The strategy that every client needs

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While all investment strategies will be slightly different according to the circumstances and objectives of the investor, the common ground should be that they all have one.

Edward Smith, head of portfolio management at Australian Unity Investments (AUI) says, “The most important thing is that all investors have some kind of long-term strategy in place that helps them define their goals and what kind of investments best suit them.

“Investors can get distracted from their investment strategy by looking for fast-track investment opportunities and short-term considerations such as tax minimisation schemes.  This happened to many people in the lead-up to the global financial crisis.”

There are three considerations when developing your clients’ investment strategies:

  1. Time frame

How long investors intend to keep their investments and what they want them for are key issues in any intended approach, says Smith.

  1. Objectives

Objectives need to take into account the lifestyle considerations of the investor and tend to be linked with time frame. For instance, if the strategy is to do with retirement, what sort of retirement is the investor looking for?

“Objectives for younger people may need to take into account some medium-term aims such as saving for a deposit on a house, as well as objectives with a longer time frame – for example, saving for children’s education,” he said.

  1. Personal circumstances and opportunities

While risk profile needs to be considered, it must be against the light of objectives and time frame, as well as other personal circumstances such as existing and potential earned income levels and the amount available for investment, Mr Smith says.

 “It may be that a couple approaching retirement will instinctively favour a very low risk investment approach as caution is a common characteristic as people grow older.

“However, depending on their particular circumstances and objectives, they may need to consider a slightly more aggressive investment approach than the one they feel most comfortable with to take into account a longer life expectancy.”

Diversification and constant reviewing of investment progress against strategy is also vital, but avoid knee-jerk reactions according to market volatility and other short-term considerations, says Smith. 

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