Investment Risk Profiles

‘Risk Profiling’ is a financial planning tool and a guide only as to the direction in which investments are allocated. It is not a constant state but more of a variable dependent upon a number of changing factors. It is very important that you understand your risk profile and asset allocation will vary and may change over time according to these conditions including an ongoing education process you acquire of the changing financial industry. It will also vary through a change in your personal circumstances, needs and objectives, political or economic cyclical changes including your own decision to invest in products outside your original described ‘risk profile’. Therefore, there is a need that your investments are reviewed from time to time. There are a number of risks that may have an impact on your investment portfolio, and your portfolio’s degree of risk can be dependant upon your ‘Investor Profile’, which may subsequently determine the investments held within your portfolio.

The ranges of Investor Profiles vary from ‘Defensive’ to ‘High Growth’, and can be summarised as follows:

Cautious (Cautious/Moderate) [Short investments, generally 2-3 years]

For investors who are seeking an income stream (i.e. pension) with some capital growth attached. It can have a high exposure to fixed interest, but may also include some exposure to shares and property markets. It is suited to a medium term investor who is seeking capital stability, but who also wants some protection from inflation. Some tax relief on income maybe available from franking credits and in some circumstances, other products. The fluctuation of price is moderate to low over the short to medium term.

Balanced (Prudent) [Medium term investments, generally 3-5 years]

Using a slightly higher exposure to growth assets than income assets, this portfolio will have lower short term fluctuations in value than the other growth based investment portfolios. Its aim is to produce moderate capital growth in a medium to long term time frame. It has a more BALANCED exposure to a wider range of investment products that may also include shares, property and fixed interest assets, while the income generated by the portfolio will be partially tax effective and may come from a range of alternative investment products. This portfolio is subject to market fluctuations.

Growth (Assertive) [Medium to longer term investments, generally 5-7 years or more]

A small income exposure slightly reduces the short term fluctuations of the Growth portfolio. It is best suited to a long term investor who can accept some investment risk over the long term. The income stream will be more tax effective and it may have a high exposure to shares and property to provide long term investment growth and may include a range of alternative investment products. The investor is prepared to accept short term market fluctuations over long term growth objectives.

Aggressive (Hi Growth) [Long term investments, generally 5-7 years or more]

A portfolio generally with no cash or fixed interest exposure but rather investment products that are capable of producing higher returns that include shares, property and may include a wider range of alternative financial products. It has a strong emphasis on maximising capital growth over the long term. The aim is to produce a tax effective income. Investors can expect high short term fluctuations in values and higher chance of capital loss. However, they are prepared to accept this as a trade off in achieving their long term investment objective.