September 15, 2016

Sequencing risk: the order of things

As financial advisers, we talk a lot about risk, so what is sequencing risk? Let’s begin with an example… Jennifer and Sue each contribute $20,000 per year to their superannuation funds for 10 years. They both earn an average return of 5% per annum, after tax and fees, and from Years Two to Nine they earn identical returns each year. The only difference is that Jennifer’s portfolio returns 8% in the first year and -8% in the last year; whereas Sue’s returns are -8% in Year One, and 8% in Year Ten. This doesn’t seem like much of a change, […]
September 8, 2016

Your marathon investment portfolio

A recent cover feature in The Economist magazine asks readers to imagine a future world where you celebrated your 94th birthday by running a marathon with your school friends. The article was using the illustration of extremely fit old-timers – well past their present life expectancies – as a means to emphasise just how much longevity has increased over the past century and is continuing to rise. It may be a hard for us to imagine in 2016 that the point will ever be reached where 94 year-olds are running marathons with their school mates. Nevertheless, considerable advances in medical […]
September 1, 2016

Tax-smart investing

One of the most practical ways that investors can help keep their returns as high as possible in a low-interest environment without taking additional risks is to ensure that their investment taxes are managed as efficiently as possible. Indeed, ensuring the efficient management of investment taxes is largely under an investor’s control – unlike numerous other aspects about investing. As a matter of everyday practice, investors should concentrate on what they can control rather than on what they can’t control. And efficiently dealing with tax falls firmly into the under-my-control basket. While tax shouldn’t dominate investment decisions, as financial planners […]