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Aged care report goes to the heart of Australia’s tax debate
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Removed super no longer protected from creditors: court
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Labor tweaks stage 3 tax cuts to make room for ‘middle Australia’
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Quarterly reporting regime means communication now paramount: expert
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Plan now to take advantage of 5-year carry forward rule: expert
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Why investors are firmly focused on interest rates
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Investment and economic outlook, January 2024
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Millions of Australians lose by leaving savings in default MySuper funds
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Vanguard economic and market outlook for 2024: A return to sound money
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An investment year of ups and downs
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Article archive
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Quarter 4 October - December 2023
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Quarter 4 October - December 2016
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Quarter 4 October - December 2015
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Quarter 3 July - September 2015
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Quarter 2 April - June 2015
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Quarter 1 January - March 2015
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Quarter 4 October - December 2014
Quarter 2 of, 2015 archive
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Reminders and Tax Strategies for SMSFs pre-year end
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End of year tips for SMSFs
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Market Update – May 2015
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An investor's personal trainer
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SMSF trustee penalties going up
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Contraventions rife among non-advised SMSF trustees
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Dealing with investor uncertainty
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Reserve bank gives the economy a lift
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Retirement planning: the gap between intention and reality
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Market Update – April 2015
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Australian Government - Budget 2015
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Budget 2015 - some professional opinions
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What does the ATO want from you?
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Making sense of the new excess contribution rules
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Greying, working and contributing
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Simple-yet-smart investment housekeeping
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Market Update – March 2015
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Two sides to the age profile of SMSF members
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Actuaries call for end to superannuation policy tinkering
Dealing with investor uncertainty

 

A broadly diversified portfolio with an appropriate target asset allocation for an investor's circumstances ....

       

.... is a straightforward and disciplined way to deal with uncertainty about where to invest in today's unquestionably challenging investment environment.

This enables investors to spread their risks and their opportunities throughout different market conditions - rather than trying to pick future winners or trying to "time" the markets (attempting to pick the best times to buy or sell assets).

Successive research has concluded that a diversified portfolio's strategic asset allocation - the proportions of its total assets invested in different asset classes - is responsible for the vast majority of its return over time. (See The global case for strategic asset allocation, published by Vanguard, July 2012.)

An appropriate strategic or target asset allocation takes into account each investor's risk tolerance, time horizon and financial goals.

And a disciplined investment approach involves periodically rebalancing a portfolio so its risk/return characteristics remain consistent with its strategic asset allocation. Rebalancing is particularly critical after different markets have moved sharply up or down.

As Smart Investing recently discussed in The investor's lament, investors seeking a diversified portfolio can choose to invest in a simple diversified investment fund. These funds are designed to reflect an investor's tolerance to risk with typical choices of conservative, balanced, growth and high growth portfolios.

Of course, many investors create their own diversified portfolios by investing in a series of sector-specific funds.


By Robin Bowerman
Smart Investing 
Principal & Head of Retail, Vanguard Investments Australia
18 May 2015

 

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