Asset allocationEveryday we are each subjected to a barrage of ‘noise’ about the state of the market.

The ups and downs of different sectors gets daily airplay.  And it’s easy to feel edgy about whether there’s something you should be doing or changing in response to that.

Our philosophy is to encourage our clients to tune out to this noise, and instead to focus on their own customised strategy that’s built upon an asset allocation tailored to their goals, risk tolerance and timeframe.

[If you’re wondering what we mean by asset allocation, here’s a definition: “Asset allocation is the process of spreading, or ‘diversifying’, your investments across a range of different asset classes and geographical regions – to minimise the risk of all your investments falling in value at the same time, and to maximise the potential for smoother, and therefore higher, compound returns.” Source: Financial Times Lexicon]

Asset allocation

At 5 Financial, we spend a lot of time getting to know and understand what our clients want to achieve in their life. In doing so, we can build a wealth management strategy that supports them in attaining those goals in their desired timeframe, balancing relative risk and reward so that it sits comfortably with them. A large focus of this is considering the mix of underlying assets they hold (that may include a range of growth assets such as international shares, domestic shares and property – as well as defensive assets such as fixed income and cash) – otherwise known as their asset allocation.

In our experience, asset allocation is one of the cornerstones for achieving an objective. But it only works if the allocation is adhered to over time and through varying market environments. Periodic rebalancing will be necessary to bring the portfolio back into line with the allocation designed for the objective.

In short, there is substantial evidence that:

 ■ Enforcing an asset allocation through periodic rebalancing can help manage a portfolio’s risk.

■ Spontaneous departures from such an allocation can be costly.

■ Attempts to outguess the market rarely pay.

■ Chasing winners often leads to a dead end.

■ Simply contributing more money toward an investment goal can be a surprisingly powerful tool.

One of the most important things our advisers do is to coach you to resist the ‘noise’ around investment markets. We help keep you focused on your long term objectives – which is what really matters – and  help you avoid feeling anxious about market gyrations.

As our firm’s ‘motto’ says, we help you feel clear and confident financially.

If you’d like to know more, please contact us to arrange a complimentary initial consultation. We’d love to help you create a financial roadmap that supports you to achieve all you want in your life. Contact us today to learn more.