CARE® Investment Philosophy
To ensure the long-term sustainability of your portfolio, our wealth management strategies are underpinned by our CARE® Investment Philosophy.
We will create a holistic and personalised strategy that is right for you and implement an appropriate solution to help you to achieve your goals.
The CARE® Investment Strategy
Exciting Life, Boring Money
…and not the other way around. The investment philosophy where good behaviours and smart decision make all the difference.
Fundamental to the CARE® Investment Philosophy is what is known as the DALBAR Study. The original DALBAR Study was conducted between 1980 to 2000 in the USA on the top 500 US listed companies. The study found that the average return over that 20-year time period for the 500 companies was a 12% return.
Do you know what the return was for investors over the same period? It was around 4% over the same 20-year period! That’s a poor average investor return. The number one reason for the 8% difference was bad investor behaviour.
See the DALBAR emotional rollercoaster schematic below.
The CARE® Investment Philosophy believes that 50% of your returns are made up by your investment behaviour. 45% of your return is to do with asset allocation and the remaining 5% is timing and selection. The traditional investor would contest this and say the investor return equation is 90% asset allocation and 10% timing and selection and has nothing to do with investor behaviour.
However, based upon the DALBAR Study we do know that 50% of returns are based on investor behaviour, which has a critical impact on your returns. See the impact of investor behaviour in the graph pictured.
The DALBAR Study found that the average holding period by investors who said they were investing for the long term was just over 3 years! Those investors made bad short term decisions based upon events happening in the world at the time. That’s why the CARE® Investment Philosophy was designed – to stop investors from blowing up money, to prevent bad investment decisions being made in down markets and to stop the dangerous DALBAR cycle that destroys the wealth our clients have worked so hard to create. Are you interested in an excellent investment philosophy that protects your investment future? Ask your GPS Wealth Adviser for more information on CARE® Investment Philosophy.
HIGHLY RECOMMENDED BY OUR CLIENTS
CORE INVESTMENTS
Core Investments includes a mix of multi-sector and multi-managed funds that form the base of your portfolio. This part of your portfolio includes a range of Exchange Traded Funds (commonly called ETF’s) and fixed interest fund managers that are single sector, single manager securities and funds that are constructed to be invested according to your risk profile. Your Core investments, together with your risk profile are a strategic mix of Cash, Fixed Interest, Property, Australian shares and bonds, and overseas shares and bonds.
ACTIVE INVESTMENTS
Active Investments forms a part of our philosophy where we use a tactical blend of ETF investments which includes Australian Shares, Global Shares, Emerging Market shares, Global Small Companies and Gold. The Active component within the portfolio is designed to take advantage of long-term market themes and attempt to smooth your total portfolio return by systematically adjusting allocation to undervalued or overvalued asset classes.
RESERVES
The Reserves aspect of our philosophy and provides a steady income stream with a very low risk to capital. The second benefit is that we recognise that volatility and capital loss have a probability of occurring in the short term. Reserves are an important component of CARE where we set aside up to four years of any income requirements, especially for retirees, because in volatile markets if you don’t have enough Reserves you may have to sell assets to provide sufficient income, or worse: you may panic and sell. The Reserve is a good buffer for peace of mind and to assist you with the cash flow you need during these investment downturns.
ENHANCED RETURNS
The Enhanced Bucket is based on using a high focus direct share portfolio to provide you with a consistent income that has the tax already paid through franking credits on Australian shares.
These shares are generally blue chip being predominantly selected from the largest 100 Companies on the Australian Securities Exchange (ASX).
