Investment Advice
Staying ahead of the rise in cost of living is something that is
on everyone’s mind.
Maintaining a suitable investment strategy could be essential in helping build wealth to deal with inflationary concerns. Whether it be looking at an investment property or constructing a share portfolio, Donmont Capital can assist you in understanding and achieving your investment goals.
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Understanding Your Investment Goals
Understanding your risk tolerance and time horizon is crucial when seeking investment advice. Risk tolerance refers to your comfort level with market fluctuations and potential losses and therefore it is essential to align your investment strategy with your risk tolerance to ensure you can withstand market volatility without abandoning your long-term goals.
Equally as important to understand is your time horizon. This refers to the duration over which you plan to invest before needing access to your funds. A longer time horizon typically allows for a more aggressive investment approach, as there is more time to ride out market fluctuations and potentially benefit from higher returns. Conversely, a shorter time horizon may need a more conservative approach due not having the time to ride out market fluctuations and in turn capacity to take on risk.
At Donmont Capital we utilise a risk assessment tool called a Risk Profile. This questionnaire asks a series of quantitative and qualitative questions to determine your investment goals so we can ensure the advice that we provide is suitable to the level of risk you are willing to take.
Why Diversify Your Investments? or “Don’t put all your eggs in one basket”?
Different types of investments behave differently under various economic and market conditions. Diversification is an investment strategy that involves spreading your investment portfolio across different asset classes, industries, sectors, and geographic regions to help mitigate investment risk.
Unsystematic Risk refers to the risk that is unique to a specific company, industry, or sector. As seen in the adjacent chart, this particular risk can be reduced with diversification. By spreading investments across multiple companies, industries, or sectors this can reduce the impact on unfavourable events on single investments on the overall portfolio.
Widgets – Investment Strategies
ETFs
Exchange-Traded Funds (ETF) are passively managed open-ended funds that are traded on an exchange, similar to individual shares. They are designed to track the performance of a particular index, commodity, bond, or a basket of assets and offer investors a way to gain exposure to a diversified portfolio of assets without having to buy each security individually.
LICs
A Listed Investment Company (LIC) is a close ended fund with typically a fixed number of shares where fund managers will provide their investors exposure to a variety of shares or other assets. Due to an LIC being close ended this provides the unique ability to to not have to purchase or sell shares at inopportune times as money doesn’t enter or leave the fund.
Managed Funds
Managed funds are unit trusts where investors pool their money together to invest in a diversified portfolio of assets. The investment decisions of the fund are made by experienced fund managers of investment teams who conduct research and analysis to complete the investment selection in order to achieve the fund’s investment objectives, such as capital growth, income generation or a combination of the two.
Direct Shares
These refers to income from personal investments held outside of the superannuation environment.
This could include income from an equity portfolio, term-deposit or rental property.
Due the assets being held personally, understanding the tax implications of your investment income is important to consider in retirement.
