Published on June 9, 2010 5:09 am, by Pete Lalor
The MoneyBrilliant Save and Invest tool uses a number of model portfolios constructed by BetaShares to illustrate possible investment returns and risk with saving and investing.
We also use an example portfolio constructed entirely of cash. The expected returns of this portfolio are based on the Bloomberg Bank Bill Index and are consistent with the long run “neutral RBA cash rate.
The BetaShares Strategic Asset Allocation portfolios are constructed using Exchange Traded Funds (ETFs). ETFs are typically a very cost effective investment product and they can be used to provide exposure to a variety of different asset classes and investments.
The BetaShares Strategic Asset Allocation model portfolios are based on the following long-term asset class assumptions. These assumptions are reviewed on an annual basis at the start of each calendar year.
Long term asset class assumptions
|Asset Class||Benchmark||Yield||Capital||Total Return||Comment|
|Cash||Bloomberg Bank Bill Index||3.5%||3.5%||Assumed yield return in line with the long run neutral RBA official cash rate of 3,5%|
|Bonds||50/50 split of Bloomberg Australian composite and Global Aggregate Bond Index||3.5%||3.5%||Australian and global long-run returns 0.5% above the RBA official cash rate and 0.5% below long-run US 10 year Treasury yield (3.5%) respectively|
|Australian Property||S&P/ASX200 Index||5.0%||2.5%||7.5%||An income yield of 5%, plus capital return in line with inflation|
|Australia Equities||S&P/ASX200 Index||5.0%||4.0%||9.0%||Grossed up dividend yield of 5% plus capital returns just under nominal GDP growth of 5%|
|International Equities||MSCI All World Equity Index||2.5%||4.0%x||6.5%||Yield of 2.5% plus capital returns just under nominal growth in global GDP|
|Commodities||S&P GSCI Light Energy Excess Return Index||3.0%||3.0%||Commodities are projected to grow 1% in real terms above 2% price inflation|
Annual Return Standard Deviation and Correlation Matrix
|Asset Class||Standard Deviation||Cash||Australian Bonds||Australian Property||Australian Equities||International Equities||Commodities|
APRA/FSC/ASFA Standard Risk Measure
|Risk Band||Risk Label||Est # negative returns every 20 years|
|2||Conservative||0.5 - 1|
|3||Moderate||1 - 2|
|4||Balanced||2 - 3|
|5||Growth||3 - 4|
|6||High Growth||4 - 6|
Strategic Asset Allocation Model Portfolio
|Asset Class||Conservative||Moderate||Balanced||Growth||High growth|
|# negative years in 20 years||1.0||2.0||3.0||4.0||5.0|
Peter is the CEO of MoneyBrilliant. He has over 20 years experience in banking, insurance and accounting. Peter has three sons, ranging in age from 16 to 3, is a sport and fitness fanatic and a volunteer firefighter. He is passionate about improving people's lives through making financial services more accessible.