We believe the industry approach to portfolio construction known as Strategic Asset Allocation (SAA) is broken. The SAA approach to portfolio construction has dominated the Australian investment landscape since the mid-1980s. There is significant evidence to suggest however, that the SAA approach is failing investors. It includes a series of performance damaging constraints that make it almost impossible to add value to a client’s portfolio after retail fees.
Industry leaders openly acknowledge that the SAA approach is now well past its use-by date and unstructured benchmark/risk based techniques are experiencing growing support.
Our Strategic Risk Allocation method is a multi-award-winning approach to investing with a proven track record of superior outcomes for the average investor.
Unfortunately, an individual’s risk tolerance rarely aligns with their risk required. Finding the balance between comfort and necessity is the hard part described as the “real risk-return trade-off”.
“This is the point where you are willing to accept some variability in your investment returns in pursuit of an overall return that delivers you to your goals and objectives,” Don’t assume that the emotional risk preference will deliver anything near what is needed to reach your financial goals.
“You should focus on the risk you need to take and then if there is a gap with what you’re comfortable taking, you need to find a way to manage that.”
This may be through seeking out an explanation for what that risk really means and developing a plan to spread the risk over time. You might dial it back as you approach retirement so that as you are reaching the pinnacle in terms of dollars held, the smallest amount of wealth is at risk.
Book a Call with us today to start your journey.