Intro Allocation of assets - just need to know investment object & risk tolerance this wk Getting the right

ht exposures rather than the right selection of assets MFs, derivatives (s/t considered sa e class, su!jective" #$ What are the 2 types of shares? %& 'isted (e(uities u can purchase on stock exchanges" Growth & li(uidit) (u can get ur * !ack fairl) (uickl)" +& ,nlisted -ither invested in large chunks eg *%...-*+... - not as divisi!le as shares ,nderl)ing securities not traded Adv.'s of unlisted shares? 1. ore growth, u get co pensated for the illi(uidit) pre iu s 2. Good / diversification - !c not correlated with listed nor traded #0 What are the 3 most popular investments among individual investors? 1. #hort-ter de!t/cash 2. #hares 3. Fa il) ho e #1 What are fi ed!income securities? 2onds 3reference shares What are bonds? 4he '4 ones (at least %+ onths" 5orp !onds (looking for higher )ield" or govt !onds ( ain !onds in Aus, fro r!a" "o they default? 6e, not risk free despite arket pitches that these are low risk What is dif bt#n pref shares $ ord shares? 7ell traded in stock exch we have (uite a few pref shares, largest is newscorp #%. Why is income impt? Why is maturity matching impt for fin'l planning , can atch the exact dollar a ount if u put in stocks etc, eg to ensure that u get * in a specific ti e cf putting in a !ond, engineer wen u get it exactl) #%% Why is property attractive? , reduce ur no inal tax & present tax

 8igh collateral value Generate a lot of interest deductions 9nco e is relativel) sta!le Good for creating potentiall) negativel) geared lenders willing to give u :.;, cf !onds - <$.; Fa il) ho e is one of few things not taxed #%+ What do commodities $ collectives include? =ld and other precious etals, ge stones and collecti!les >on?t want to put too uch in, shouldnt !e ain, just for diversification #%: @ust add up arket value colu n %.; return in 4his 3eriod %%/.&% .&% the divisor, needs to !e constantl) adjusted #+. Why #ould u use derivatives to manage ta ? -g, !ought shares for %-%. )ears, no need for the one) !ut alread) got %..* gains (!ought for *%.., now *+.." , see arket a!out to crash 9f )ou sell on ur cash positions, u?ll have to pa) tax ((uite high, /1-/:; and lev), etc" Alternativel), short position to protect downside of ur shares invest ent -#3 useful for short ter changes, and hedging downside risk of positions #+0 %ontract for diff? 5ontract with u for price change >on?t get divids or price change #+1 9nitiall) traded as a !etting agenc) 4axed at #4 arginal tax rate #$+ #ector rotation #o e sector will do !etter than others 2anking stock #ector is currentl) in favour with investors 5onsu er staple #ector (super arkets, @ohnson, as opposed to >avid jones which fluctuate ore" also has lower risk Mandate is :.; have to !e in stocks (can?t get out, !ut can switch !twn stocks" 4hese are the / !road sources of return for asset allocations Most ppl would argue that the first % is ost i pt #$0 What are the asset classes for the tangency portfolio? Aisk) assets %..; in !ond and stocks

u keep so e in stocks, !ut !ond and cash go up and down (!c of diversification" -ncourages u to operate along !lue rather than green Assu e that u can?t !orrow #$1 &ori'on Is? 7hen u need to withdraw * fro ur portfolio #$: understand this graph 'ooks at returns on !ills e(uities over a centur) 7hat is the sd of return when u have a %. )ear holding period increase What is the dif bt#n bonds u hold to maturity $ rolled over? 2onds held to aturit) u don?t have price risks, onl) reinvest ent risk (ey msg about e)uity? =ver the long run, e(uit) is not so !ad -(uit) is still riskiest, not as risk) in the ver) short ter 9f u have long point horiBon, u shud put in growth assets #/% Ae!alancing C 3ush !ack to fixed interest securities with risk weight consistent with ur risk appetite - selling asset that appreciate, & !u) depreciated assets #/+ >)na ic asset D 4r) to exploit !) rotating !etween the industr) sectors (switching !twn the " %yclical eg? Mining stocks !c it goes up and down with econ c)cle 5f 3rocter ga !le, woollies 2eta usuall) low #/: Main thing - @ust need positive saving, know risk tolerance --E don?t need to !eat the arket #/F #o e securities are not correctl) priced, so u can take adv #0. 7hat would !e the relation !etwn high ret securities & high riskD 3t$ #o e ppl !eco e ore risk averse, so eti es less -g when the)?re losing one), ore averse -E efficient arket h)p eans not relevant here 9t just eans, re(uired ret will fluctuate 9t doesn?t violate the e h, just that #/4 ppl have higher cost

3t/ Gariation in risk pre iu

is ok - not violating the e h