2. 2 Discussion AMP went through a lot of financial difficulties in 2003 because of the failure of its UK operations. Their share price plummeted. Does this mean that you should have sold your AMP managed funds?
3. 3 Understanding risk Managed funds are very diversified. The fund’s risk is how “uncertain” the returns are compared with the long-term average return. The chance of a fund “defaulting” and not being able to pay you back any money is extremely low. The funds assets are a mixture of shares, bonds and units in property trusts. If you want your money back then the fund just sells some of its assets. However, a few “property funds” went bankrupt in the 1980s because they couldn’t sell the commercial properties when investors wanted their money back.
4. 4 Game - Arrange the following investments along the risk scale: Lower average returns over 10 years, but less uncertainty of returns in any given year Higher average returns over 10 years, but more uncertainty of returns in any given year
5. 5 Discussion Which is the most appropriate portfolio for a graduate who doesn’t want to touch their funds for 7 years and is willing to accept a moderate level of risk? A) 50% Australian Shares, 30% International Shares, 20% Property B) 70% Australian Shares, 30% Fixed Interest and Cash C) 40% Australian Shares, 20% International Shares10% Property, 30% Fixed Interest and Cash D) 30% Australian Shares, 70% Fixed Interest and Cash E) 70% Fixed Interest, 30% Cash
