Equities have a role in most portfolios: Amanda Skelly

23 November 2012
| By Staff |
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Any portfolio with a time horizon of three years or more must have some exposure to equity markets, according to State Street Global Advisors' (SSgA's) Amanda Skelly.

Skelly, who is SSgA's director of Australian exchange-traded funds, said she was concerned that investors who are piling their money into term deposits are failing to appreciate the sacrifices they are making on the capital growth side.

She pointed to a recent research paper by SSgA entitled A Case for Dividend Investing, which found that "an investor who placed $100,000 into quality domestic shares paying strong, sustainable dividends in June 2002 would have been $37,700 better off by June [2012] than an investor holding an average term deposit".

A high-yield strategy that replicated the return of the MSCI Australian Select High Dividend Yield Index from June 2002 to June 2012 would have risen to $105,000 in the 10 years and generated dividend income of $85,600 (including franking credits) over the period, according to the SSgA research.

Skelly said she understood that many investors like the "comfort of knowing they're not going to lose money".

"It's just a matter of educating them: if you allocate some of your portfolio to equities, you might be better off. This is where we encourage people to seek financial advice so they really understand the full gamut of what can happen," Skelly said.

"I think advisers are largely doing a good job with this. They really understand the client's risk profile and give them examples of what different portfolios can look like under different scenarios," she said.

The more information financial advisers can give investors on blending cash, equities and bonds the better placed investors are to make a decision, Skelly said.

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