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investment philosophy

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Your Objectives

The first step to identifying an appropriate investment strategy is to clearly articulate what is most important to you. When we understand the underlying values behind your financial objectives, we can be more confident in defining both your tolerance for risk and the need for risk for risk taking.

Risk tolerance is a combination of your personal preferences, objectives and investment horizon; that is the timeframe you have to achieve your goals. Once we have determined the appropriate level of risk, our objective is to achieve a consistent return throughout the investment cycle within the level of risk being taken.

Our Approach to Wealth Management

At Invest Blue, we take very seriously the responsibility and trust given to us by our clients in managing their wealth. Our clients give us the responsibility of protecting and enhancing their wealth and as such, we take a cautious, risk-based approach to the way we manage money. We aim to maximise the probability of our clients meeting their objectives, whilst ensuring we implement a strategy that is consistent with their tolerance towards risk.   We do this by focusing on the two components of investing; risk and return, aiming to achieve maximum return for the level of risk being undertaken.

Risk and Return

Risk & Return - required gain to recover original value

Reducing losses to maximise returns: loss and subsequent gain necessary for full recovery.

We understand that for most people, risk isn’t a theoretical variance from a random benchmark, but the risk of losing your hard-earned money. As such, we take the view it is more important to protect portfolios from the risk of loss than to solely chase the highest returns.

The other reason we focus on loss protection is that recovering from a loss requires a significantly greater gain to recover your funds. For example, if your portfolio were to lose 50% of its value, it would take double that, in returns (100%) to recover the lost value.

In today’s global economy, understanding financial markets and the impact on asset values is extraordinarily complex. Yet, in its simplest form, risk is inherent if you wish to achieve a return. A key to wise investing is to ensure that you have full transparency and understanding of the risks you are taking when investing and make sure the return you receive is commensurate to the risk you are willing to take.

Based on the above, when managing your money, we believe it is essential to have transparency over all of the underlying holdings in your portfolio to understand how the individual assets blend and the resultant impact on potential returns.

Further, we assess performance in returns against the risk taken to earn those returns. We compare and benchmark ourselves against the returns generated for each unit of risk taken on.

Investor Sentiment Cycle

When it comes to markets and valuations, it’s important to note that they are as many social institutions as they are products of facts and figures. Essentially markets operate in two modes: fear and greed. Market prices increase when demand does. We often see cycles where the price for certain investments increases purely because the demand has increased – investors see others investing in it, the price goes up, therefore they believe it is a good investment and buy in as well: greed. If something happens to unsettle the demand, values can fall, it creates uncertainty and the selling can intensify. The share price goes down: fear. This is the emotional product of investing and why we recommend separating investment selection from the person and putting it in the hands of an objective and skilled fund manager.

One of the ways to avoid having to try and pick market cycles is to take advantage of “dollar-cost averaging” which simply involves investing consistent, regular amounts throughout the cycle (in rising and falling markets), rather than a single lump sum, which relies more heavily on market timing.

Diversification & Asset Allocation

Because it is extremely difficult to pick cycles, a less risky way of investing is to diversify your investments across a range of asset classes, in Australia and globally over a reasonable time period. This can vary depending on your needs, but usually, a 5-7 year period is preferable.  This is better than trying to pick cycles and jump from one asset class to another. This is often called the ‘don’t put all your eggs in one basket’ rule.

The major asset classes utilised are:

Defensive Assets
Cash Bank accounts, cash fund
Fixed Interest Term deposits, Australian and international government bonds, corporate bonds
Growth Assets
Property and Infrastructure Australian and international listed and direct
Shares (Equities) Australian and international large and small companies, with a mixture of hedged and unhedged currency exposures
Alternative Investments* Managed futures, real return and market neutral

*A note on Alternative Investments: “alternative” investments are typically highly specialised investments used specifically to diversify returns and risk in a way that is unrelated to market cycles. Their ability to invest both long and short in many different financial and commodity markets around the world makes them suitable vehicles to take advantage of shorter-term market trends. They can also exploit opportunities in financial markets not available to traditional portfolios.

The key to diversification is accessing a sufficiently wide variety of investments across a range of asset classes that enables a “smoothing” of returns at a portfolio level through various market cycles. This process is called asset allocation.

It is the role of the portfolio designer to determine which are the best investments to fill your asset allocations with. For diversification benefits, a range of investments are combined to provide the optimum risk v return result for you. This usually varies from 10 – 18 managed funds and/or direct investments. Again, to diversify, this may be a combination of some low-risk funds, such as fixed interest and cash funds, and some higher risk share funds, both from Australia and internationally.

Research & Portfolio Construction

In terms of portfolio construction and asset selection, we believe in utilising professional, external and specialist independent research firms to build and recommend investments for our clients, be those managed funds, direct equities, property or any other investment class. We believe their expertise will provide better outcomes for our clients.

In building our model portfolios, we currently utilise the expertise of Zenith Investment Research, a private investment firm that builds portfolios based on their own extensive research and governance. Their managed funds research team has consistently been ranked as Australia’s leading research house over the past four years[i]. While past performance is not always a guarantee for future outcomes, they have a considerable track record of delivering above average returns with below average risk.

Additionally, we leverage the expertise of other independent investment professionals when providing advice on investments other than managed funds.

We periodically assess our independent research partners to ensure they are continuing to provide high quality, independent research. As such, our choice of research partner may change from time to time.

The Investment Process:



“The main objective for portfolio construction is to build a suite of investments that balance your needs for cash and protection from market downturns with ­­­your long-term growth objectives.”

Taxes & Fees

Whilst after-tax returns are important, we primarily believe tax should not be the key driver in selecting an investment manager. We believe the total return to our clients should be our main objective. Sound investment decisions should enable tax effectiveness.

We also consider after-fee risk and return outcomes in building our portfolios. Fees should not drive decisions provided they are more than offset by the value created by active management, either in terms of risk protection or enhanced returns. We believe in selecting high-quality investment managers and are prepared to pay for quality, rather than take a lowest-common-denominator, “cheapest is best” approach.  This means that accessing our model portfolios will likely be more expensive than non-active index funds or mainstream active funds that are not rated highly (against multiple benchmarks) compared to their peers.  Our investment philosophy best suits clients who see value in investing in a methodology that utilises highly rated, active managers focussed on an after fees and tax return with a risk-adjusted focus to investing.

This brochure contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.

Invest Blue Pty Ltd (ABN 91 100 874 744) and Subsidiaries trading as Invest Blue, is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited, Australian Financial Services Licensee and Australian Credit Licensee.

[1] https://www.zenithpartners.com.au/who-we-are/