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Don't
be,
short-sighted ...
about
performance.
With performance
tables for fund managers appearing almost daily in financial papers
and magazines, there is always the temptation to choose a manager
based on good short-term numbers. However, this is a trap for the
unwary investor.
The adage "past performance
is not a guide to future performance" really is sound financial advice.
For example, in the William M Mercer retail multi-sector survey, the
number one performer for the year to 31 May 1998, fell to 30th place
(out of 45) one year later.
Top performance is generally
very difficult to sustain and can result in undue risk to the investor.
It could mean taking large 'bets' on certain investments, which may,
or may not, result in outperformance of other managers.
There is, however, no denying
that performance is an important aspect when selecting a fund manager.
The difficulty is interpreting the numbers so that they are relevant
to your circumstances.
What you need to keep in
mind are your financial goals and the time you have to achieve them.
The next step is to match the performance tables to your situation.
For example, say you want to save some money to renovate your house
in the next 18 months. An appropriate investment for this type of
short-term goal may be a cash management trust or term deposit. The
easiest way to select a suitable trust or deposit of this type is
to compare the rates for the period that you want to invest for, so
in this case, short-term numbers are relevant and important.
Alternatively, say you want
to retire in 10 years time. In this case, short-term performance is
not as important. It is the longer-term numbers that you should compare.
Managed funds with investments
in shares and property are generally suitable for long-term investment
goals. Short-term performance is affected by temporary movements
in investment markets and by economic conditions overseas, and can
vary enormously from month to month. Over the long term, however,
performance tends to smooth out, and a more reliable picture of the
returns can be seen. Long term performance also shows a manager's
ability to cope with a variety of market conditions.
Rothschild has a disciplined
investment approach with a focus on providing consistently competitive
performance over the long term. We do not aim to be the best performer
in the market because this can carry with it undue investment risk,
to which we do not subscribe. In a recent article in the Australian
Financial Review, the Rothschild Balanced Fund was ranked 5th out
of 22 managers over 10 years and 8th out of 27 managers over five
years (source: William M Mercer).
For
more information on the issues raised in this article, or
about Rothschild's managed investments and retirement funds,
please call 1800
672 222
between 8.00am and 7.00pm (Sydney time), Monday
to Friday,
or visit our website at www.rothschild.com.au.
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Rothschild
Disclaimer
This
report has been prepared for general information only and does not
contain and is not to be taken as containing any securities advice
or securities recommendation.
Investment in any
Rothschild managed investment may only be made on the application
form attached to the current prospectuses or offer documents which
are available from the Manager, Rothschild Australia Asset Management
Limited (ACN 000 727 659) and which have been lodged with the Australian
Securities & Investments Commission where appropriate. Rothschild
receives fees from the issue of units in these funds and from time
to time holds units that it has repurchased which it may resell at
a price which is higher than the price it paid for the units. Rothschild
may also vote on such units subject to the provisions of the relevant
Trust Deeds.
Nothing in this
material constitutes an offer of any investment or an invitation or
solicitation to subscribe for or purchase any investment to any person
in any state, foreign country or jurisdiction where such offer or
solicitation may not lawfully be made.
The information
is based on Government laws and regulations current at time of issue
(May 1999). This information is not intended to be relied upon for
the purpose of making an investment decision. This material provides
general information only and does not constitute financial advice
or a recommendation in respect of any Rothschild product and should
not be relied upon as such. The material is made available in good
faith by Rothschild and has been derived from sources believed to
be reliable and accurate. However, it is not intended to be a complete
description of the matters described and Rothschild assumes no responsibility
for updating any information contained in this material or for correcting
any error or omission which may become apparent after the material
appears on the Internet.
Copyright in the
material reproduced on these pages is owned by Rothschild. Except
to the extent otherwise permitted by the Copyright Act 1968 (Cth),
the material may not otherwise be reproduced or displayed in public
and may not be distributed or transmitted electronically to any other
person or incorporated by any means into another document or material,
including other websites. Without limiting the generality of the foregoing,
Rothschild does not permit reproductions of its material in other
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of other financial planners or competitors in circumstances when it
has not given its prior written consent.
Investments in the
funds are not deposits with or other liabilities of NM Rothschild
& Sons (Australia) Limited (ACN 008 458 366) or of any other company
in the Rothschild Group, and are subject to investment risk, including
possible delays in repayment or loss of income or capital invested.
Neither the repayment of capital nor the investment performance of
the funds is guaranteed by NM Rothschild & Sons (Australia) Limited,
the Trustee or the other companies in the Rothschild Group.
AFSD
Disclaimer Notice
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