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Managed Funds

Photo by Ferdinand Stöhr on Unsplash

Recently, ASIC penalised super fund Spaceship for making false and misleading statements about its GrowthX fund.

ASIC took issue with Spaceship’s claim it was actively managing the portfolio and being selective in deciding which stocks to include and which to omit, based on profitability and product differentiation.

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Sustainable investing

Photo by Rajesh Appalla on Unsplash

For years, I have been drawn to the idea that it might be possible to maximise investment returns and maintain an acceptable level of risk and still invest in companies that share my environmental and social values.

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Justin Brand

Every week I’m asked:

How do I check if my investment advisor has given me good advice?

My answer:

How is your investment portfolio performing against the index (or average) of the markets in which you are invested?

And in my experience, the majority of people I ask tell me that they don’t know.

There are other factors that determine good investment advice besides performance. But it surprises me how many intelligent people don’t think to check the performance of their portfolio against the average market return. Especially when they’re paying an advisor a fee for investment advice.

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The Importance of an Investment Philosophy

An advisor without an investment philosophy is like a boat without a rudder.

If your advisor doesn’t have a convincing, evidence-based set of beliefs about the markets and how to invest in them, then you risk drifting from one idea to another.

An inconsistent investment approach is a common cause of capital loss.

An investment philosophy should inform an advisor’s decisions about your portfolio, so it’s important you not only understand and agree with their values and ideals, but that you can see evidence of a logical basis for making decisions about your wealth.

If your advisor recommends an investment strategy that doesn’t fit your values or view of the world – and that bothers you – then it’s not the right strategy for you.

My investment philosophy follows:

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Photo Credit: smiscandlon

Have you ever thought about how much you’re really paying for the advice you got from your financial planner? The direct costs are one part – and I think you should look at those closely to ensure you’re getting value – but take a look at the indirect costs.

Keeping costs down are a key to wealth – high costs put your future at risk.

Some of the most significant costs are hidden in your portfolio and are caused by product selection and your advisor’s bias towards actively managed funds.

Although most financial advisors recommend actively managed funds, in reality, the net return of active funds are consistently below most passive investments or index funds.

But apart from the underperformance and additional cost of active funds, there is another cost, which is often overlooked when investors compare active and passive (index) fund portfolios – a cost I’ll cover later in this post.

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