What is the CAREphilosophy®?
Fundamental to the CARE Investment Philosophy is what is known as the DALBAR Study. The original DALBAR Study was conducted between 1980 to 2000 in the USA on the top 500 US listed companies. The study found that the average return over that 20 year time period for the 500 companies was a 12% return.
Do you know what the return was for investors over the same period? It was around 4% over the same 20 year period! That’s a poor average investor return. The number one reason for the 8% difference was bad investor behaviour.
* Over a 20 year period
Dalbar emotional rollercoaster
Understanding investor behaviour
The CARE Investment Philosophy believes that 50% of your returns are made up by your investment behaviour. 45% of your return is to do with asset allocation and the remaining 5% is timing and selection. The traditional investor would contest this and say the investor return equation is 90% asset allocation and 10% timing and selection and has nothing to do with investor behaviour.
However, based upon the DALBAR Study we do know that 50% of returns are based on investor behaviour, which has a critical impact on your returns. See the impact of investor behaviour in the graph pictured above.
What is the strategic allocation of CARE?
C
'Core' Portfolio
Strategic Allocation
Core Allocation
The “C” in CARE stands for “Core” investments. The Core of a CARE portfolio is made up of a range of Exchange Traded Funds (commonly called ETF’s) and fixed interest fund managers that are single sector, single manager securities and funds that are constructed to be invested according to your risk profile. Your Core investments, together with your risk profile are a strategic mix of Cash, Fixed Interest, Property, Australian shares and bonds, and overseas shares and bonds.
A
'Active' Portfolio
Tactical Allocation & Downside Protection
Active Allocation
The “A” in CARE stands for “Active” investments. This is a tactical blend of ETF investments which includes Australian Shares, Global Shares, Emerging Market shares, Global Small Companies and Gold. The Active component within the portfolio is designed to take advantage of long term market themes and attempt to smooth your total portfolio return by systematically adjusting allocation to undervalued or overvalued asset classes.
R
'Reserves' Portfolio
Personalised & Liquidity Bucket
Reserves Allocation
The “R” in CARE stands for “Reserves”. This is a very important part of the overall investment strategy that looks to benefit you in two ways. The first is that it provides a steady income stream with a very low risk to capital. The second benefit is that we recognise that volatility and capital loss have a probability of occurring in the short term. By allowing enough time for investment in shares and property to grow, the risk of you having to sell assets in times where markets are declining is mitigated. Reserves are an important component of CARE where we set aside up to four years of any income requirements, especially for retirees, because in volatile markets if you don’t have enough Reserves you may have to sell assets to provide sufficient income, or worse: you may panic and sell. The Reserve is a good buffer for peace of mind and to assist you with the cash flow you need during these investment downturns.
E
'Enhanced' Portfolio
Alpha
Enhanced Allocation
Lastly, the ”E” in CARE stands for “Enhanced”. This portfolio is made up of Australian and overseas shares, held either directly or through managed funds or ETF’s. Listed Australian shares will predominantly be selected from the largest 100 Companies on the Australian Securities Exchange (ASX). These companies generally produce good dividends for our clients. Investors also have the option of investing in a portfolio of international shares managed by a specialist manager or via an exchange traded fund (ETF). The Enhanced looks to deliver above market returns or “Alpha” as it is called in investment circles.
Investing with CAREphilosophy®
CAREphilosophy® is a well-established investment strategy and is offered via our CARE managed portfolios. As one of the first adopters of managed portfolios, we understand the benefits they offer including simplicity and scalability, with the ownership of assets being tax-effective and the reporting on performance being timely and transparent.
Client Focused
Investing can be complicated, challenging and daunting for every day consumers. CAREphilosophy® embodies the principle of ‘simply sophisticated’ and supports outcome-based advice that looks to get clients to their goals by focusing on the key drivers of performance and removing or minimising the key detractors of performance.
Adviser engaged
CAREphilosophy® empowers advisers to be more focused on client engagement and comprehensive financial planning. We provide a customised solution that is transparent, cost effective and easily explainable to a group of clients. Enlist the experience and expertise of a team of professionals to make the complicated decisions.
Our CARE portfolios are professionally managed by high calibre professionals with a sound and disciplined investment process.
CARE portfolios enable clients to invest in a strategy that can be tailored to their financial needs and risk profiles for the long-term without making poor investment decisions.
Investing with portfolios that can deliver consistent results at low costs is crucial to build the wealth you will need to achieve financial independence and a great retirement.
We invest in Exchanged Traded Funds (ETFs) wherever possible and majority of the underlying assets within the managed portfolios are indexed investment options that offer investors the benefits of broad diversification, liquidity and transparency.
