At Ord Minnett we believe investors should begin their investment strategy by choosing an appropriate asset allocation aligned to attitudes to risk.
Discover the benefits of diversification
At Ord Minnett we believe investors should begin their investment strategy by choosing an appropriate asset allocation. That is, deciding on how best to spread capital across the key investment asset classes. Academic studies and experienced investment professionals widely accept that asset allocation is likely to be the predominant driver of the variation in an investor’s investment returns. Ords shares this belief strongly.
Benefits of Diversification
The key to asset allocation is combining individual asset classes in the best proportions to obtain the optimal trade-off between risk and return. The goal is to combine assets with different risk and return profiles. If you diversify across similar investments, which all perform alike during similar economic and market conditions, then the benefits of diversification are reduced.
Today’s investor faces many choices as to where to invest their money. Examples include ordinary shares, bonds, hybrid securities, exchange traded funds, property and term deposits. Investors must also decide on how to best employ superannuation and whether to consider using leverage and derivatives.
These are just a few of the wide variety of investment choices available to you. It’s hard to know where to start, and of course there is the risk of making poor investment decisions if you are not properly informed.
Ord Minnett has been advising private investors on making investment decisions for more than 150 years. During this time we have refined an approach to investing that we believe provides investors with a solid foundation on which to build and maintain their wealth.
Ord Minnett’s professional team of advisers use their expertise to guide our clients to develop an investment strategy aligned to their needs. The first step involves undertaking a thorough review of all your current lifestage circumstances and investment goals (including your cash-flow requirements and risk profile) to decide on the appropriate asset allocation. This process will establish how much of your capital is to be apportioned across the different asset classes including:
- Fixed-interest securities, such as bank bills, term deposits and bonds
- Shares, including domestic and international, ordinary and preference shares
- Alternative assets, such as hedge funds, commodities and private equity.
Because asset allocation decisions are paramount, by selecting the appropriate asset allocation, you should maximise the probability of successful investment outcomes and at a level of risk most suited to your objectives.
At Ords, we seek to sensibly manage investment risk to ensure our clients are adequately rewarded with higher returns for the risks they undertake. Using the analysis of our Research Team and investment professionals, the primary way that we manage risk for our clients is by constructing carefully diversified portfolios. The following two types of diversification are of most importance:
- Diversification across asset classes – asset allocation
- Diversification within asset classes – security selection and portfolio construction.
Diversification involves thorough research, analysis and the use of the latest tools, techniques and investment theory to arrive at the best allocation of a client’s wealth among a range of investments. The aim is to maximise the probability of achieving stated investment goals while managing risk in a way that best suits the individual.
Sensible diversification reduces risk because when one or more of your investments may be delivering lower returns, other investments will be performing more strongly to offset those lower returns. The overall result is a portfolio that provides a more stable growth profile.
Spreading your wealth among a number of different investments means that while you may not achieve extraordinary gains from holding a few well-performing investments, neither will your portfolio’s performance be severely compromised by a single poorly performing investment.
As an Ord Minnett client, access to our daily research and bespoke advice coupled with our experience of both the good times and the bad times, means that you have the reassurance of our track record to guide you - a dynamic portfolio that responds to changes in not only the markets but also your personal situation.
"Through prudent investment advice and market analysis, Ord Minnett has been building the wealth of investors for generations."
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