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Feature
 

The impact of the sub-prime crisis
Sub-prime lending is the term used to describe non-standard home loans, ie loans to those who find it difficult to get a ‘standard’ home loan, typically those with low (or in some cases) no income.
The recent market volatility is rooted in the US. With the boom in property prices over the last few years, US home loan lenders have been very keen to get a larger slice of the pie and a whole raft of sub prime home loans have been introduced allowing a greater number of people access to home loans, not only as a way to borrow to buy their first home, but as a way of releasing equity from their home. Lenders then packaged up these sub-prime home loans and sold the debt to financial institutions all over the world.
As long as house prices were rising everything was fine. However, as they started to slow down and in some areas fall, it increased concerns that if the borrowers defaulted then lenders were unlikely to get all their money back.
Modern accounting methods force financial institutions into taking a worst case view on their assets and as a result many companies are having to crystallise paper losses, even though we have yet to see the extent of the loan defaults. Whilst in the context of global markets, sub prime lending is a relatively small amount, the ensuing write downs has led to a reluctance for institutions to invest in these packaged products and an
overall tightening of the belt. The resulting difficulty in institutional lending has impacted nearly all markets and sectors.
On a positive side, this has meant that cash deposit rates are quite high as banks look entice investors to balance their overall book of lending.
Diversification creates opportunity
As a personal investor in the markets for over 20 years,I personally experienced a number of cycles.
The one thing that is apparent time and time again is the value of a diversified portfolio.
Managing your own money is a very emotional experience and not only effects the value of your portfolio but can easily fall over into your work and personal life when you see significant falls in your portfolio and relate that to how hard you had to work to earn it in the first place.
One of the biggest mistakes I see in a portfolio time and time again is a lack of diversification. Investors sense of loyalty to the planner that put them in the product 10 years ago or a feeling of affinity for the fund that did so well when they first invested but has since fallen by the wayside find themselves over exposed to an asset class. Thus increasing the risk of their investments whilst they continue to sit in an outdated or underperforming fund.
Our portfolio healthcheck service, can help you with an independent appraisal of a funds performance, helping you to manage your own portfolio and understand if your overweight in certain asset classes.

This month, we have highlighted a couple of investment opportunities for investors looking for returns in a falling market and cover some of the basics for end of year tax planning.

Cromwell (unlisted) Property Fund
Favoured by many investors for their tax deferred income, unlisted property funds have once again come to investor attention after they have continued to provide returns in a falling market.

p11
FEA Plantations Project 2008 (tax effective forestry)
There is an increasing gap between world supply and demand of timber coupled with the current tax incentives makes for a compelling investment

p8
Free Portfolio Healthcheck
Probably the worst thing you can do is sit on an portfolio full of proverbial “dogs” in the hope that they’ll somehow get their act together and produce you the great returns overnight. We’re giving investors the opportunity to get a free report across all their managed fund investments.

p13




Portfolio Healthcheck
FUNDS FOCUS Investment newsletter: Issue 2, June 2008

2/13
Order a ZERO entry fee PDS

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Cromwell Property Fund

FEA Plantations 2008 Forestry Project

DDH Graham - Bank of Queensland Money Market Account

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Download the funds focus newsletter

This month, we have highlighted a number of investment opportunities for investors looking for returns in a falling market and cover some of the basics for end of year tax planning.
 

Cromwell (unlisted) Property Fund.

Favoured by many investors for their low volatility and tax deferred income, unlisted property funds have once again come to investor attention after they have continued to provide returns in a falling market.

p11
 

FEA Plantations Project 2008 (tax effective forestry)

There is an increasing gap between world supply and demand of timber coupled with the current tax incentives makes for a compelling investment

p8
 

Free Portfolio Healthcheck

Probably the worst thing you can do is sit on an portfolio full of proverbial “dogs” in the hope that they’ll somehow get their act together and produce you the great returns overnight. We’re giving investors the opportunity to get a free report across all their managed fund investments.

p13
 
Portfolio Healthcheck