Control your investment

Back in 2022 a financial advice company Dixon Advisory collapsed. I expect most of our clients would have been unaware of the collapse. I raise the issue now as we are once going into a more volatile time in the market. I have below included an article in regards the Dixon Advisory collapse for those who would like more information.

https://www.afr.com/companies/financial-services/dixon-advisory-s-collapse-delivers-a-painful-lesson-for-investors-20220119-p59pji

These collapses will continue to happen in the future as they have in the past. Storm Financial, is a good example that many of you would have experienced. All investors need to understand how their money is invested and the risks of the investment. The first mistake most investors make is to focus on the returns when you should be focused on the risks.

Here are my tips on reducing the overall risk in your portfolio.

Hold investments which you can control. For example, direct shares held in your name, a Self-Manage Super Fund (SMSF).
Hold shares in a Separately Managed Account (SMA)

Holding investments directly gives you more control if the markets collapse. For example, the COVID drop, investors inside of managed funds sold out and booked the losses. If you were invested in the fund, you had no choice as the fund managers have control.

The investors who controlled their own investments had the choice hold the investments or buy more of the investment. Those who held on recovered the losses within 12 months. Those who took advantage of the market pull back be add to they holdings cleared a 30% gain over the following year.

One of the issues in the Dixon collapse was that investors did not clearly understand the risk. Dixon was all about the GFC and buying distressed property and re-selling it to make profits. As it is a closed investment investors did not really understand the risk until it was too late. As with Storm Financial, most investors were in the one fund and they were geared into the investment. At this stage they were at the mercy of the other investors. They lost control of their investments and lost the ability to wait out the recovery.

I raise the issue as we are going into another rocky economic time, not tomorrow, but in the coming couple of years. Having control over your investments directly allows you to have more control on your investment choices and generally provides better returns.

You will still need a professional adviser to navigate you through the investment’s opportunities, legislation and taxation requirements. By working with your adviser, you will provide a better overall result as you will have a better understanding of your portfolio as opposed to a fund manager making all the decisions.

Generally, most investors have small mounts of money invested in an industry super fund. These investors would have little to no idea how their money is being invested.

As this newsletter goes out to Grow Your Wealth clients, I would encourage you to send this market update to friends and family. If they like it they can go to our website to put themselves on the email list.