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Wealth creation is an important aspect of securing ones future financial stability and maintaining a lifestyle you're accustomed to.
What wealth creation means is that of investing in various income generating streams so it's not a matter of limiting yourself to one type of investment.
By investing in different areas through a wealth creation strategy your investment is also flexible in a sense that you are able to, in most cases withdraw your funds and place them in an investment which is providing higher levels of return whereas if all of your funds are tied up in superannuation you are limited to having access only once you satisfy the requirements for release of your super.
Spreading your investment also provides you with some level of risk mitigation so if one investment is not performing you have another one which is performing and therefore the average return is balanced out.
As mentioned above you also have the option of shifting your investment dollars into areas which provide a higher level of performance.
There are certain elements of wealth creation that need to be considered, these are from a tax scale and capital gains tax perspective and we suggest you engage one of our financial planners who can assist you.
There are two ways in which your investment portfolio can grow, one is your return on investment from an earnings point of view and the other is by way of capital growth of your investment dollars.
Here are some points to help you determine and understand the type of wealth creation strategy which may best suit your needs:
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Your financial goals |
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The timeframe for investing be it immediate or in a few years |
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Your lifestyle objectives |
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Your level of income |
Gearing your investment within your wealth creation strategy may also be another avenue where you can accelerate the growth of your investment portfolio by borrowing to invest.
By doing this you are able to create a larger investment portfolio than would have been possible using cash funds alone.
In line with accelerating the growth of your investment you also magnify the risk you take as you still have a financial commitment should the investment value reduce or if the interest rates increase on the borrowings which were used to invest.
There are some potential tax benefits of gearing as the interest component of your loan may be tax deductible. Again we suggest you speak to one of our financial planners who is able to assist.
As part of your wealth creation strategy a financial planner will provide you with a Client Questionnaire and this document will help determine your attitude towards risk, this questionnaire covers off the below risk attitudes and outcomes:
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Your tolerance towards fluctuations in capital values |
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Your income needs from the money you will be investing |
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Where your money should be invested based on risk attitudes |
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How long your investment should last for based on your goals |
Any investment will have some element of risk involved.
The direct relationship between the risk involved and the expected return is fundamental in making the appropriate decisions with regard your wealth creation strategy.
High returns generally have a high risk attached, conversely lower returns have a lower risk level so the choice will be based on your attitude towards risk.
In general there are five asset classes which you can choose for your wealth creation plan, these can be a mix of some or all of the below:
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Australian equities |
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International equities |
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Cash markets |
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Property markets |
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Fixed interest |
Why not speak to one of our financial planners who can help you understand the options available to you when considering a wealth creation plan.
Asset classes for wealth creation - Opportunity and Risk
There are opportunities to create wealth through investment by way of capital growth and earnings through your investment.
Diversifying your wealth creation plan helps in mitigating the risk of your investment from an income volatility point of view.
Whilst it is not possible to eliminate all investment risk, risk management through diversification across varying asset classes is a surefire way to minimise the risks involved with investment.
Your investment portfolio can be constructed in many ways but there are four most commonly chosen methods in which this is done. These are listed below:
Master Funds |
This is a trust structure which allows investors to access wholesale funds and investments. Accessing and purchasing these investments is performed through an administration manager of the fund who provides the investor consolidated reporting |
Retail Funds |
A retail fund allows investors to pool their money which in effect allows a greater level of purchasing power and the potential for cost savings The retail fund will professionally manage the investment on your behalf and generally the minimum investment amount is $5,000 |
Direct Investments |
As the name suggests this is a direct investment strategy where it involves the purchase of fixed interest investments, property trusts, direct properties, Australian shares and/or international shares |
Wholesale Funds |
This investment type of geared towards professional investors who have a substantial amount to invest and can therefore access wholesale offers that the general public are generally not able to. This is because the amount invested as a minimum is in the vicinity of 100k or more |
When it comes to wealth creation and the strategies required to achieve your desired goals the process can be all too much.
This is where you can engage the services of our financial planners and access their knowledge and services to achieve your financial goals with confidence.
So why not contact us and arrange an appointment today.
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