Consolidate and grow!

Chart with dollar sign 150x150 Consolidate and grow!Louise is 42 and has just helped her parents celebrate retirement. They will be reliant on the age pension for most of their income in retirement and Louise can see they will be forced into a basic lifestyle – not what she wishes for herself. She resolves to get her financial affairs in order and sees a financial adviser.

Louise is single and a nurse. She has worked in many private hospitals and in her words “hasn’t got much super”. When her adviser gets details of her funds, much to Louise’s surprise, he finds she has $56,000 across six different funds. All of her super is invested in “balanced funds” but this grand total is enough to spark Louise’s interest in investing her super more effectively. Her adviser helps her understand basic investment principles such as the relationship between risk and return, her time horizon and diversification.

Louise agrees she can invest more aggressively because she has at least 23 years until she retires. Her adviser recommends a master trust platform. The trustees provide a “menu” of fully researched funds from which she can create her portfolio. Most of these funds are wholesale funds.

They agree on an aggressive asset allocation with 85% growth assets as shown on the table below.

Asset class

Allocation

Amount

Annual fee

Comment
Cash 5% $2,800 0.1%  
Fixed interest 10% $5,600 0.2%  
Australian shares 35% $19,600 0.9% Spread over a value fund, a growth fund and a small company fund
International shares 25% $14,000 1.0% Spread between a value fund and a growth fund.
Property trusts 15% $8,400 0.8% A fund of funds manager
Hedge funds 10% $5,600 1.5% A fund of funds manager

 

Her portfolio is diversified over nine funds. Louise commits to salary sacrifice to give her super balance an extra boost. As she had very little exposure to international shares and given her timeframe to retirement, Louise and her adviser believe that this asset class will provide a well-diversified portfolio and the best long-term growth opportunities. She arranges to allocate new contributions 40% to international shares, 40% to Australian shares and 10% each to hedge and property funds. Distributions from the funds will be deposited into her cash management account and allocated every six months.

Louise and her adviser will review on a annual basis to ensure that she remains on track for her stated goals and so that her portfolio always remains relevant and with a purpose. She understands that the value of her growth funds will fluctuate but she finds solace in being able to monitor her investments easily. Louise is becoming a more educated investor and is now confident that she will retire more comfortably than her parents did.

*Figures are for illustrative purposes only and may vary significantly.

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Disclaimer:

The advice on this site may not be suitable to you because it contains general information that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.  Please also refer to our general advice warning under contact us tab on our website.  The article is based on information available at the time of writing only and therefore care should be taken as to the accuracy of the content.

Image courtesy of [sscreations] at FreeDigitalPhotos.net

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