Invest
How do I know if I have enough liquidity in my portfolio?
While some people may appear to be wealthy, their financial situation in reality can be quite bleak. It is important that steps are taken to build enduring wealth, so what should you consider when reviewing yours?
How do I know if I have enough liquidity in my portfolio?
While some people may appear to be wealthy, their financial situation in reality can be quite bleak. It is important that steps are taken to build enduring wealth, so what should you consider when reviewing yours?
If people are too dependent on the fortunes of a single asset or their lifestyle is propped up by borrowings for example, the appearance of wealth can be quickly shattered.
Many home owners think they are wealthy, but they are possibly asset rich and cash poor, and in some cases struggling to meet their recurring expenses. They are also vulnerable to falling property prices in the short term and rising interest rates in the medium and longer future.
Not being able to repay credit card debt each month is often the first sign that your personal cash flow is in trouble. Being unable to manage a financial emergency without increasing debt or being forced to sell an illiquid asset is another concern.
All investors should ask the following questions to ensure they are building good quality, sustainable wealth.
Does your income exceed spending?
Do you save money each month?
Do you pay the full amount off credit cards monthly?
Are you investing appropriately for your circumstances?
Is your portfolio diversified?
Do you have adequate insurance?
Is your wealth accessible if needed?
Can you cover unexpected expenses or loss of income over the next two years?
Are you on track for a comfortable retirement?
Have you consolidated your super accounts and checked its performance?
Do you have a will and other estate planning arrangements in place?
The way to build wealth is to spend less than you earn, save the difference and do something meaningful with the money saved. This could include making extra repayments on the mortgage or making regular deposits to an investment portfolio.
Any investment strategy should be appropriate for a person’s stage of life and circumstances. An appropriate strategy for a 30-year-old will look very different to one for a 50-year-old.
Time frames also impact strategy. For any time horizon over five years, consider investing in a portfolio with a higher allocation to equities and property. These asset classes provide the opportunity for capital growth and higher yields but also come with more short-term volatility.
However, if you are investing for a period of five years or less, there is not the benefit of time to ride out short-term market volatility so a portfolio predominantly invested in cash and fixed interest assets may be more appropriate.
You can be asset rich but cash poor when too much of your wealth is tied up in illiquid assets, such as direct property or unlisted shares. This can leave you exposed if your income circumstances suddenly change and you can’t easily extract cash from these lumpy assets to cover living costs.
It is also important to consider how assets are held, as this can make a significant difference to tax paid. This could mean investing savings in the name of the lower income earning spouse or putting more in superannuation.
Finally, having adequate insurance and estate planning arrangements in place will ensure your wealth is protected and a legacy passed down to future generations.
Michael Hutton, head of wealth management, HLB Mann Judd Sydney
Stock market
Could this bull market be losing steam?
There’s an old investment adage that bull markets never die of old age, with the current market showing signs of cracking just months after the recovery, an industry expert warns. ...Read more
Stock market
Super fund investors bid to acquire Sydney Airport
A group of super fund investors has lodged a non-binding takeover bid for Sydney Airport, valuing the company at over $22 billion. ...Read more
Stock market
10 most globally held stocks revealed
Australian investors remain bullish on electric vehicles and technology stocks, according to their long-term held positions, new research has shown. ...Read more
Stock market
How ‘gamer investors’ are pushing a new wave of social responsibility
A new generation of younger retail investors are pushing a new social movement, yielding a distributive impact on the markets, most notably through the GameStop saga, two researchers have revealed. ...Read more
Stock market
ASX tipped for record high despite inflation fears
The market is tipped to shake off fears of rising inflation, with the ASX 200 now tipped to close the year at a new record high, an economist has revealed. ...Read more
Stock market
‘Commission-free propaganda’: Warning issued for retail investors
The phrase “if you’re not paying for it, you’re the product” applies just as much to stock trading apps as it does to social media networks. ...Read more
Stock market
Is the tech sell-off creating opportunities for investors?
A tech sell-off sparked by inflation concerns has seen world markets crash. But is it creating an opportunity for investors to ‘buy the dip’? ...Read more
Stock market
Government opens arms to Wall Street
In its bid to maintain Australia’s global competitiveness, albeit its firmly shut borders, the Australian government has included a measure in its recent budget to allow foreign financial services p...Read more
The Olympic effect on property and equity investors; COVID-19 Disaster Payments and super
Listen now
Do lockdowns boost property prices? Are short-sellers levelling the playing field? Did you lodge your tax returns early?
Listen now
Will lockdowns halt the housing boom? Is the metaverse taking over? And the cons of lodging your tax returns early
Listen now
Are you being priced out of the market? Have you got the Tuesday blues? And are you ready for the upcoming super changes?
Listen now
Stock market
Could this bull market be losing steam?
There’s an old investment adage that bull markets never die of old age, with the current market showing signs of cracking just months after the recovery, an industry expert warns. ...Read more
Stock market
Super fund investors bid to acquire Sydney Airport
A group of super fund investors has lodged a non-binding takeover bid for Sydney Airport, valuing the company at over $22 billion. ...Read more
Stock market
10 most globally held stocks revealed
Australian investors remain bullish on electric vehicles and technology stocks, according to their long-term held positions, new research has shown. ...Read more
Stock market
How ‘gamer investors’ are pushing a new wave of social responsibility
A new generation of younger retail investors are pushing a new social movement, yielding a distributive impact on the markets, most notably through the GameStop saga, two researchers have revealed. ...Read more
Stock market
ASX tipped for record high despite inflation fears
The market is tipped to shake off fears of rising inflation, with the ASX 200 now tipped to close the year at a new record high, an economist has revealed. ...Read more
Stock market
‘Commission-free propaganda’: Warning issued for retail investors
The phrase “if you’re not paying for it, you’re the product” applies just as much to stock trading apps as it does to social media networks. ...Read more
Stock market
Is the tech sell-off creating opportunities for investors?
A tech sell-off sparked by inflation concerns has seen world markets crash. But is it creating an opportunity for investors to ‘buy the dip’? ...Read more
Stock market
Government opens arms to Wall Street
In its bid to maintain Australia’s global competitiveness, albeit its firmly shut borders, the Australian government has included a measure in its recent budget to allow foreign financial services p...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
