Is it time for a portfolio review?
Christine St Anne  |  05/12/2012Text size  Decrease  Increase  |  
Christine St Anne: It's now nearly the end of the year and many people would be looking to review their investments. Today I'm joined by Westpac's David Simon, to talk about whether it's time to review your portfolio. David, welcome.

David Simon: Thank you Christine.

St Anne: David, what part of the portfolio do investors need to review?

Simon: Look, I mean we encourage portfolio reviews all time. So, it's a continual discipline that's done on a regular basis and we found that all asset classes need to be reviewed on an ongoing basis. I suppose gone are the days of being a spectator. And taking I suppose the original footprint of the asset allocation for granted.

So, indeed not just markets, not just financial markets that change, the economies continuing to change and certainly legislation, regulation is also continuing to change. All of these are factors have an impact or influence in terms of portfolio performance. But indeed there is the personal circumstances and objectives of the individual investor they continue to change as well.

So, it's about going back to those and reiterating are they still current, (others) do imply and then matching up the portfolio to making sure that they are quite consistent. But other factors such as cash flow, ideology on risk, timeframes, liquidity requirements these are whole range of factors that need to be tested and addressed at every single point in time to ensure that clients remain on track to achieve their objectives.

St Anne: You mentioned personal goals, so do investors need to be maybe rethinking their retirement goals?

Simon: Christine, it's a really good point because I mean times are great oversight retirement seems a lot closer and achievable in its end, and accessible and retirement income expectations again are a little bit more generous than would otherwise thought to be.

But when markets move into a more bearish or in a more depressive state, that's what we've experienced in recent years, retirement objectives certainly change. So, expectations for people change. So, they pull certain levers which means they could work longer. So, they could work for five years more, they could in fact reduce their expectations on their lifestyle needs in retirement.

They could reduce their expectations and what they from an income stream, or try to make that capital work harder by attaining a higher risk portfolio, asset allocation or indeed trying to mirror that capital with their life expectancy. So, really retirement objectives continue to change and evolve due to several factors around work, but also dominated also by market influence.

St Anne: David, we're facing unprecedented volatility particularly with what’s happening with Europe, and to a certain extent the US, should investors look at those sorts of factors when reviewing their portfolio and what other key elements should they look at?

Simon: Look you've always got to remain cautious and I believe that if you're going to be a spectator and take the portfolio or anything for granted then you probably going to get on stock. So, seeking quality advice and by that I mean an excellent adviser on an ongoing basis is absolutely imperative.

Continuing to check with research is also critical, because things are changing so quickly and so is research. So, keeping tune to information is imperative. I mean the current headwinds are apparent and certainly dominant. So, you mention the US absolutely, the US fiscal cliff, which is effectively $600 billion worth of tax increases and expenditure cuts are meant to automatically come in on the first of January, that could have catastrophic impacts on the market. And could potentially put the US back into recession unless the politics can resolve that indeed, information on recent evidence that's come from Europe, is confirming that Europe is currently in a recession.

So, these are again examples of the headwinds and now we're talking about the Middle East conflict if that does, perpetuate then that could have in-adverted impact in oil prices and energy costs and then again have an impact on agro markets. So, it's important to be nimble, it's important to be to completely informed through quality research and quality advice to ensure that you are might going to be right decisions of along the path.

Overall, it's still important to have that long-term view. So, it's unnecessary to make those wholesome changes, but taking a longer process ensures that you're not getting caught out.

St Anne: David, you mentioned keeping a long-term perspective. What about underperforming assets? What should investors do with those sorts of assets in a portfolio?

Simon: Underperforming assets are going to be a part of everyone's portfolio. It's absolutely impossible to hold all assets that are all going to be - that are going to truly outperform. So, those underperforming assets it’s important to understand why they're underperforming? So, the rational and the reasons of why you purchased these assets in the first place do those reasons prevail.

Other micro fundamental characteristics of those assets do they still, or they still relevant are they still the same? Or is it just they are underperforming due to more noise related and macro reasons. If you find that they are due to more macro and broad issues that are particularly directed at the characteristics of that asset, well then over the long-term it still could be a good asset to hold.

St Anne: David, thanks so much for your time today.

Simon: Thank you.

Video Archive...

to Morningstar Premium Membership

Market outlook for 2015
18/12/2014  Morningstar's Peter Warnes gives investors an idea of what to expect from the Australian share market over the coming year, while also providing some tips for a stronger portfolio.
Morningstar's new ETF ratings
10/12/2014  Morningstar’s Tim Murphy discusses the new ETF analyst ratings and reports that are now available to investors.
Top opportunities in hybrids
09/12/2014  After a recent broad widening in pricing, investors may find opportunities in some of the older-style bank notes and high-quality corporate issuers.
Iron ore's changing landscape
03/12/2014  With small, high-cost miners set to struggle, Chinese growth to flatten and the low-cost majors pushing hard on expansion, the face of iron-ore mining is set to look very different.
Will QE boost European stocks?
28/11/2014  As ECB members hint quantitative easing could come sooner than expected in the Eurozone, we examine the prospects for European stock markets. From Morningstar UK.
Quality stocks, sustainable yields
26/11/2014  Anton Tagliaferro of Investors Mutual shares his outlook for the market at last month's Morningstar Individual Investor Conference.
Key risks in bond investing
21/11/2014  There are a number of risks investors need to consider in bond investing.
Confronting volatility and low growth
18/11/2014  Given issues such as recent volatility, rising global debt levels and the threat of European deflation, there are steps investors can take to safeguard their portfolios.
Medibank: A quality business at the right price?
13/11/2014  The health insurer is a quality business but it will all come down two the price, according to two fund managers.
Telstra and sustainable returns
12/11/2014  The Australian telecoms giant has some exciting growth opportunities ahead of it and will continue to provide sustainable returns over the longer term.
Bank earnings wrap-up
07/11/2014  Morningstar sector head of financials David Ellis gives investors the lowdown on the most recent batch of earnings from Australia's major banks.
Medibank IPO Report
29/10/2014  While there were a few "surprises" in the prospectus, health insurer Medibank Private is still on track to deliver growth, according to Morningstar's Peter Warnes and David Ellis.
Opportunities in fixed income
28/10/2014   Bentham Asset Management principal and portfolio manager Richard Quin provides investors with some insights into fixed-income investment and the role that short-duration credit can play in a portfolio.
Key investor risks
21/10/2014  Voted among the 50 most influential people in finance today, author and former banker Satyajit
Finding value in small companies
14/10/2014  A portfolio of "terrific value" can still be achieved despite the stretched valuations in the smaller end of the Australian equities market.
Choosing quality businesses
07/10/2014  Credit investors adopt a different approach to equity investors when assessing a quality business, according to PIMCO's Tracy Chin.
Don't panic about PIMCO
30/09/2014  Morningstar's Tim Murphy talks about the recent portfolio manager changes at the global bond manager and why investors should not panic.
Medibank IPO Preview
25/09/2014  Morningstar's Peter Warnes and David Ellis preview the upcoming initial public offering of health insurance giant Medibank Private.
A better deal for investors
24/09/2014  Morningstar’s Anthony Serhan outlines what the government’s Financial System Inquiry will mean for investors.
Europe growth: Gone for good?
18/09/2014  Facing entrenched structural issues, the eurozone’s days of robust growth are likely over, but there are some reasons for hope, says Morningstar's Bob Johnson.