1. What are the reasons for saving and investing?

There are many reasons why saving and investing takes place and these are just a few of many depending on your personal goals and objectives.

2. What is an Investment Manager?

Financial Investment Managers invest and manage their clients’ investment assets, with the aim of generating optimal financial returns for their clients. Their areas of expertise can include shares, bonds, retail or mutual funds, super funds, infrastructure, and more. Their clients can include private individuals, institutional investors like superannuation funds and government or organisations like banks and insurance companies.

In Australia, Investment Managers are also known as Financial Investment Advisers or Asset Managers, and they must be registered with ASIC. They are usually qualified in finance, accounting, commerce or economics. Investment Managers work with other financial specialists such as security analysts, researchers and economic strategists to build robust investment portfolio solutions. Answer b is the definition of a financial manager, rather than an Investment Manager.

3. What is sharemarket volatility?

Volatility is a term used to describe the fluctuation of an investment security or market index price, which can be unpredictable and sometimes sharp. The term is frequently used when the market drops, however it also applies to abrupt increases in price. Generally, the higher the volatility, the riskier the security and the more often the price moves.

4. What does it mean to have a diversified portfolio?

Diversification is an approach to investing whereby a mix of different assets is held, to reduce risk and generate a steady long-term return. The analogy ‘don’t put all your eggs in one basket’ is often used to describe this concept. An investor uses diversification by including a range of investments, from shares to ETFs to managed funds, spread across different companies, industry sectors, and even countries; to provide the best chance of meeting the desired investment goals. Diversification is a way of managing investment risk.

5. What is a Risk Profile?

Risk profile refers to the level of risk an individual is willing to tolerate and their appetite for risk.
Risk tolerance is a function of an investor’s current assets, time horizon, and future financial needs; it can be estimated by considering capital, income, personal circumstances such as age and number of dependants, and spending needs. In general, young people should be able to tolerate higher risk than those nearing or in retirement. This is because young investors are lucky enough to have an abundance of one of life’s precious commodities: time.

Risk appetite is the investors personal feeling about taking risk. Some investors are very risk averse and the prospect of losing money makes them uneasy about investing. Others are happy to take on risk for the chance of a large payoff.
As an investor you can directly control how much risk you take, the costs you’ll incur, your time horizon, and the inevitable emotions that come with the rise and fall of global markets. Completely beyond your control are the returns you’ll receive.

6. What is an aggressive investment strategy?

An aggressive investment approach generally involves a class of investment management that assumes greater risk, for the potential of higher returns. The typical construction of an aggressive portfolio will consist of more growth assets than defensive assets.
Aggressive investment strategies suit investors who are focused on long-term growth and who are comfortable with the commensurate risk and volatility that comes with this style of investing.

7. Is investing in crypto currencies and non-fungible tokens a good investment?

There is no one correct answer to this question. Many investment professionals remain sceptical of these types of assets while others are strong supporters. Where they are included, Investment Managers will only include a small component of the portfolio into these types of assets as the volatility of the price has been very high to date, but they have the benefit of the price moving differently to other growth and defensive assets so can provide further diversification. There are also operational issues, so it is a complex decision on whether to include in an investment portfolio.

8. What is the ideal timeframe for an investment?

The right timeframe for an investor’s strategy is a question of their individual circumstances, goals and risk profile.  An investor who is two or three years into their working life will have different answers to these questions than someone who is approaching retirement. This is because a younger investor potentially has many decades for their investment to grow and to recover from market falls, therefore they may prefer a more aggressive investment strategy. By contrast, a pre-retiree has less time so may prefer a more defensive style of strategy, which is less sensitive to market volatility and aims to protect investors against a fall in the real value of the portfolio over time (that is, after inflation).

9. What is a model portfolio?

A model portfolio refers to a combination of investments constructed, managed and rebalanced by a professional Investment Manager. These portfolios are constructed after rigorous research and analysis and contain a mix of asset classes and different strategies for the purposes of diversification.

The goal of a model portfolio is to achieve a given return and risk level, whilst navigating variable market conditions. Model portfolios provide self-directed or independent investors with an effective and easy way to access the deep expertise and specialised resources of professional Investment Managers.

10. What is a bull market vs a bear market?

A bull market refers to a financial market that has rising or expected-to-rise prices. The term is typically used in reference to the sharemarket. However, it can also be used to describe bonds, real estate, currencies, commodities, or anything else that can be traded in a marketplace. By contrast a bear market is the opposite meaning the market is experiencing or is expected to suffer persistent price falls. Typically, of 20% or more from their latest high.