Asset Allocation

Asset allocation refers to the allocation of assets to specific asset classes such as shares, property, fixed interest and cash. It is very important to get the asset allocation right as your exposure to Australian shares as opposed to cash will have a far greater impact on your long term returns over selecting one specific investment over another.

Please find following the asset allocations for the range¹ of investor profiles. Your investor profile is determined after discussions with your adviser.

Benchmark Calculations - Range

	Conservative Investor	Moderately Conservative Investor	Balanced Investor	Moderately Aggressive Investor	Long Term Growth Investor
Australian Cash	10 - 50	10 - 40	5 - 25	0 - 20	0 - 10
Australian Fixed Interest	25 - 55	25 - 45	10 - 30	5 - 25	0 - 10
International Fixed Interest	5 - 15	5 - 15	5 - 15	0 - 10	0 - 10
Defensive Assets	80 - 90	65 - 75	40 - 60	20 - 30	0 - 10
Australian Property	0 - 10	5 - 15	5 - 15	5 - 15	5 - 15
Australian Equities	5 - 15	15 - 25	20 - 40	40 - 50	45 - 55
International Equities	0 - 10	5 - 15	10 - 20	15 - 25	20 - 30
Growth Assets	10 - 20	25 - 75	40 - 60	70 - 80	90 - 100
Return objective	#CPI + 2%	CPI + 3%	CPI + 5%	CPI + 6%	CPI + 8%
Time horizon	1 - 2 Years	2 - 3 Years	3 - 4 Years	4 - 5 Years	5 Years +

#CPI refers to the consumer price index
¹ A range is an acceptable variance to your asset allocation within a sector that we are comfortable for your investments to be allocated to during times of market movement (i.e. as one sector outperforms another sector its allocation will naturally increase due to the increased value).

While strategic and actual asset allocation recommendations (refer following) may vary, the range of defensive and aggressive assets generally will fall between the above ranges

Strategic Asset Allocation

Strategic Asset Allocation (SAA) is a way or rebalancing your portfolio to a comfortable level of tolerated risk (including opportunity risk). While growth investments will increase and decrease in value, it is important to acknowledge that buying and selling investments at regular intervals will re-align your investments with your tolerated risk profile. The advantage of SAA is to ensure that the volatility of the six asset classes in which you are investing is kept at a consistent level for the life of your investment. The disadvantage of this type of investing is that no consideration is made in terms of particular market conditions and the cost of buying and selling investment.

Tactical Asset Allocation

Tactical Asset Allocation (TAA) is a way or rebalancing your portfolio to a comfortable level of tolerated risk (including opportunity risk) and in addition a consideration of particular market conditions is made (for example a strong Australian Share Market for many years may encourage a sell off of these investments or in other words to “take some profits”)

The advantage of TAA is to ensure that the volatility of the 6 asset classes you are investing in is kept at a constant level for the life of your investment in consideration of market conditions. The disadvantage is that the assumption of getting the market conditions right may lose funds for the investor. By this, a reduction in Australian Equities in late 2006, because the market has been strong for a few years, would have cause a “loss of potential earnings” to the investor due to “opportunity risk” However with the recent decline of the Australian Share Market, the same investor would, after another strong year, and a significant fall, would be advantaged at this particular point in time.

David McManus Financial Adviser Based In Kew d.macmanus@ethosfinancial.com.au 0424 61 60 60 CFP DFP Certified Financial Planner Insurance Superannuation Retirement Planning Pension Centrelink Aged Care Income Protection

David Mac Manus Financial Adviser Based In Kew d.macmanus@ethosfinancial.com.au 0424 61 60 60 CFP DFP Certified Financial Planner Insurance Superannuation Retirement Planning Pension Centrelink Aged Care Income Protection

David MacManus Financial Adviser Based In Kew d.macmanus@ethosfinancial.com.au 0424 61 60 60 CFP DFP Certified Financial Planner Insurance Superannuation Retirement Planning Pension Centrelink Aged Care Income Protection

David Mc Manus Financial Adviser Based In Kew d.macmanus@ethosfinancial.com.au 0424 61 60 60 CFP DFP Certified Financial Planner Insurance Superannuation Retirement Planning Pension Centrelink Aged Care Income Protection