Chapter 11 – Investing

Chapter 11 – Investing

August 28, 2017

Written by Sam Pizzata & Choon Kwa Resolution Wealth

Sam Pizzata & Choon Kwa have recently written and published a book called ‘A doctors guide to financial happiness’. Whilst the book was written for the many doctors they have as clients, the information contained within relates to all people. We have taken parts of Chapter 11 in the book relating to Investing and added the information below.

Sam & Choon have a limited number of copies they would be happy to offer to any Catalyst client on request.

Chapter 11 – Investing

To help in achieving long term financial goals savings must be invested. By allowing funds to grow in different forms of investment, a much higher rate of return can be made, compared to if money were simply kept in the bank. Investment also brings a much wider range of options than many people typically understand.


Types of investment include:


1. Term deposits:

Term deposits offer capital security, fixed interest rates, varying lengths of time money is tied up.

2. Bonds:

Bonds are a type of loan to either governments (Federal or state) or to corporations. There are many large corporations that have credit ratings similar to governments, and would therefore be regarded as low risk. However not all bonds are the same and many organisations have a poor credit rating or none at all. Loans to such entities would be considered non-investment grade, junk bonds or sub-prime.

3. Direct Real Property:

Most Australians have an appetite for investment property. This includes residential homes, commercial (offices, medical suites, retail shops), and land (rural or inner-city development sites).

4. Listed Property:

Some property businesses are listed on Australian and global stock exchanges. They may be invested in different types of property assets including shopping centres, office buildings, land developers, hotels, and construction companies.

5. Infrastructure:

These include monopoly businesses such as airports, toll roads, ports, gas pipelines, public transport systems. Most infrastructure projects have high barriers to entry – it is extremely difficult to build a competing airport or train line next door to one that already exists.

6. Australian shares:

Traditionally the Australian share market has been dominated by large financial companies (banks), large supermarket retailers, a telecommunications company and a few mining companies. Australian shares have been favoured by most investors due to our home country bias and a favourable tax system for treatment of dividends (imputation tax credits).

7. International shares:

International shares provide greater geographical diversification beyond Australia (including the USA, Europe, Asia) and better diversification into industries not very prevalent in Australia (such as oil and gas, pharmaceuticals, largeconsumer staples, technology and internet giants).

8. Commodities:

Commodities can include precious metals such as gold or commodities to be consumed such as oil or wheat.

9. Alternatives:

There are many investment managers who specialise in alternative investments with the aim of stronger returns for clients. This may include areas such as agriculture, mortgage trusts, hedge funds, currency trading.

10. Unlisted businesses:

This involves buying shares in a private company. This may be a start-up business (e.g. new technology) or an established business (e.g. a bakery). Depending on the business, quite often a number of issues arise including having to find a large amount of capital to buy in; putting all your eggs in one basket; or a lack of liquidity (trying to get some or all money back).

When it comes to the purchase of many of these asset classes, you can either invest directly or via a managed investment fund. A dilemma with acquiring assets individually (such as a bank share or a government bond) is the lack of diversification where wealth is concentrated only in a few investments. Another issue may be not knowing the best time to buy and sell the investments.

Managed funds involve the pooling of money with other investors so that investments are spread more broadly rather than only in a few select investments. As an example, a typical actively managed Australian share fund would hold shares in 60 to 80 different companies across different industries.

However, a typical direct share investor would only hold four to five shares (a couple of the big four banks, one of the supermarket giants, a larger miner, and a large telecommunications company).

Investing in a diversified investment portfolio across different types of asset classes allows investors to aim for a potentially better long term rate of return. Investing should have a sense of purpose and assist long term goals to bemet, such as buying a holiday home or retiring comfortably. Wealth is created slowly through discipline, not by taking high risks on speculative investments. By investing well, clients will have better flexibility in the longer term. They may be able to achieve their goals earlier. This may mean retiring sooner than later, or having more time each year to go travelling or spending time with children. As goals are achieved earlier with better investment returns, new goals can be considered or created. It is important to receive sound advice around building an investment portfolio that is right for you. Everyone is at different stages of their career, has different family situations and varying tolerances for risk.

It is important that any portfolio meets your own personal ‘sleep test’ – ‘Am I going to be awake at night worrying about my investments?’.

Choon Kwa and Sam Pizzata are directors of Eight Financial Services Pty Ltd ABN 25 114 328 942 and Plexus Wealth Pty Ltd ABN 35 002 976 294 trading as Resolution Wealth Partners and are authorised representatives and credit representatives of Charter Financial Planning Limited ABN 35 002 976 294, AFSL 234665 and Australian Credit Licensee (Charter). Australian Investment Solutions Pty Ltd ABN 14 124 764 576 and Catalworx Pty Ltd ABN 58 126 066 859 also trade under Resolution Wealth Partners. This editorial provides general information only. Before making any financial or investment decisions we recommend your consult a financial planner to take into account your particular investment objectives, financial situation and individual needs. Charter Financial Planning and its Authorised Representatives do not accept any liability for any errors or omissions of information supplied in this editorial.

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