The biggest portfolio construction mistake by pre-retirees


E&P chief investment officer, Tim Rocks, has detailed the three biggest mistakes made by pre-retirees when it comes to building their investment portfolios.
Rocks said he frequently saw investors make the same mistakes with their portfolios as they were too focused on short-term performance.
Speaking at the Morningstar Investment Conference in Sydney, Rocks said: “All mistakes come from one error which is not having the right timeframe, it’s absolutely critical. No-one in pre-retirement should care about their one-year performance. We should all have a timeframe which reflects the timeframe we are going to need those investment and that should be 10 years plus.”
This problem was then manifested in their asset allocation with a preference for holding income stocks.
“We end up with too many stocks or funds that are chosen on the basis of income when you should be thinking about total return and about growth if you don’t need that income in the next year,” he said.
The final mistake was too much focus on liquidity of portfolios. This was demonstrated by the amount of investors who were opting out of investing in early-stage companies or private equity as they were deterred by the liquidity.
“There is a fixation with liquidity when it is not needed. If you are in pre-retirement then thinking you can only go into an asset with daily liquidity is frankly just nuts because all it does is massively reduce your opportunity set.
“The right diversification is having a broad exposure to a range of growth assets, both listed and unlisted.”
Recommended for you
Advisers at DOD Bookkeeping, which received an $11 million penalty last week, received as much as 40 per cent of their remuneration via a bonus when clients purchased a property via a SMSF, according to court documents.
Private wealth manager Escala Partners has launched an end-to-end investment platform to strengthen its alternatives capability as clients seek sophisticated vehicles.
Perpetual Wealth Management has hired two advisers from Ord Minnett as part of five hires, just weeks after the rival firm announced it had picked up six from Perpetual Private.
ASIC has cancelled the AFSL of a Perth financial services firm following payments to its clients by the Compensation Scheme of Last Resort after a failed managed investment scheme.