Investment Portfolios

Illustrative Investment Portfolios – Moderate

Published on June 9, 2010 5:06 am, by

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 ‚Äúneutral” 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 ClassBenchmarkYieldCapitalTotal ReturnComment
CashBloomberg Bank Bill Index3.0%-3.0%Cash returns assumed to equal 0.25% over the RBA official cash rate. Current cash returns of 1.75% are likely to persist for the coming year, though will gradually lift as the RBA returns the official cash rate to the neutral level of 3.25% p.a.
Australian BondsBloomberg Australian Composite Bond Index3.5%-3.5%A starting yield of 2.4% p.a. and some return drag as yield rise will constrain returns to be below long-run fair-value of 4% p.a.
International BondsBloomberg Global Aggregate Bond Index3.0%-3.0%A starting yield of 1.6% p.a. and some capital drag as yield rise will constrain returns to be below long-run fair-value of 3.5% p.a.
Australian PropertyS&P/ASX200 Listed Property Index5.5%2.0%7.5%Returns projected to be below fair-value of 8.25% p.a. due to a low starting distribution yield plus a negative earnings impact as interest rates rise.
Australia EquitiesS&P/ASX200 Index5.25%3.75%9.0%Returns projected to be close to fair-value of 9.25% p.a. as a modest valuation drag from higher interest rates will be largely offset by a recovery in earnings from below-trend levels.
International EquitiesMSCI All World Equity Index2.5%4.5%7.0%Returns projected to be modestly above fair-value of 6.5% p.a. with earnings close to trend and a modest valuation drag more than offset by exchange rate gains against the $A.
GoldGold bullion spot price in $US-25%2.5%Initial weakness in gold prices reflecting ongoing global economic recovery and a rising $US, before resumption of trend 3% growth.


Annual Return Standard Deviation and Correlation Matrix

Asset ClassStandard DeviationCashAustralian BondsInternational BondsAustralian PropertyAustralian EquitiesInternational EquitiesCommodities
Australian Bonds3.5%0.51
International Bonds3.0%0.50.751
Australian Property15.0%-
Australia Equities15.0%-0.25-0.5-0.250.51
International Equities15.0%-0.5-0.5-


APRA/FSC/ASFA Standard Risk Measure

Risk BandRisk LabelEst # negative returns every 20 years
2Conservative0.5 - 1
3Moderate1 - 2
4Balanced2 - 3
5Growth3 - 4
6High Growth4 - 6


Strategic Asset Allocation Model Portfolio

Asset ClassConservativeModerateBalancedGrowthHigh growth
Australian Bonds30%25%20%15%5%
International Bonds20%20%15%10%0%
Australian Property5%5%5%10%10%
Australia Equities10%15%25%30%45%
International Equities5%15%20%25%35%
Total Return4.25%4.75%5.50%6.25%7.25%
Std Dev2.5%4.0%6.0%8.0%11.5%
# negative years in 20 years1.

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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.

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