Raffi PailagianMBA, BSc, DipFP
Adviser / Managing Partner
(00:00): Hi, it’s Raffi Pailagian from Manly Financial Services here. Today, I want to talk about the overall concept of financial planning and show you how you can start creating wealth to achieve your short, medium, and long-term goals and aspirations.
(00:22): As we start our careers, our incomes will usually start low while we climb the company ladder, so to speak, and gain more and more experience.
(00:29): Over time, our income starts to rise, and this rise will be quite steep or exponential and then, the rate of increase will plateau off as we get closer and closer to our retirement years. As our income starts to rise, we can start contributing to what we like to call a wealth tank.
(00:46): This wealth tank includes savings accounts for our short-term savings, growth assets for our medium-term investments, and superannuation assets for our long-term.
(00:58): We can use these savings for short-term expenditure that may arise. Things like buying a first car, saving for a home deposit, purchasing prams or costs while preparing to have a child, or simply funding the replacement of a hot water system that might stop working.
(01:12): These medium to long-term investments can be used to upgrade your home, fund child education expenses, repay the mortgage, or add to your retirement nest egg. And the superannuation savings can fund your long-term retirement lifestyle goals and aspirations once you enter your retirement years.
(01:32): In the process of creating wealth within our wealth tank, it is important to allocate funds to the appropriate assets according to the timeframe in which these funds will be required.
(01:41): Short-term assets are typically saved for up to three years and therefore, it’s best to allocate these short-term savings to defensive assets such as cash, term deposits, or government bonds.
(01:53): Medium-term investments on the other hand, are typically invested for between three and seven years before they’re sold down and can therefore include the defensive short-term assets plus listed property securities, listed on the ASX, as well as Australian and International blue-chip shares.
(02:10): Long-term assets are usually held for over seven years, and typically consist of our superannuation investments. These superannuation portfolios can therefore also include higher growth assets, such as mid capital, small company shares, and private equity investments.
(02:27): I’ve included direct property or real estate between the medium and long-term, as these investments be it commercial property, residential investment property, or your own home are only effectively valued at the time of sale, and can require more time to generate capital growth than liquid assets that are bought and sold on the stock exchange every day.
(02:47): Why is this important? It’s because assets with different expected rates of investment return also display different levels of volatility or investment risk.
(02:58): The efficient frontier graph shown here, shows us that defensive assets such as cash and bonds are expected to generate a lower return with lower associated risk, compared to growth assets such as shares that are expected to generate a higher return with higher volatility or risk.
(03:16): The longer that these more volatile growth assets are held, the more chance the volatility is ironed out over time.
(03:24): The first step to starting your wealth creation journey should therefore be to set some short, medium and long-term goals.
(03:29): Step two is to determine the amount of money you’re going to require to achieve these goals over those time periods.
(03:36): The third step is to allocate the required funds to the required asset classes to make these goals over the short, medium, and long-term a reality.
(03:44): help our clients every day along this journey in achieving their financial lifestyle goals. And if you’d like some help, please visit our website at manlyfs.com.au or reach out to one of our advisors. So we can say there’s a way in which we can help you.
Head Office: Suite 105-106, Level 1, 39 East Esplanade, Manly NSW 2095
Manly Financial Services Pty Ltd is a Corporate Authorised Representative (Representative No.: 321127) ABN 38 115 806 883 of Futuro Financial Services Pty Ltd, Australian Financial Services Licensee (AFSL 238478)
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