Financial Planners Active Asset Allocation Must Be Done Correctl

Why Active Asset Allocation Must Be Done Correctly

Financial planning, in Perth and across Australia, is a field that is constantly evolving. Recently, Dr Shane Oliver, Chief Economist and Head of Investment Strategy and Economics at our parent company, AMP Capital, published a wealth of information on active asset allocation.*

We would like to share some of the information with you to help you understand the importance of allocating your assets correctly.

Overview

In the long term, growth assets such as shares can provide huge returns due to compound interest. However, growth assets regularly go through periods of high volatility. This causes some investors to react to periods of low value by selling these assets off and resorting to cash investments, which don’t often produce losses but don’t produce long term returns, either.*

The key, according to Dr Oliver, is to use one of two strategies. The preferred strategy is to stick with assets for the long term and take advantage of the growth. However, Dr Oliver also recommends what he calls a “rigorous approach to dynamically varying the asset mix” if one can’t hold onto an investment long term or wants to take advantage of cyclical swings in the markets.*

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