviser so I can’t direct you either way.
15% isn’t really that good for the last 12 months if what you are in is considered risky? Are you currently paying fees to achieve that return?
I would suggest you get a second opinion and maybe a third but it has to take into account your personal situation regardless of what the market “might” do
Best of luck
Scott

Hi James,

It is notoriously difficult to be able to time when to invest and when to cash out of the market, to the point that I don't believe anyone can do it reliably.

The problem with changing investment strategy based on what you think markets might to is 2 fold. 1 is you'll inevitably get it wrong and 'miss out' on returns and the 2nd is that the ongoing costs (taxation and transaction costs) will end up impacting your long term returns.

I think you should have an appropriate asset allocation based on your tolerance to investment risks and your goals and objectives, then leave it as is and spend your efforts on things you can control such as keeping costs and taxes low, managing cash flow, investing surplus cash flow etc etc.

Cheers

Glenn

Hi James,

Since I am not a financial adviser cannot give you an advise on the strategy itself but what I would like to say is this:
- What is your risk profile i.e. your risk taking appetite should derive your strategy and not just market fluctuations.
- If you are unsure of your current financial advisers always good to have a second opinion or a 3rd as mentioned by Scott.
- Depending on your risk taking capacity and what are your goals for future (short term or long term) should be the key factor.

Note that their is no right or wrong for your question.

Best of luck.

So why is a diversified portfolio of managed funds any less exposed to risk than a diversified portfolio of shares???
maybe the question to your investment guru is how does the change in strategy benefit me?? what actual risk is being mitigated?? what costs am I saving? How much CGT is being triggered?? what is in it for me??? Why would I punt shares that are giving me such a good return???
I rather suspect that a fleet of managed funds is a lot easier for your investment guru to manage than a fleet of direct shares.
or maybe I am being a bit cynical.....
but definitely ask a LOT of questions.....that cant hurt!!
cheers
BC

Hi James,

Just reinforcing some of the earlier comments.

Moving from a portfolio of shares to managed funds is unlikely to be any less risky.

Provided you don’t have a high concentration in a handful of individual stocks then a diversified portfolio of direct stocks will have a similar return profile to that if managed funds. You just won’t see the individual stock returns so you perceive it as being less risky when it actually isn’t.

Set your investment strategy around your goals, rebalance back to that allocation from time to time then just concentrate on the things you can control (taxes, fees, your own contributions etc.).

No one (anyone on here or your existing adviser) has any idea of what’s to come with investment markets.

All the best.
James
james.wrigley@firstfinancial.com.au
03 9909 5800

HI James , think about setting up a self managed fund and then explore alot more options available.
I just recently moved from ANZ managed fund to a SMSF and my investment is working very nicely.
Give me a yell for more details !
Happy to talk