4 September 2012

This is the million dollar question (pardon the pun). Sadly there is no magic bullet, what we do have however, is logic and common sense.

 From July 2011 we started an across the board investment strategy change for all our clients.

 This decision was the result of several factors:

  • World economy was directionless with many dark clouds on the horizon.
  • Growth assets such as property and shares across the world have all lost value in previous 4 years.
  • Investor sentiment was negative. At the same time though good quality company and assets were producing excellent income- companies and property.
  • Managed fund income returns were barely making 5% while dividends from many Australian shares (directly held) were over 8%.

 The strategy changes were simple; seek income, maintain diversification, and only invest in blue chip assets.

 The result over the last year has been excellent.

 e.g. BMstar PGR ITR Msector balanced fund index returned to 31 July 2012  = 3.62%

Our average balanced strategy returned = 6.94%* (net fees).

 How have we done this? (this is an example for balanced portfolio. The same principals relate to all investor types).

  1. Australian and international shares exposure- moved to direct shares using eQR income portfolio*.
  2. Retained property exposure.
  3. Simplified fixed interest.
  4. Cash exposure to term deposits for 6 month cycles.

 Our view is this:

  • Our balanced profile clients may still have a 40%-50% exposure to Australian Blue chip shares.
  • If the share price of these shares remain unchanged for 2 years (2014) due to economic conditions, they will earn income from those directly held shares dividend.
  • The projected gross dividend payments from the eQR Concentrated Income Portfolio** is 8.7% gross.

 We do not know what the property or stock market values will be next week or this time next year. We are confident dividend income will remain consist and through for next few years. We expect to see share price and property price growth over next 5-7 years.

If we can maintain an income of 6.3% for a balanced portfolio (net of fees) during the next 5 years then we feel this places clients in a confident position. Both to attain a sound return and not miss out on growth if and when values return to property and share markets.

 If you are interested in knowing more about our portfolio and investment strategy please call us today.

 *This average taken from selection of clients with balanced portfolios whom undertook strategy change between August 2011 to December 2011.

**eQR; research company that provide our office daily portfolio updates for direct shares.

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