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...

Don’t overdo benchmark consideration
27/06/2017  --
Factor-based investing using ETFs
26/06/2017  Investors should consider style-exposures--such as value, defensive or yield-- they would like in their portfolios, explains Jonathan Shead, head of portfolio strategists – Asia Pacific, State Street Global Advisors
Volatility plays to active manager strengths
--  The climate of political volatility in the US holds important implications for investors and the funds they invest in, particularly around Donald Trump's ability to pass legislation through Congress, says Pimco's Libby Cantrill.
Is the FTSE 100 Facing Another Market Crash?
16/06/2017  Ten years on from the pre-crisis FTSE 100 high, Morningstar UK's Emma Wall examines how UK stocks have fared
How to guard against retirement threats
16/06/2017  As retirement approaches, even the best-laid plans can go awry, as Tim Steffen tells Christine Benz, Morningstar US.
PIMCO Global Credit Fund
07/06/2017  The PIMCO Global Credit strategy receives a Morningstar Analyst Rating of Silver due to its sizeable and highly capable credit research team.
PIMCO Income Fund
07/06/2017  Morningstar's Tim Wong looks at the strengths and competitive advantages of this Silver-rated strategy.
3 pockets of opportunity in fixed income
07/06/2017  The head of PIMCO Australia portfolio management explains his views on active management in fixed income and outlines where he sees most value in this space.
Trump administration biggest macro threat for investors
05/06/2017  Even as European political volatility subsides, the US Government remains a considerable threat to financial markets, says Colleen Barbeau, director of equity portfolio management, Franklin Templeton.
Antipodes Global Fund: Class P
01/06/2017  Antipodes constructs this portfolio based on three major objectives--capital preservation, inclusion of attractively priced businesses, and investment resilience.
Investors Mutual WS Future Leaders Fund
01/06/2017  Investors Mutual Future Leaders is a capable strategy focused on investing in Australian companies outside the top 50.
Why the time is right to invest in India
25/05/2017  Indian stocks rallied after the appointment of Narendra Modi as Prime Minister--but then subsequently fell. UK-based investment manager Jonathan Schiessl says now is the time to buy.
When should you pay active fund fees?
23/05/2017  When is it worth paying higher fund fees for active fund management? The single most important factor effecting a fund's relative performance is its price.
Budget 2017: bank levy a potential 4pc hit to big five profits, dividends
10/05/2017  If unable to pass on costs associated with the new levy proposed in the Budget, bank profits and dividends could dive 4 to 5 per cent, in a significant hit to shareholders and customers.
Why PIMCO Australian Bond is a Gold-rated strategy
10/05/2017  Tim Wong explains why PIMCO Australian Bond is Morningstar's most highly rated fixed-interest strategy in this market.
2 leisure stocks weather Cyclone Debbie, Dreamworld fallout
02/05/2017  These two companies with large theme park operations have faced significant challenges in recent times. Morningstar senior equity analyst Brian Han explains how they've fared.
Schroders stays hot on commodities, cooler on tech and defensives
01/05/2017  Long-term investors in Australian shares will continue to find value, but the time for risk-taking on more speculative plays has passed, says Martin Conlon, Schroders’ head of Australian equities
Introducing star ratings to Morningstar Australasia equity research
27/04/2017  What investors can expect from Morningstar's roll-out of its star rating methodology across Australian and New Zealand stocks, as explained by the regional director of equity research, Adam Fleck.
French elections: Macron versus Le Pen
26/04/2017  Following the first round of the French Presidential elections, the 7 May vote is now between Emmanuel Macron and Marine Le Pen. What does it mean for investors?
How climate change will impact your portfolio
20/04/2017  Ignore climate change at your portfolio's peril, says Jeremy Grantham, founder of asset manager GMO.