The sixth Women in Focus webinar explored Goals-Based Investing versus traditional investing approaches, and helped you to consider how well equipped you and your family are with an investment strategy tailored to your long-term needs.
CountPlus One Senior Financial Adviser Scott Relf, an Authorised Representative of Count Financial Ltd., presented the session, Goals Based Investing; he gave a step-by-step overview of the process involved in setting goals, assessing appetite for risk and choosing the right assets for your portfolio. His considerations were against the backdrop of steady economic recovery after Covid-19 disruptions, and historically low interest rates.
Once you have a set of long-term, realistic goals, what can you expect from the process of making investments or growing an existing investment portfolio?
Our Women in Focus series aims to educate new audiences on the basics of managing finances through each of the life phases, or refresh the knowledge you may already have.
Beginning next quarter, we will re-brand our series to Family in Focus, and begin to introduce in-person events at our North Sydney office. We’ve realised that there is active interest from the broader family unit that wants to be involved in learning about and managing a family’s financial journey. For this reason, our re-branding intends to open our doors to welcome all members of the family to participate.
As has been the case in the past six months, CountPlus One will continue to introduce its leaders to unravel practical financial information that you can use.
You can get to know the latest presenter, Scott Relf here.
Here’s a brief recap of Scott’s presentation, which can be viewed here:
In his presentation, Scott Relf outlined Goals-Based investing, an approach which aims to help you meet personal and lifestyle goals. He also covered how to mitigate risks, and the impacts on investing of COVID-19 and interest rates at their lowest levels.
Goals-based investing is different to a traditional investment approach where:
Maximising wealth at retirement is the default goal
The focus is solely on an individual’s risk profile
It is a one size fits all approach
The traditional approach doesn’t take into account that everyone is different, with varied goals and priorities that occur well before they contemplate retirement.
Then, there needs to be a deep understanding of your current situation; “This is the first step before portfolio discussions even begin,” said Scott.
He said investment risk isn’t measured by performance versus a specific benchmark; it’s about whether you will be able to achieve your goals, or what you need to consider and change to ensure you remain on track to achieve your goals.
Investment solutions must be designed around forecasting the desired rate of return needed to achieve the set goals. So the questions that need to be asked and answered are What are your objectives, Why are you investing, and What are your timeframes?
When looking at Why you are investing, Scott said it was key to understand the difference between Saving and Investing.
Saving is a relatively low-risk way to protect your money for a short timeframe, with predictable returns ie: whatever rate the bank sets, and savings are taxed at your marginal tax rate like any other income.
Investing is a strategy to grow your wealth over a longer period. It is riskier because it is tied to market movements which can be volatile, but you have the potential to earn higher income than the interest rates on a savings account.
After determining the rate of return and growth investment strategy required to achieve your goals, it’s important to understand attitudes towards investment risk. As every individual investor responds differently to volatility, understanding the different risk profiles will help you before constructing the most suitable investment portfolio. For example:
A defensive investor is focused on protecting their investment capital and having total peace of mind
A moderate investor will create a portfolio that takes on some short-term risk for potential long-term growth
A growth investor has a higher threshold for short-term risk in order to achieve greater long-term growth.
There are four main asset classes divided into Defensive and Growth assets
Defensive assets have lower risk as well as lower potential returns. These include:
Cash – such as savings accounts in the bank
Fixed interest – including bonds and term deposits, which provide regular payments for an agreed period of time.
Some fixed interest investments like bonds also have the potential for capital growth, depending on market movements.
Growth assets carry higher risk but also have the potential for higher returns. These include:
Shares – Australian and international
Property – which includes property securities, or shares in companies that manage properties
Growth assets tend to be longer-term investments, as they need to ride out periods of market volatility and increase in value over time.
After determining and agreeing on your required rate of return and risk profile, the next step involves understanding your investment preferences, by breaking down investment options within each asset class, including:
Direct shares listed on the Australian stock exchange
Exchange Traded Funds
There should also be discussion around investment themes such as market volatility, listed versus unlisted investments, and developed and emerging economies
“Goals based investing is about having a long term strategic investment plan,” said Scott. He said sticking to your plan, determined by your goals and the other factors outlined above, will help you ride out the disruptions of events such as the COVID-19 pandemic and its impact on global economies.
Like all CountPlus One webinars, the information provided is a guide only and personal advice should be sought for your individual situation. CountPlus One does offer clients a free, half-hour discovery session to explore goals-based Investing.
For more on recent webinars, to ask questions relating to your personal situation, email [email protected].