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...

The importance of valuation
25/11/2015  Valuation is critical as it drives both risk and return, and buying the wrong asset at the wrong time can have devastating consequences.
2016 another difficult year for emerging markets
24/11/2015  Emerging markets veteran Hugh Young of Aberdeen admits that 2015 has been hard for investors but says stocks are cheap and there are gains to made over the long term.
Emerging markets: down but not out
18/11/2015  Emerging economies have struggled in recent years, but their increased productivity, stronger population growth, and rising middle classes represent an important growth opportunity for the future.
Characteristics of quality investments
17/11/2015  While markets may be constantly changing the traits of good-quality companies remain the same, Celeste Funds Management's Frank Villante says.
Moats, stewardship and managing volatility
12/11/2015  Morningstar's Mathew Hodge looks at how moat ratings complement an income strategy and can steer investors away from a range of problems.
Hong Kong stocks better value than Chinese
10/11/2015  It is important to be selective when investing in China, says Aberdeen's Nicholas Yeo, as volatility is here to stay.
Biotechs under the microscope
05/11/2015  Morningstar's Chris Kallos explains why all biotech companies are not the same and how this can affect the number of risks a certain company can carry.
China slowdown won't hurt Asian equities
03/11/2015  Chinese GDP growth may have slowed but the fundamentals are still supportive of equity markets, says Barings head of multi-asset Khiem Do.
Health stocks in the green zone
29/10/2015  Morningstar's Peter Warnes looks at an area of the market where the recent volatility has created opportunities, while also reiterating the importance of moats and stewardship.
Investing in a time of disruption
26/10/2015  While economies grapple with demographics, price distortions and deleveraging, a fourth D confronts investors, says Fidelity’s Kate Howitt.
US won't catch recession off China
22/10/2015  When you have slow underlying growth, it's sometimes tough to tell the difference between a slowdown and a recession, says BlackRock's Tony DeSpirito
What is an economic moat?
19/10/2015  Businesses with a Morningstar economic moat rating are positioned to generate excess returns over an extended period.
Keeping a long-term focus
12/10/2015  Superannuation balances still grew despite extreme events such as the global financial crisis, says Morningstar’s Anthony Serhan.
The problem with China
07/10/2015  China’s stock market crash will spur an internal debate in the country about the need for more market-based reforms, says author and former banker Satyajit Das.
Best ideas in credit
06/10/2015  Morningstar’s John Likos discusses what types of securities are included in the Moat-Focused Credit Best Ideas list.
Pitfalls of investing for retirement
30/09/2015  Bad behaviour before and in retirement can take a major hit to your savings. We outline the pitfalls to avoid if you want to maximise your pension pot.
Outlook for rates and the dollar
28/09/2015  Nikko Asset Management currency strategist Roger Bridges gives his view on China's recent move with the yuan, as well as the outlook for interest rates and the Australian dollar.
The new mediocre and growth
25/09/2015  Housing affordability challenges and shorter government terms will be the norm under the "new mediocre" of growth, says author Satyajit Das.
A look at global valuations
22/09/2015  Magellan’s Hamish Douglass talks about where he is finding value across the globe and why his fund has reduced its exposure to emerging markets
Global economic worries stall Fed
18/09/2015  Although overseas concerns halted Fed action this month, a hike is still in the cards this year--but it shouldn't derail the economy, say Morningstar's Bob Johnson.