ANZ Smart Choice Super Investor Update : Member Update Winter 2013
For better or worse, sporting jargon has infused day-to--day business. In our business -- managing billions of investment dollars -- it takes on a special meaning. That's not simply because millions of Australians take a keen interest in both sport and investing. It is because success in both fields demands a special skill: prudent risk taking. Think about sport. Sporting contests, like markets, aren't static. Momentum ebbs and flows and conditions change. New opportunities and threats come and go, sometimes fleetingly. Coaches drill players for hours on strategies for offence and defence. Good players know when and how to take on risk and gain an advantage, and when to shut it down and protect a position. Investing too is about taking calculated risks, so it is not surprising investors are said to have 'skin in the game'. Over the past year, investors' risk appetite has fundamentally changed. Central banks have encouraged more investing in shares by pushing down bond returns. This is having an effect here in Australia. For instance, while the benchmark Australian share index has risen strongly over the last year, government bond yields have fallen. So too has cash, to historically low levels. Of course, every investor's situation is different and there is no right or wrong answer. So to help you prepare, let's touch on some investment fundamentals. Back to basics Today's markets underscore a fundamental principle: to achieve a higher return you generally need to take on more risk - you must have skin in the game. But it is also important to both measure and manage risk. Effective diversification is key. Diversification means spreading your money across different investments so you achieve a more consistent return. Two simple ways to diversify are: 1. Across sectors to give a mix of defensive assets like cash and fixed income and growth assets like shares, property and alternative assets. 2. Within sectors between different fund styles, industries, countries, company size as well as other factors. Income or growth, or both? Broadly, an investment return comes in two forms: Income -- this can include a fixed amount as in the case of cash deposits or a variable payment such as a dividend. Capital growth -- an investment that can be bought and sold offers potential capital growth and capital loss. Managed funds typically hold listed investments whereby a unit price reflects the current market price. These include shares, property, bonds, commodities and currencies.
Member Update Autumn 2013
Member Update Spring 2013