Why Has My Balance in My Diversified Fund Dropped?

Interest rates around the world have gone up recently. This has caused the value of fixed interest investments such as bonds to fall. The fall in the value of bonds can directly impact the value of your fund.

To understand why your fund’s balance has dropped, it would be helpful to know more about the fixed interest investments that your fund invests in.

Your fund’s allocation to fixed interest investments is part of the defensive component of the portfolio, which is your collection of financial investments. The defensive component is generally lower in risk and less volatile than the aggressive component or ‘growth’ investments, such as shares and property that are listed on the stock exchange. This helps diversify the overall risk and returns in a portfolio.

Fixed interest investments are issued by governments, banks, and companies. A borrower, like the Australian government, can borrow money in different ways, including fixed interest investments called bonds. Bonds pay investors regular interest at a fixed rate, called coupon payments. The borrower agrees to pay back the original amount borrowed to the investor at the end of the established period such as 5, 10, or 15 years.

Many bonds are listed on a financial exchange such as the Australian Securities Exchange (ASX), which means they can be traded or bought and sold. For investors, bonds offer the ability to lock in a better rate than ‘at call’ cash invested in a bank account or money market investments. Because a bond is a riskier investment than cash, they generally offer a better rate.

Recently, interest rates around the world have gone up. This has caused the value of fixed interest investments to fall. The fall in the value of bonds can directly impact the value of your fund. This is because the market value of your fund and its investments is tracked and re-priced daily. Therefore, your fund balance falls in line with the market and will rise in line with the market.


At Bluerocke, we specialize in helping High Net Worth, soon-to-be High Net Worth and want-to-be High Net Worth professionals and business owners.

Please contact us through our web-site www.bluerocke.com, if you need such help.

Negative Returns and the Quality of Fixed Interest Investments

You may wonder if negative returns mean that your investment has gone bad. Rising interest rates do not mean the quality of the fixed interest investment has changed, and it is normal for the interest rate cycle for the value of fixed interest investments to rise and fall.

It is a normal part of the interest rate cycle for the value of fixed interest investments or bonds to rise and fall over time. Rising interest rates don’t necessarily mean that the quality of the fixed interest investments in a portfolio has changed. Like before, issuers are still expected to keep paying the fixed rate of interest. When the bonds in your portfolio reach the end of their term, the issuers are expected to return the total value of the amount invested in your fund.

Other risks of fixed interest investments include:

Credit risk: when the issuer may be unable to make future income or principal payments.

Inflation risk: when inflation rises, an investor in bond will require a higher return on the investment to compensate for the effects of inflation.

Liquidity risk: when the bond may not be able to be sold quickly for a price that represents its market value.


At Bluerocke, we are very experienced in helping High Net Worth, soon-to-be High Net Worth and want-to-be High Net Worth professionals and business owners.

Please contact us through our web-site www.bluerocke.com, if you need such help.


When It’s Time to Get a Financial Adviser


Financial advice isn’t just for the wealthy or those close to retirement. You might consider working with a financial adviser if you are not confident in your financial decisions because you don’t have the time, knowledge, or capacity to explore your options.

It can be hard to navigate the financial world, but you don’t have to do it alone. You might consider working with a financial adviser if you are experiencing the following:

A lack of time

It can be challenging to carve out time to sit down with your finances if you are balancing work and family life. And making big financial decisions can be overwhelming and take time away from work and relationships. A financial adviser can work with you by researching options and advising on a course of action that help you work toward your goals.

Confusion about the market

With so many investment products on the market, it becomes hard to be sure if you’re getting a good return for the risk that is involved. A financial adviser can clarify the concepts for you, with in-depth knowledge of investments and markets.

Moreover, as your financial adviser reviews your current situation and goals, they get a better understanding of your appetite for risk. They can create an achievable plan that matches you with quality investment solutions that suit your circumstances. They can also identify investment opportunities that you might not have found out about otherwise.

A major life event

When a major life event occurs, it has a ripple effect across your finances. For example, when you get married or move in with a partner, you might want to merge finances and redefine shared financial goals. A financial adviser can guide you throughout the entire process, by outlining the financial implications of a decision and working to build or adjust your financial plan, ensuring you stay on track.

Considering making an important purchase

Although you make financial choices every day, certain financial decisions are more significant than others. For example, you may come into an inheritance, or receive a bonus at work or a redundancy payout. In these cases, there is a strong temptation to splurge the cash.

You might be exploring different ways to make the most of the money: should you pay off your mortgage, boost your super or invest it for the future? A financial adviser will walk you through your options and what they mean for your situation, so you can feel confident in your financial decisions.

Financial stress

People often choose to work with financial advisers for the peace of mind it gives them and their families, particularly if they’re experiencing financial stress. Financial stress can accost anyone, regardless of age or background, and can have a profound and lasting impact on your health and relationships.

Building your wealth faster

There are several assets classes  structures and strategies that will help build your wealth faster and to higher levels- the longer your remaining working life is, the more your wealth can grow.



At Bluerocke, we specialize in helping High Net Worth, soon-to-be High Net Worth and want-to-be High Net Worth professionals and business owners.

Please contact us through our web-site www.bluerocke.com, if you need such help.

Why understanding your risk tolerance can help build greater confidence for retirement

By Ninda Hendy

The content is produced by the Good Weekend in commercial partnership with MLC.
When it comes to our nest egg, some of us are happy to simply rely on the wonders of compound interest to grow the balance. Others, meanwhile, leave it up to their super fund to take a few calculated investment risks on their behalf, confident it will pay off later.

How we feel about the financial risks that we take to grow our superannuation is known as risk tolerance.

In simple terms, an investor with a high-risk tolerance is more likely to risk losing some money occasionally in order to get better long-term results.

An investor with a low-risk tolerance, however, tends to favour investments that are more likely to preserve their original investment.

Risk tolerance is determined by a combination of factors, including your financial experiences, investment goals, what sort of retirement you would like to enjoy and how much time you have to invest.

Understanding your individual risk tolerance is an important step in understanding how super works. Investing based on your tolerance can have a big impact on the money available to you later in life, so it’s well worth taking the time to understand it now.

Growing an appetite for risk

Sydney couple Kiri Yanchenko and Wesley Taylor, founders of Australian skincare brand Amperna, have poured everything they have into their business, both personally and financially. And they are serious about growing their super.

The small business owners contribute 10 per cent of earnings each month to their super to mirror what they would be receiving if they were employed, based on the current national super guarantee.

Yanchenko says her appetite for risk has improved over the years, after watching her parents fight to keep the family home back in the 1980s. At the time, interest rates were hovering at an eye-watering 17 per cent, so making mortgage repayments was tough. Conversations about money were rarely positive, she says.

“That experience definitely determined my appetite for risk. I grew up erring on the side of caution when it came to money,” Yanchenko says.

But her husband, Wes, had a different experience growing up, and together, they decided it was worth taking a few calculated risks with some help from a financial planner.

Their super is diversified into both international and Australian shares, property and cash investments – and it has paid off already, with the couple well on track to retire comfortably.

“At the moment, given our age and where we are in life, we have a higher risk tolerance. So, we’re investing in high risk options,” Yanchenko says, adding that
they have organised quarterly reporting from a financial adviser to keep a close eye on progress.

“There’s some movement in our super balance each quarter, but in our view the longer term financial rewards far outweigh the risks.”

Calculating risk

Determining someone’s risk appetite is an important part of the job for MLC principal financial adviser Pete Brewster. He does this by asking customers a series of questions, before recommending tailored investment solutions.

“With the right context we can understand what you want to achieve and how this fits with your risk tolerance,” he explains.

“It doesn’t make any difference whether you’ve got a lot or a little in superannuation. Either way, you need to understand how your approach to risk will impact your superannuation and investment balances.

“It’s about knowing yourself well enough financially to understand what you’re comfortable with and making sure the investments made on your behalf reflect your risk appetite,” says Brewster.

For example, asset types that investors with a high-risk tolerance might consider are Australian and international shares, residential and commercial property.

“It might even be appropriate for some who are still accumulating assets and have a long-term approach to borrow to invest or ‘gear’. These types of investments may come with a lot of uncertainty day to day, and some risks of short-term losses, with an aim to gain for profit in the medium to long term,” Brewster explains.

In contrast, investors with a lower risk tolerance typically seek more certainty and security, with the knowledge they can withdraw exactly what was invested at any time.

“Alternatively, assets like term deposits or fixed interest investments might be more suitable for people with a low-risk tolerance who are happier to receive a much lower return for their peace of mind, more certainty and less ‘ups and downs’ in the short term.”

It’s a valuable conversation for anyone to have. “Once your appetite for risk is understood, you can have more confidence around your financial future and make better decisions to build your nest egg,” Brewster adds.

Eric Blewitt, CEO of stockbroker AUSIEX agrees. Super is a long-term investment, so you should consider its performance over the longer term. It’s not conducive to apply short-term thinking by tracking the daily fluctuations of the market, he says.

As you get closer to retirement, your financial adviser can help you assess the risk profile of your investments. They can discuss how to best structure your portfolio, which may involve transitioning into assets that are more stable, but still produce good growth and income.

“After all, retirement for many is a 20-plus year outlook. You want your money to continue to grow in a stable manner, as well as being able to withdraw funds to enjoy your retirement,” says Blewitt.

“Planning for retirement is an important exercise that involves investment and tax considerations. It’s advisable to seek advice in both areas to set yourself up confidently for retirement.”

Source: MLC https://www.mlc.com.au/personal/blog/2021/10/understanding-your-risk-tolerance

If you have questions and would like your financial situation to be evaluated, please email us on ds@bluerocke.com with your contacts, for an exploratory meeting, at our cost, not yours.

5 ideas for generating passive income

‘Passive income’ – the term conjures up images of long days relaxing on a beach free of financial worries because your investments are generating enough for you to enjoy life without needing a job.

Maybe the term ‘replacement income’ is more accurate as it gives the idea of working towards eventually replacing the income you generate from your job. Thanks to super, we’re all working towards the passive/replacement income in retirement goal.

There are also people who aren’t prepared to wait until retirement for passive income. You may have heard of the Financial Independence, Retire Early (FIRE) movement, made up of people devoted to a program of extreme savings and investment that aims to allow them to retire very early, like 30 in some cases!1

That’s probably a stretch for most of us, but aside from growing money in super, here are 5 ideas for generating passive income.

1. Property investing

We all know about Australians’ love affair with real estate. According to CoreLogic, more than 2.2 million of us, or around 20% of us, are property investors.2

Buying an investment property probably means borrowing money. In the early years, the cash flow from rental income may not cover loan payments. Depending on the type of loan (assuming it’s a principal and interest loan, and not an interest-only loan), over time, the debt is likely to be paid down and the rental income go up, so that eventually the property will generate surplus cash.

Hold the property long enough and the debt is likely to be repaid and you can enjoy the full benefits of a passive income source.

Of course, there are downsides to owning property like council rates, insurance, repairs, and upkeep. There can also be issues with tenants, some of whom may not treat the property well. And you can’t sell a bathroom if you need to access part of your investment.

For those who don’t want the hassles associated with direct property ownership, there’s the option of investing in listed property funds, also known as Australian real estate investment trusts (A-REITs), providing exposure to commercial property.

In the case of A-REITs, all property management, tenancies, and sourcing new properties are the responsibility of the manager of the A-REIT. It’s also diversified across lots of different property sectors, and regions.

But values of A-REITs do fluctuate more because they’re listed on the share market. Investors are constantly buying and selling A-REITs every day and in doing so they’re revaluing them constantly. Unlike an investment property, which is sold once in a blue moon.

2. Share ownership

Shares are another passive income source. Companies generally provide income in the form of dividends.

It’s also easy to diversify your share investments, especially if you own managed funds giving exposure to Australian as well as global companies.

You can also invest in shares through Exchange Traded Funds (ETFs), which are listed on the stock exchange and offer exposure to many industries, companies, and countries.

Shares, whether directly owned, or indirectly owned through managed funds and ETFs, are generally liquid. You can usually buy and sell them quickly, and it usually doesn’t require a lot of money to start investing in them.

The ASX website as well as MoneySmart are good sources of information about share investing.

3. Investing in bonds/fixed income

Governments, as well as companies, borrow money from investors. Those borrowings are known as ‘bonds.’  In exchange for those borrowings, governments and companies make interest payments.

It’s because of the interest payments made by bonds that they are also referred to as ‘fixed income’ investments.

Government bonds, especially those associated with the governments of advanced economies like Australia and the UK, are generally considered to be less risky than bonds issued by companies. Bonds are typically regarded as being less risky than shares. That said, bond values can go up as well as down, so they’re not risk-free.

There are many types of bonds with different structures and time horizons. Bonds are issued to institutional investors, like super funds, and minimum investments are generally measured in millions of dollars.

However, bonds are made accessible to everyday investors through managed funds as well as bond ETFs.

4. Start a low-input business

Starting a business on the side, especially one that doesn’t require a huge amount of your time, could potentially be an attractive way of generating passive income.

Businesses like laundromats, vending machines, even do-it-yourself car washes, come to mind.

Be clear that low-input doesn’t mean no-input. If you’re going to continue with your ‘day job’ while investing in these kinds of businesses, you’ll be hiring people to do things like restocking vending machines, and keeping laundromats clean and washing machines and dryers in good condition.

5. Be an Airbnb host

COVID-19 has been a massive hit to the travel and holiday market, including short-term Airbnb stays.

The upside is that the restrictions we’ve become accustomed to for health and safety reasons, will eventually end, and life will migrate to something resembling what we remember as normal. That should be a huge boost for the travel industry.

So, if you have an investment property, rather than renting it out for long-term tenancy, you could make it available for shorter stays through Airbnb and reap the benefits. Of course, you don’t even need an investment property to be an Airbnb host. Some people rent out a spare room in their house or apartment.

Other possibilities
In a world where technology has become so accessible, easy-to-use, and low cost, there are many more ways to try and generate a passive income than the five mainstream ideas mentioned.

There are people doing everything from creating their own YouTube content, to blogging, building and selling websites, and being online reviewers for products ranging from food to cars, and much more.

Taking action to develop passive income can help to add to the earnings from your 9 to 5 job or be the first step towards replacing the income from your job altogether.

It’s about your goals and motivations. All you need to do is get started.

If you have questions and would like your financial situation to be evaluated, please email us on ds@bluerocke.com with your contacts, for an exploratory meeting, at our cost, not yours.

Article Source: https://spotlight.morningstarhub.com.au/the-power-of-compound-interest/?utm_source=eloqua&utm_medium=email&utm_campaign=thought_leadership_research&utm_content=31686