- Financial Planning
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OUR APPROACH TO INVESTMENT ADVICE
HNW Planning looks at long term expectations.
HNW Planning believes that investment decisions first need to be in context. Please refer to HNW Planning’s 'Our approach to Financial Planning'.
HNW Planning recognises that results from investment decisions have to be seen both in terms of the dollar value of the returns and in terms of the suitability of the returns. This suitability of returns may be that returns are from capital gains or as income, with or without volatility. Suitability might also take into account the consequential risk of any investment.
Targeted results will come largely from the strategic allocation between investment sectors (Australian shares, international shares, property, fixed interest etc). HNW Planning is not a tactical sector allocator; we do not advise you how to make short term bets on which sector will outperform another. Rather we advise on a diversified and appropriate long term target allocation that might vary strategically over time and in line with long term forecasts and comparative opportunities. We define ourselves as 'medium to long term strategic sector reallocators'.
Market returns can be compressed into three elements: income; growth in income; and, the effect of changing valuation ratios (See table below).
HNW Planning looks at long-term expectations of market drivers and expects reversions to the long term means or trends of the key indicators. Such key indicators are: Price to Earnings Ratios, Earnings Per Share, Corporate Profits as Share of GDP, Price Earnings of Australian Shares compared to International Shares, etc. We also believe that where possible changes over time in the strategic allocation of capital to investment sectors should generally be made with new capital or from the earnings from existing investments in preference to selling one investment to buy another.
Within the sector allocations HNW Planning may recommend managers with a tactical (short term positioning) mandate as well as managers and/or combinations of direct investments that might be described as 'growth', 'growth at reasonable price', 'value', 'index', 'benchmark unaware', 'absolute return (hedge fund)' or others.
From time to time we might also modify the risk/return position (risk in terms of consequence) of a portfolio of direct investments or managed investments using particular investment strategies.
Source: Farrelly's Investment Strategy Handbook - summary of critical features of article by John Bogle 'Investing in the 1990s: Remembrance of Things Past and Things Yet to Come.' (Journal of Portfolio Management, Spring 1992, pp. 5-14).
