This month’s Wealth Pipeline continues our discussion on mitigating sequencing risk. Specifically, we focus on the art of investment portfolio construction and the use of absolute return/capital preservation funds, fixed interest, low correlation assets and international securities.

This month’s wealth pipeline was intended to continue our discussion on mitigating sequencing risk.  However, due to the recent mid-year budget announcement by the Government, our discussion on mitigating sequencing risk will resume next month.  This wealth pipeline focuses on the superannuation aspects of the mid-year budget.

This Wealth Pipeline specifically discusses objective based investing and strategies used to mitigate sequencing risk.

Sequencing risk is the risk of receiving the worst returns in their worst order. Conventional wisdom assumes that retirees and those relying on investment income are solely affected by sequencing risk. However, sequencing risk also affects wealth accumulators as they continuously and frequently contribute capital after the initial investment has been made. The idea of sequencing risk contrasts with the principle that time in the market heals all wounds.

Whether franking credits can be offset against an individual’s net tax payable revolve around what is commonly known as, the 45 or 90 day rule.  The 45 day rule applies to ordinary shares and the 90 day rule applies to preference shares.  In this Wealth Pipeline we will be discussing the 45 day rule.