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SMART MONEY - Financial resources launched
By Barry Rollings
Edition 1173, August 23, 2007 |
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MONEY TALKS: Bruce Billson launches a package of financial educational resources.
Photo by Kevin Piggott |
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The ADF’s range of financial resources for its personnel has won the accolades of private enterprise, according to CDF ACM Angus Houston.
He was speaking at the launch of the ADF Financial Services Consumer Council’s (ADFFSCC) package of educational resources in Canberra on August 9.
The package includes websites, booklets and multi-media resources to assist ADF members and their families make important and informed decisions about their financial futures.
Bruce Billson, Minister Assisting the Minister for Defence, officially launched the package.
CDF ACM Houston said the ADFFSCC had embarked on something of which to be “very proud” since its launch last September.
“We are setting the standard for many other Australian companies and institutions,” he said.
It had been said to him several times, when he had explained the council and its initiatives to his colleagues in industry, that the ADF had a very enlightened approach not yet matched in private enterprise.
Mr Billson said the websites, booklets and multimedia resources “have the potential to impact positively on the welfare and peace of mind of all serving members and their families”.
For more information visit the ADFFSCC website, which can be found at www.adfconsumer.gov.au
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| Assess the risks |
| By Jeffrey Lucy, ASIC Commissioner |
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Your life as a member of the ADF involves evaluating the risks in any situation.
The same approach applies to managing your financial situation and controlling your assets. First comes a realistic assessment of your goals, and this must then be overlaid with an assessment of the environment, including risks, and how that might change over the timeframe you have in mind.
Think of the cycles
When making financial decisions, remember that the economy works in cycles.
The Australian financial market is influenced by domestic factors, such as interest and currency rates, as well as international issues, such as the price of commodities.
These economic factors can also be influenced by less tangible issues, such as market confidence, which, in turn, can also be influenced by domestic and international issues. Inevitably, sentiment changes and all these factors can contribute to risk.
When we talk about risk in investing, it means the potential for losing some or all of the money you have invested; that is, the underlying capital, as well as the income, such as interest or dividends. So, it’s vital that you understand how the investment you’re considering would be affected by an economic downturn.
It’s your risk
While it’s a good idea to get licensed, professional advice, ultimately it’s your money and your decision. You must be comfortable with the risks, factoring in your personal circumstances and objectives. So, play an active role in finding out what you’re getting into.
If you want to earn more from your investments than you can by having your money in the bank, you have to accept there is a greater risk of losing money in bad years or with risky ventures.
The key is to balance a clear understanding of the risks with a conscious decision about what you can afford to lose. Remember, the higher the return, the higher the risk.
Realistic returns
To get an idea of realistic returns, compare any investment with what’s happening in the overall market. Returns vary considerably from year to year, so look at performance over as long a period as possible. To help you assess the risks, the Australian Securities and Investments Commission (ASIC) has developed the Risk & Return Calculator, which you can download at www.fido.gov.au.
Borrowing to invest
Borrowing to invest, or “gearing”, can be a suitable strategy, however, it’s not for everyone. While gearing can increase the potential profit on your investment (because you have more money to invest), it also means you will increase your losses if the increase in the value of the investment does not outstrip the cost of gearing. And you will still have to pay back the loan.
Negative returns
A negative return is when you make a loss on your investment, after any income earned. When you invest over the long term, you can expect negative returns some of the time. With shares for example, you can expect negative returns about once every four years (according to ASIC’s licensed actuaries).
If you’re saving up for retirement through your super fund, you’re quite likely to be investing in a “growth” strategy. Although you may experience negative returns in the short term, it’s reasonable to expect positive returns in the long term.
Spread your risks
The best strategy for managing risk is to spread your money across different kinds of investment choices, such as shares, property and cash, and across different sectors, such as shares in different companies or investing in different properties. This strategy is known as diversification – more on this in a future column.
This column is an initiative of the ADF Financial Services Consumer Council. To suggest a column topic, email ADFcolumn@asic.gov.au |
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