3. Why is my risk tolerance important
• Suffer large losses due to misunderstanding the risk
• How to achieve your long term goals
• Is standard risk profiling fundamentaly flawed.
• Understanding your ow risk structure before you meet an advisor
• What is my capacity for loss assessment
• What level of risk do I need to achieve my goal
• Being able to do a gap analysis (how much am I missing)
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4. How do I determine my true risk profile
• Everyones perception of risk is diffent
• Determine your own risk using online tools such as
http://investme.ae/riskManagement/
• This should give you expected returns based upon your risk
• This is the basis of determining your potential of reaching your
retirement goal
• Most people base their strategies on the returns they want. This is
wrong.
• Focus on managing risk and accept returns that go along with it.
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5. How much do I need when I retire
• Determine your inflation adjusted income needs
• Work out how much you need to retire using online tools such as
• How much do I need to save
• http://investme.ae/retirement-calculator/
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9. Where to allocate assets
• Rule of thumb, the older you get the less risk you should take.
• Rule 1 the time horizon is one year, stay in cash
• Rule 2 time horizon is 1-5 years safe income producing investments
• Rule 3 Money you dont need for at least 5 years is a candidate for the
stock market
• Rule 4 Diversify into other asset classes
• Rule 5 Get your fees as low as possible
• Rule 6 No Lock in Periods
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10. The Market is too risky ?
Market falls by this much Historical frequency
10% Every 11 months
15% Every 24 months
20% Every four years
30% Every decade
40% Every few decades
50% 2-3 times per century
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14. How do I achieve the returns with my risk
profile
• Fees are the biggest detriment to long term performance
• 3% p.a. Fees requires 3% return just to stand still
• Asset allocation has the second biggest effect on long term returns
and volatility.
• Do not do market timing, the average investor underperforms the
market by 4% p.a.
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15. Start Saving Late assuming 8% return
• 30 year old investing 10,000 p.a. for 35 years total saved 360,000
• 40year old investing 17,000 p.a. For 25 years total saved 357,000
• Despite saving 70% more per month to catch up.
• 30 year old would have approx 1.75 million in equity
• 40 year old would have approx 1.4 million in equity
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19. Why Diversify? BACAUSE WINNERS ROTATE.
Perhaps nothing better illustrates the need for an asset allocation plan than the chart below, which shows how various asset classes performed
on a year-by-year basis from 1994 through 2013. The best-performing asset class is at the top of each column. Please remember, past
performance does not guarantee future results.
Annual Return of Key Asset Classes Between 1994-2013
Ranked in Order of Performance from Best to Worst.
21. Similar returns different outcomes
1972-2007 Portfolio A Portfolio B Portfolio C Portfolio D Portfolio E
Return* 11.2% 11.8% 13.0% 11.7% 13.2%
£1 turned into... £45.50 £54.53 £81.79 £52.81 £87.31
Standard deviation 17.0 21.7 17.4 24.5 11.0
Sharpe ratio 0.39 0.35 0.48 0.34 0.68
Worst 1-year return -26.5% -23.2% -21.4% -35.7% -12.8%
Worst 3-year return* -14.6% -17.0% -10.5% -9.6% -0.6%
Worst 5-year return* -2.3% -2.6% 3.3% 4.5% 3.3%
Worst 10-year return* 5.9% 4.3% 9.1% 2.1% 8.7%
*Compound annual total return. Source: Roger C. Gibson, Gibson Capital Management.
Source : GIBSON (Capital Management)
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S&P 500 EAFE Property Commodities Equal Parts ABCD
Nareit GSCI Annual Rebalancing
22. What is asset allocation
• Different investments that are non or low correlated
• Reduces volatility (highly correlated assets do not lower risk)
• Tends to outperform due to rebalancing
• Non or low correlated assets are Real Estate, fixed income, natural
resources or commodities
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23. Should you do it yourself?
• Not if you have little or no experience with finances
• Not if fear or greed determines how you invest
• You dont have the time or inclination to do it
• You want an objective outside perspective
• You have a complex financial situation
• This is now where you need the help of an IFA
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24. Investing is a very serious business
• Ensure that the company and advisor you are speaking to is regulated
by either
• The Insurance authorities or The Securities & Commodities Authority
(SCA)
• www.sca.gov.ae/english/pages/default.aspx
• Ensure that the advisor is employed by the company
• Ensure that the advisor has financial qualifications from the relevant
authorities.
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25. Ask the following questions
• What experience do you have
• What services do you offer
• How will I pay for your services
• How much do you typicaly charge
• How are you compensated (No double dipping)
• What are the hidden charges
• Can I have it in writing
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26. Active Portfolio Management
• The IFA should be able to use financial modelling tools to determine
the probability of achieving your goals with the selected asset
allocation model
• The IFA should be doing a constant rebalancing of the portfolio
• Every meeting should be based upon reviewing your portfolio and not
selling new products
• You should be doing an annual risk analysis as time changes
everything
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27. Our solution
• Investment Portfolio using Exchange Traded Funds (ETF’s)
• Asset allocation model
• No Lock in Periods
• No redemption costs
• Set up fee 1%
• Total asset management costs of approx. 1.75%
28. InvestMe
How do our costs compare?
Type of Investment
Solutions
Typical Multi Asset
Funds
InvestME
discretionary
managed ETF
portfolios
InvestME
Protected
Portfolios
Typical Bespoke
DFM
AMC 1.00% 1.00% 1.00% 1.00%
Investment Fee n/a 0.10% n/a 1.00%
Underlying
Investments
1.85% 0.30% 0.50% 0.50%
Platform Fee 0.35% 0.35% 0.35% 0.35%
Total annual
cost
3.20% 1.75% 1.85% 2.85%
