Clear Idea #4

40 www.acasociety.com | info@acasociety.com Wai-Yee Chen Principal and Lead Investment Manager Acumen Investors Pty Ltd 0425 304 302 wchen@acumeninvestors.com.au http://www.acumeninvestors.com.au Address: Suite 602, 37 Pitt Street, NSW 2000 Phone: 02 8005 1218 contact@acumeninvestors.com.au Disclaimer This document has been prepared with care, is based on sources believed to be reliable and opinions expressed are honestly held as at the applicable date. However it is of a general nature only and the author accepts no liability for any errors or omissions. This is not an offer of securities. This document has been prepared without taking account of your individual objectives, financial situation or needs. You should obtain your own investment, taxation and other advice and consider the ideas in this document before deciding whether to acquire, or to implement. Investments are subject to investment risks, including possible loss of income and principal invested. Past performance is not a reliable indicator of future results. Any performance forecasts are not promises of future performance and are not guaranteed. Acumen Investors, its directors, employees and agents may from time to time hold interest in the securities referred to in this document. Although this document is provided in good faith, it is not intended to create any legal liability on the part of the author. Allowing time to work the returns (or compounding) and ironing out inherent risks is an easy win but for the younger professionals. For all others at whatever phases of their professional life, all other strategies work as well. Hedging (like buying insurance) should be one of an on-going investment strategy of portfolios because it’s next to impossible to predict an event which used to be called black swan eventuating which is now more commonly seen. But more so, if you were to buy insurance protecting yourself, the highest income generating assets during your peak income years, what about your investment assets when you retire? Generating more income from one’s assets is another challenge that is only going to be a tougher task as cash rates drop and staying low globally. Planning and having the right strategies are paramount. First, have your ideal in mind, then structure the assets in the “right pots” and third put in place strategies to work towards it. Your desired dream will be that much nearer and clearer. Acumen Investors is here to help. Scenario 2 which was simulating a superfund with regular contributions into a portfolio, showed Portfolio B underperformed by 26% not because of any investment strategies or choice of investments, but purely as a result of Sequencing Risk. The worst return happening at the worst time, at peak portfolio value. What are the lessons we can draw upon from these scenario analysis? • Investment returns matter, that is a given • But how one invests early in the investing or wealth accumulation journey matters • And how one protects one’s wealth closer to peak and post accumulation matters even more How do we invest with Sequencing Risk in mind? As Steven Covey says, ‘Begin with the end in mind’. This is how we will begin with our Scenario 1 investment pot – the one where investment returns matter and one that you don’t make further capital contributions into. This is your Growth Assets Pot. To further turbo charge this pot – you may undertake gearing (if it suits your financial situation) and invest in assets with long liquidation event. If managed well, this pot can deliver: interest deduction during working years and debt free ownership of a highly appreciated asset, free to be sold at a much lower tax rate at retirement. Assets in this pot may be early stage or growth phase listed or unlisted companies. The Scenario 2 investment pot is your regular investment where you can structure it to be conservative or actively managed. The important principles to be adhered to in this pot that can help with managing Sequencing Risk are: starting early, hedging, generating more income from assets and active profit taking. ACAS2020, Sydney NSW