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Building an investment property portfolio and your investment strategy

At Utopia, our financial planners are experts in wealth creation, whether you’re interested in a self managed super fund (SMSF), building a property portfolio or an alternative investment strategy. Here are some investment tips from our team.

Where do you start?

When looking at your investment strategy there are a number of issues that need to be considered. The starting point is your risk profile, or in other words, the amount of risk or volatility that you are willing to accept with your investments. Can you accept higher volatility in your investments over the longer term in return for higher growth?

Your risk profile will determine your asset allocation – your allocation to income and growth assets within your portfolio. The main options to consider are Australian shares, international shares, building an investment property portfolio (in Perth, WA or further afield), fixed interest and cash. Shares and building a property portfolio are considered to be growth assets, whereas fixed interest and cash are considered to be income assets.

The risk profile helps obtain a clear direction in terms of the investments you may make.  It also helps determine how much super is enough for you to retire on, any shortfall that may exist between the super you currently will have at retirement and the super you have identified as being the right amount for you, and how this shortfall can be addressed.

Diversifying your investment strategy

Having access to the different sectors of the market provides diversification to your portfolio, as some sectors are not correlated to others. This will have the effect of smoothing out your returns. Generally, younger people can afford to have higher risk profiles as they have longer timeframes for their funds to be invested. Conversely, retirees usually have lower risk profiles as their focus is more on preservation of capital.

Building a property portfolio

With property, you have the choice of investing in A-REITS, which are Australian Real Estate Investment Trusts, who invest in commercial property. You can also invest in unlisted property trusts and residential property, or invest directly in commercial property through a self managed superannuation fund (SMSF) . SMSFs can borrow in these cases, however they are subject to strict lending rules. In any case, there are a host of options, and you are not tied to investing in Perth’s property market.

Get your investment strategy right – talk to our team

Portfolio construction studies have shown that the main determinant of an investor’s return is their asset allocation. Getting this correct is therefore extremely important. Strategic asset allocation involves having specific allocations to the different market sectors and leaving this in place over the long term. Alternatively, tactical asset allocation involves making specific decisions on allocations to each sector depending upon the economic outlook.

At Utopia, our team in Perth will gladly advise you on all aspects of your investment strategy, giving you peace of mind that your asset allocation suits you, your goals and your personality perfectly. You can find more information about investing in shares here. Alternatively, contact the team to discuss your investment strategy and building a property portfolio in more detail.