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Understanding your ideal investment portfolio

November 1, 2017  |  #Investment

Understanding your ideal investment portfolio

Regardless of why you start investing, it’s important that you have a working understanding of the intricacies of your investment portfolio.

Australians feel confident investing in popular products such as cash and property, according to the Australian Securities Exchange (ASX). However, shortcomings in awareness about more complex options and investment concepts has created a considerable lack of comfort surrounding other products.

Working with a financial planner will establish a lifelong learning relationship, instilling you with greater confidence in your investments. We spoke to Anthony Lyons, a financial planner from our Brisbane office, about how he helps clients to understand their portfolios.


If you would like to work with an adviser to understand your ideal portfolio, get in touch.

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Understanding your investment portfolio is all about knowing where you’re going and how you want to get there.


Calculating risk tolerance

“Risk tolerance links back to our investment philosophy; we’re not here to simply get the highest returns but also to focus more on capital preservation. It’s about the end-game and how much we need to live our best possible life, without taking more risk than is necessary,” says Anthony.

The risk/return trade-off is a key principle of investing, which is not as widely understood as it should be. A massive 68 percent of Australians either do not understand the concept, or have never heard of it, according to the Australian Securities and Investments Commission (ASIC).

This concept refers to the correlation between the risk and the projected returns of a product. Simply put, the higher returns expected from an investment over a short period of time, the more likely it is to experience a permanent loss of value or below-expectation performance.

As risk is a fundamental aspect of investing, Anthony stresses the importance of helping you understand your own ‘risk tolerance’ – your personal willingness to make risky investments and using that to guide you to suitable investments:

“At the end of the day, I want to be up-front with my clients about the worst case scenario to make sure they completely understand and are prepared for how their investment may perform.”

Explaining your investment options

“Often your investing habits and directions can be formed from the habits and experiences of your family. When talking to clients about other recommendations, I break down why those suggestions may or may not be suitable for their specific situation and relate it back to their circumstances and risk tolerance,” Anthony says.

Australians are often willing to take on the financial advice of family members, but that advice may not always be relevant to your own financial situation or investor profile.

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A financial planner can lead you through the clouds of misinformation.

Anthony adds, “Keep in mind that what worked 20, 10, even five years ago might not be the best option for today or for your situation.” In some cases, advice from parents can be outdated and put you at risk of rear-view mirror investing. Working with a professional financial planner will help you avoid this by growing your knowledge base and financial literacy.

Dispelling investment myths

“The first myth I hear most is that property never loses value; it doesn’t always but it is a definite possibility. Property is not daily priced and you only know the value of your place when you come to sell it,” explains Anthony.

There are countless bits of misinformation floating around, often caused by sweeping generalisations about investments. Your financial planner has access to industry knowledge of the projected performance of various investments, which can help clear up confusion caused by these myths.

Anthony elaborates on how investment myths are to be taken with a grain of salt:

“The second myth I hear is that shares are really risky and you can lose your money. As with every investment, there is a level of risk involved, but when you factor in time, dollar cost averaging, compound interest and a diversified portfolio, risk can be minimised. Shares are also a daily priced asset so you can track the value more frequently.”

Diversification is another key aspect that Australians are commonly left in the dark about. Only 39 per cent of Australians believe they understand the concept, according to the ASIC financial literacy report. Investment myths threaten to eschew your portfolio and have you put all your eggs in one basket – potentially increasing your risk profile beyond your tolerance.


Like a child, your investment portfolio is a complicated commitment that requires understanding, careful monitoring, and patience. A financial planner works to take away the doubt in that commitment. Get in touch with the team at Invest Blue today to talk about the future of your investments.

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