Your Money & You

November 2011

Investment Tracking

Investment Tracking

Don’t just invest and forget. If you’re an investor keep your eyes open and be prepared to ask questions. Watch out for warning signs that tell you something may be going wrong. Investment markets can be volatile, so review your plans regularly.

Savvy investors take the time to understand the basic principles of investing, then develop and stick to their investment plan based on the timeframe of each investment goal. Even when market and economic conditions are rapidly changing it’s vital that you keep a cool head as a knee-jerk reaction can often make things worse.

Don’t panic
When market conditions change, it’s important to revisit your investments to assess whether they still fit your goals and risk tolerance. This will help clarify your position and will inform your next steps. Make decisions based on your long-term investment goals and what you think will happen in the future. Do not make a decision based on what has happened in the past, for example: ‘my investment has gone down 20 per cent’.

If your investments are still on track to meet your goals, then you will need a good reason to change.

However, if your investments are no longer on track, you have a tough decision. Should you change investments (and sell when prices are low) or hope that your investments will go up in value? It’s important to think carefully about your next step. If you are making your own buy and sell decisions, you may need to review and rebalance the investment mix to make sure it still matches your strategy and attitude to risk. If you are using a fund manager or financial adviser, discuss your options with them.

If you have used a margin loan to pay for your investments, you should check your loan account regularly because the value of your investment can change very quickly. As your investment is used to secure the loan, you should ensure that you can sell the investment and repay the loan, if market circumstances change.

When monitoring your investments, keep your goals and risk tolerance in mind. If your goals change, you may have to re-jig your strategies too. A change in your employment status or health may alter the risks you are prepared to take when investing.

However, there’s no guaranteed method to spot losses in advance. Even the most experienced investors make mistakes. Some typical warning signs that your investment may be heading downhill include:

Published statements: Sometimes ASIC and the Australian Securities Exchange (ASX) require issuers of investment products to publish statements clarifying or correcting information given to investors. The investment may still be suitable, but these warnings may signal that the investment involves more risk than you want to take. The problem may have been a genuine oversight but you need to be sure.

Accounting problems: Mistakes, delays, audit qualifications and controversy over accounts could be warning signs. Accounting rules can be complex and genuine errors or differences of view do occur. However, repeated issues may indicate deep-seated problems.

Management problems: Director and senior management in-fighting, resignations, breaches of the law or unethical conduct are sometimes warning signs. Changes in management may be necessary, but could take attention away from responsibilities to investors.

Repeated over-promising and under-delivery: While even the best managers make mistakes, ongoing disappointing results, lack of communication and falling service standards may indicate that something is seriously wrong.

Get organised
Record keeping is an essential part of investing. You need records for accounting and tax purposes and to assess whether you need to make changes to your investment portfolio.

The world changes and so do you. That’s why successful investors review their plans regularly. The rule of thumb is to revisit your investment plan at least once a year.

E-mail ASIC with topics that interest you via

Greg Medcraft
Australian Securities and Investments Commission

We're Five Years Young!

September 2011 marked the fifth anniversary of the founding of the ADF Financial Services Consumer Council.

Back in 2006 the CDF gave us the job of helping ADF members and their families understand more about their finances as well as acting as an independent and expert adviser to the Service Chiefs’ on personal financial services matters affecting ADF members.

Since our founding we have developed very good working relationships with two important Federal Government regulators – the Australian Securities and Investments Commission and the Australian Competition and Consumer Commission.  ASIC provides us with some of the material and ideas we present to ADF members about retail financial services.  The ACCC provides information about investment scams and information for transitioning ADF members on how to run a business or franchise.

Since 2006 our website has become very popular.  Some of the information and services we provide online are:

  • ADF Online Budget Calculator – this helps ADF members understand if they’re going forwards or backwards with their money
  • Educational films and interviews – we have produced many videos which can all be watched online, many of which are used at our financial education seminars
  • Seminar Requests – ADF members can contact our secretariat and request an independent financial education seminar for their unit

We now conduct many regular free seminars throughout each year at:

  • ADF Initial Training schools – in order to encourage new trainees to develop good spending and investment habits when they begin their working lives
  • ADF Force Preparation centres – we provide important information to ADF members on the issues they need to think about so their personal and family financial situations are in order prior to deployment
  • Post deployment reintegration programs – where we remind ADF members that after deployment that there are a number of investment and financial advice issues they need to take into account
  • During Career – we provide general financial education to ADF members during their career on an as-requested basis
  • Leadership Training courses – we help future leaders understand what information and advice they can provide about retail financial products so they don’t over step the line and provide advice which could be illegal
  • ADF Transition Seminars – the ‘Your Money and You’ program at all Transition Seminars is designed to help ADF members considering leaving the ADF to understand important financial issues that they need to take into account.

And finally this year we held a symposium with the Australian Defence Force Academy about the Global Financial Crisis and its impact on retail investors (further details are provided below).

It’s been a busy yet highly rewarding five years!  Our small team looks forward to continuing our work for all ADF members.

Our Investment Symposium

Our Investment Symposium

In early October the ADF Financial Services Consumer Council held the inaugural ADF Financial Literacy Symposium with the Australian Defence Force Academy.

The Symposium was televised on Sky’s Australian Public Affairs Channel and replayed numerous times over the following days. About 200 Midshipmen, Officer Cadets, representatives of the ADFA academic staff and other invited guests were in attendance.

Peter Switzer from the Switzer Business Show, on the Sky Business channel, was our moderator.  His first duty was to welcome the VCDF, Air Marshal Mark Binskin AO, who opened the Symposium.

The VCDF told to the Midshipmen and Officer Cadets that looking back on his career he wished that he had received financial guidance similar to some of the information they were about to hear at the Symposium.  He also said that, “Most people ignore their personal financial issues especially when the issues seem complicated.”

Mr Switzer then asked Professor Chris Adam from the University of NSW to deliver a Keynote Address about the Global Financial Crisis.  He focused on its causes, its effects and whether it’s over or recent financial market turmoil is a sign it’s still impacting the world economy.

After Professor Adam’s address, he was joined on a panel by Hamish Douglas, CEO of Magellan Financial Group, Claire Mackay the Senior Principal Adviser from Quantum Wealth Advisers and Scott Pape – The Barefoot Investor.

During the next 30 minutes, questions were invited from the floor. Midshipmen and Officer Cadets posed some important issues for the panel to discuss.  The five questions related to becoming an investor; investing in real estate; buying blue chip shares; direct investing vs managed funds; margin loans and solutions to the GFC.

In future editions of this newsletter we’ll be discussing in greater detail some of the issues raised by Professor Adam in his Keynote Address as well as by the panel during the question and answer session. We will also let you know when the symposium is available to view on our website.