Investment advice puts Mortlake clients on the path to wealth creation

Posted on 13/01/2016 by Les Batchelor in Audit & Advisory

The right investment advice is the first step in your wealth creation journey. If you invest wisely you can generate an income to supplement your lifestyle or look forward to a comfortable retirement.

Regardless of where you live, be it Mortlake or Melbourne; the trouble is that the right investment advice can sometimes be hard to find. The underlying focus of any advice should be that it is tailored personally to you, ensuring that your investment portfolio is well diversified.

Diversification means spreading your investments across a variety of asset classes. In doing so, the positive returns you receive from one investment can generally offset any negative returns you may receive from other investments.

Asset classes are generally divided into four categories, these are: Cash, Fixed interest, Property and Shares. Each asset class has different attributes. The table below highlights the characteristics and risk and return for the various asset classes.

Asset class Characteristics Risk Return

Includes bank deposits, cheque accounts and cash management trusts

Lowest level of risk and return of all the asset classes. Suitable for investors who have a short-term investment outlook or a low tolerance for risk.

As the investment provides interest only, the investment value may not keep up with inflation

Low Low
Fixed interest

Generally includes income-producing assets (Government bonds, fixed term deposits, mortgage trusts) although the capital value can rise or fall in certain circumstances.

Fixed Interest is more volatile than cash but still a relatively stable asset class.

You receive your initial investment amount back at the end of the set term.

Investments often don’t keep pace with inflation as only a pre-determined, fixed amount of interest is paid on the initial investment.

Low/ moderate Moderate

Includes residential, industrial, farming and commercial property.

Property investments have a higher risk than fixed interest but less than shares.

Can provide tax-advantaged income from rent received and can include capital growth.

Moderate/ high Moderate/ high

Involves the purchase of a stake or financial interest in a company, enabling you to share in the profits and future growth of that company.

Shares are the most volatile asset class, but historically over long periods of time have achieved on average the highest returns.

Investment sectors include Australian shares and International shares.

High High

Whilst we would all love to find a perfect investment which has low risk and high returns, the fact is that this doesn’t exist because risk and return are positively related. This means that the lower risk investments – while good for peace of mind – will generally provide a lower long-term return than a high risk investment. This is why it is considered prudent to invest across different asset classes; it ensures if one class is performing poorly the remainder of the investment portfolio is not suffering the same circumstances.

The right investment advice is the most important factor for wealth creation, it is crucial that to truly prepare for your future financial needs, you seek professional, tailored advice. With offices across South-West Victoria and South-East South Australia; from Mortlake to Mount Gambier, we have financial planners to who can provide the right investment advice for you.