Understanding Your Investment Profile

Walbrook Wealth ManagementSeptember 19, 2020

It is fundamental to the quality and relevance of our advice that we have a shared, in-depth understanding of your financial position and investment profile.

We regularly check that your investment profile is up to date to ensure that we continue to serve you in your best interests and that we keep abreast of any changes that may have a bearing on the advice that we provide.

This fact sheet provides additional information to help with understanding the investment, tax and other financial planning concepts that we have discussed with you or included in your Statement of Advice.

Please contact your adviser if there is any aspect on which you need further information or clarification.

What is your investment profile?

Your investment profile has three components:

  • Investment Objective
  • Risk Profile
  • Investment Strategy

You should bear in mind that specific institutions, such as your superannuation fund, may have their distinctive investment objectives and risk characteristics which do not precisely correlate with those set out below.

You should always read the Statement of Advice and Product Disclosure Statements to gain a proper understanding of the unique investment objectives and associated risks.

Primary Investment Objective

The primary investment objective captures a preliminary understanding of your intentions and goals for your wealth and may differ between different elements, e.g. retirement savings and non-retirement savings.

Capital preservation

You want to preserve your capital with the least possible risk and high liquidity. You recognise that this offers minimal growth potential.

Balanced growth

You want to achieve regular income from interest and dividend earnings, which may be reinvested, and generate modest capital growth. You prefer medium-risk investments, recognising that there may be limited growth potential, and you are willing to accept some risk of capital loss.

Dynamic Growth

You want to grow the value of your investments and accumulate wealth over time through price appreciation. You prefer medium to high-risk investments, recognising that the potential to accumulate wealth is much greater. You are willing to accept more risk, short term loss of a higher magnitude and greater variance in annual returns to achieve above-average growth.

Risk Profile

Your risk profile is primarily an estimation of your willingness to accept fluctuations in your investment values over time. Your ability to bear financial risks is also taken into account when determining an appropriate level of risk exposure.

For example, while you may be comfortable with taking the risk of a 33% fall in your portfolio, your need for income, high debt levels, a short investment horizon or large pending capital expenditures may mean you are not able to bear that risk.

Risk Group 1

Investors in Risk Group 1 are not typically comfortable losing any of their portfolio value over a given year. In exchange for this risk, they generally expect their portfolio to generate the same return as low-risk assets, such as Term Deposits, over the same period.

A portfolio suitable for an investor in Risk Group 1 produces regular interest income with minimal volatility of capital.

Risk Group 2

In the event of a severe downturn, investors in Risk Group 2 can typically bear a 10% drop in the value of their portfolio over a given year. In exchange for this risk, they generally expect their portfolio to return 1 - 1.5 times the rate that risk-free assets, such as Term Deposits, return over the same period.

A portfolio suitable for an investor in Risk Group 2 produces regular interest, dividend and rental income, with some capital growth and minimal volatility of capital.

Risk Group 3

In the event of a severe downturn, investors in Risk Group 3 can typically bear a 15% drop in the value of their portfolio over a given year. In exchange for this risk, they generally expect their portfolio to return 1.5 times the rate that low-risk assets, such as Term Deposits, return over the same period.

A portfolio suitable for an investor in Risk Group 3 generates interest, dividend and rental income, along with modest capital growth and moderate volatility of capital values.

Risk Group 4

In the event of a severe downturn, investors in Risk Group 4 can typically bear a 25% drop in the value of their portfolio over a given year. In exchange for this risk, they generally expect their portfolio to return 1.5 - 2 times the rate that low-risk assets, such as Term Deposits, return over the same period.

A portfolio suitable for an investor in Risk Group 4 produces a mix of both capital growth and income, with a moderate level of expected volatility and return.

Risk Group 5

In the event of a severe downturn, investors in Risk Group 5 can typically bear a 33% drop in the value of their portfolio over a given year. In exchange for this risk, they generally expect their portfolio to return two times the rate that low-risk assets, such as Term Deposits, return over the same period.

A portfolio suitable for an investor in Risk Group 5 produces capital growth, from both capital gains and reinvested income. Expected levels of volatility and return are above average, with riskier segments of defensive asset classes that have some positive correlation to growth asset classes, e.g. high yield debt, enhancing returns.

Risk Group 6

In the event of a severe downturn, investors in Risk Group 6 can typically bear a 40% drop in the value of their portfolio over a given year. In exchange for this risk, they generally expect their portfolio to return 2 - 2.5 times the rate that low-risk assets, such as Term Deposits, return over the same period.

A portfolio suitable for an investor in Risk Group 6 generates capital growth, from both capital gains and reinvested income. Expected levels of volatility and return are high, with greater weighting to growth assets and riskier segments of defensive asset classes.

Risk Group 7

In the event of a severe downturn, investors in Risk Group 7 can typically bear a 50% drop in the value of their portfolio over a given year. In exchange for this risk, they generally expect their portfolio to return three times the rate that low-risk assets, such as Term Deposits, return over the same period.

A portfolio suitable for an investor in Risk Group 7 aims to produce capital gains, with some incidental income from growth asset classes and expectations of very high volatility.

Investment Strategy

Determining a suitable investment strategy relies on multiple factors, including your overall investment objectives and risk profile. Personal circumstances may also mean that your investment strategy, and the risks that you bear, differ between portfolios and investment structures.

Enhanced Cash

Investors in the Enhanced Cash strategy are typically seeking to generate an income and preserve the nominal value of their assets. They are only willing or able to accept very low fluctuations in the value of their portfolio and expect to be able to realise their investment at short notice.

The Enhanced Cash strategy will usually contain around 100% in defensive assets such as online savings accounts and bank term deposits. Exposure to high quality fixed income instruments, such as government bonds, may be incorporated.

Conservative

Investors in the Conservative strategy are typically seeking to generate an income and preserve the nominal value of their assets. They are more concerned with potential losses than potential gains, but willing and able to accept occasional short-term losses in the value of their investment, in return for some protection against the effects of inflation.

The Conservative strategy will usually contain around 85% in defensive assets such as fixed-interest and cash, with the remaining 15% allocated to growth-oriented investments such as shares or property. Other assets that exhibit both growth and defensive characteristics may be included, including infrastructure, derivatives and hedge funds.

The minimum suggested investment timeframe is three years.

Moderate

Investors in the Moderate strategy are typically seeking to generate an income and some capital growth, to aim to preserve the inflation-adjusted value of their assets. They are willing and able to accept some investment risk for potentially higher capital growth and income returns.

The Moderate strategy will usually contain around 70% in defensive assets such as fixed-interest and cash, with the remaining 30% allocated to growth-oriented investments such as shares or property. Other assets that exhibit both growth and defensive characteristics may be included, including infrastructure, derivatives and hedge funds.

The minimum suggested investment timeframe is three years.

Balanced

Investors in the Balanced strategy are typically seeking to generate both capital growth and income, which they may reinvest or withdraw for spending.

The Balanced strategy will usually contain around 50% in defensive assets such as fixed-interest and cash, with the remaining 50% allocated to growth-oriented investments such as shares or property. Other assets that exhibit both growth and defensive characteristics may be included, including infrastructure, derivatives and hedge funds.

The minimum suggested investment timeframe is five years.

Growth

Investors in the Growth strategy are typically seeking to generate capital growth. They are less concerned with potential losses than with potential gains.

The Growth strategy will usually contain around 30% in defensive assets such as fixed-interest and cash, with the remaining 70% allocated to growth-oriented investments such as shares or property. Other assets that exhibit both growth and defensive characteristics may be included, including infrastructure, derivatives and hedge funds.

The minimum suggested investment timeframe is seven years.

High Growth

Investors in the High Growth strategy are typically seeking to generate capital growth. They are significantly less concerned with potential losses than potential gains.

The High Growth strategy will usually contain around 15% in defensive assets such as fixed-interest and cash, with the remaining 85% allocated to growth-oriented investments such as shares or property. Other assets that exhibit both growth and defensive characteristics may be included, including infrastructure, derivatives and hedge funds.

The minimum suggested investment timeframe is seven years.

Maximum Growth

Investors in the Maximum Growth strategy are typically seeking to maximise the capital growth potential of their portfolio. They are willing and able to accept significant risk, including the permanent loss of principal, for the possibility to maximise long-term returns.

The Maximum Growth strategy will usually contain a maximum of 5% in cash, with the remaining 95% - 100% allocated to growth-oriented investments such as listed shares, private equity or property. Other assets that exhibit both growth and defensive characteristics may be included, including high-yield and emerging market debt, derivatives and hedge funds.

The minimum suggested investment timeframe is seven years.

Please let us know if you have any questions, or if there are any changes to your financial goals or circumstances that may impact your current investment profile.

Walbrook Wealth Management is a trading name of Barbacane Advisors Pty Ltd (ABN 32 626 694 139; Australian Financial Services Licence No. 512465). Walbrook Wealth Management (Credit Representative Number 534783) is authorised under Australian Credit Licence 389328.

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This page provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Version 4.0