Strategic Asset Allocation

Research suggests that 90% of investment returns are generated from the most appropriate asset allocation. The remaining 10% is from fund selection and/or instrument (e.g. stock) selection.

Some base investment prinicpals we think you need to be across:


Asset Classes

There are 11 broad investment asset classes that meet different objectives and each have their place in a well-diversified portfolio.

Each asset class then falls into one of two broad categories:

  • Income – You receive an interest rate without any capital gain or loss (Cash and Bonds)
  • Growth – You receive an income (dividend, yield, rental income) and a capital gain or loss (all others)

Each asset class has an approximate time frame over which it achieves its long term average return. The following graph



You can diversify your investments both within an asset class and across asset classes.

Within an asset class, you can diversify by owning a number of instruments (e.g. the Top 50 shares on the NZX, or 10 investment properties around NZ) or by acquiring a Managed Fund where your investment is pooled with others to purchase a number of financial instruments. Thousands of Managed Funds, Direct Shares; Direct Bonds; and Cash Products are available should you choose.

Diversifying across asset classes can be achieved by acquiring multiple financial instruments across asset classes (see above). Your diversification can be structured to suit your Risk Profile, Risk Capacity, and Investment Objectives and broadly split between Income Assets and Growth Assets..


Strategic Asset Allocation