Create your personal investment plan

Papers presented at the  7 November 2014 'Create your personal investment plan', one-day seminar held at Sydney, are available as indicated by the links in the program below.

Why is financial planning so important, and why is the process so difficult?  How can I invest with any level of confidence that my future needs will be met?  Should I invest for growth, or income, or is it safer to stay in cash?  How much of a buffer should I keep “in case things go wrong”?  Do I need to keep working and for how long?  Can I rely on government payments to supplement my income?  What happens if I outlive my savings?  What about inflation, or deflation?  How much should I leave to my children?  What about serious illness, aged care and end-of-life medical costs?

There is no end to the questions and unknowns that make planning such a challenge, which is why financial literacy and sound financial planning is so important.  But the plan needs to be matched to the temperament and skills of the investor.  The plan is of no use if it cannot be followed or if it is not aligned with lifetime goals. 

In this AIA “first”, we bring together three of Australia’s top investing and financial planning experts to guide us through a structured process of preparing a financial plan tailored to your personal needs and circumstances.   Be prepared to roll up your sleeves, learn about the key steps in planning, what to do and what not to do, and draft your own plan.  With this knowledge, you will be better prepared to refine, update and improve your Financial Plan over time to suit your personal circumstances.

An investment planning workbook and notes was sent to participants prior to the workshop.  Workbook1    Workbook2


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Introduction to workshop - A top down approach to financial planning

            Brian Spies (AIA Member)

We assume you have entered key information in the Plan Workbook, including your personal or family net worth, how hands-on you want to be with investing, your risk tolerance, skills, and income needs. The workshop format and interactive sessions will assist you in taking home a plan that is tailored to your personal circumstances. You will be well placed to revise and improve the plan over time.




Lifestyle Goals and Expectations 

            Doug Turek (Professional Wealth Pty Ltd)

The first step of the investment planning process is to clearly articulate your lifestyle goals and expectations.  In this session, you will learn how to translate your lifestyle goals into realistic investment objectives, and consider constraints and trade-offs.  How much income will you need at different times, including one-off specific expenses (helping kids), holidays, home renovations. How much for contingencies.  And late-stage medical costs?  Have you considered intergenerational wealth transfer - how much you want to leave to your heirs - a target amount or what’s left over?  What is your risk tolerance (which may be different for accumulation, transition and retirement stages)? 



Strategic Asset Allocation

            Doug Turek (Professional Wealth Pty Ltd)

The next step is to determine an optimal asset allocation based on your current and future income needs, and the wealth you wish to leave to your heirs.  What other income sources do you have (salary, work pension, social security)?   Decide your allocation of investment assets – shares, property, fixed income and cash.   Consider the use of core and satellite investments, or “buckets”.  Do you prefer active or passive management, and what about the mix of Australian and international assets?   Understand and manage risk – these include sequencing risk, longevity risk, inflation risk, regulatory risk (super rules, aged pension, taxation, family home), country-specific risk (including currency)   What are your liquidity needs?


Investment Types - Growth Assets

            Tony Rumble (SMSF Advice Solutions)

There are literally hundreds of investment products available to the individual investor, some straightforward and others shrouded in mystery and complexity.  In these two sessions, Tony Rumble will describe the wide range of investment products, their pros and cons, and help you decide which types of investments work best for you.  How you will invest and how won’t you?  Do you prefer do-it-yourself approach or outsource to a professional?  Passive or active management? And what about tax structure, both inside and outside Super?  Tony will describe how various asset classes can be expected to grow in value over time:

 (i)  Direct shares and property

(ii) Pooled growth-asset investments (listed ETFs and LICs, REITs, managed funds)

A further decision is whether to gear or leverage your investments, eg borrowing for property, margin loans and instalment warrants for shares.


Investment Types - Debt and Defensive Assets

            Tony Rumble (SMSF Advice Solutions)

Debt and defensive assets can be used to derive a more reliable income stream, often with lower volatility than growth assets. Debt assets include

(i) Corporate and government bonds

(ii) Annuities

(iii) Infrastructure investments

Learn about how derivatives can be used to provide income, for hedging and risk management.

Additional income can be provided through home equity release or reverse mortgages.


Managing Your Portfolio

            Colin Nicholson (Investor, Author and Educator)

A sound investment plan requires meticulous record keeping and honest reflection.  In this session you will learn how to manage your portfolio and assess whether you have followed your investment plan.  Key steps in investment management include:

  • · Record keeping – essential to know whether you are following your plan and assess specific investments
  • · Benchmarking – decide which mix of comparisons will you use to monitor your performance. Are you more interested in absolute or relative returns?
  • · When do you rebalance your asset mix?
  • · What about market timing – which of your investments are buy-and-hold, and which involve some type of timing? 
  • · Are processes in place for risk management?
  • · Cash flow and cash management
  • · Succession planning.


Revising and Improving Your Plan

             Colin Nicholson (Investor, Author and Educator)

A written investment plan is an important first step, but will require ongoing improvement and revision as information comes to hand.

- The difference between rules and guidelines

- Change in underlying assumptions

- Investment and family reporting

- Education and learning

- Changes as you get older - Who will take over when I’m not able to?

- Improving and revising your Plan