Re-think needed on growth assets: Centuria
Investors should be willing to sacrifice potential returns in order to guard against losses in a volatile post-financial crisis world, according to Centuria Capital chief executive John McBain.
The conventional wisdom amassed during the recent 15-year bull run in Australian equities is no longer relevant in the post-2008 environment, McBain said.
The dominant factor in investors' thinking should be risk rather than returns, he added.
He pointed to Rice Warner research that showed the volatility of the major asset classes in the period between September 2007 and August 2011 had increased by four or five times, as compared with the period between November 2003 and October 2007.
"You can allocate for brilliant returns, but where volatility levels are sky-high the risk for retirement savers is not worth it," McBain said.
Investors needed to revisit asset allocations prior to the recent run-up in equities, when a typical portfolio held one-third equities, one-third cash and one-third property, he added.
Allocating the majority of a portfolio to one asset class - even if it is cash - is not an ideal strategy, McBain said.
He stressed that he was not 'anti' equities, saying that investors should still have an allocation to growth assets - they just shouldn't dominate a portfolio.
As well as focusing on risk and building a balanced portfolio, the current environment demands that investors employ tactical asset allocation and revisit their weightings every year, McBain added.
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