The document discusses managed funds and risk. It states that while AMP went through financial difficulties in 2003, managed funds are diversified so the risk of default is extremely low. It also explains that a fund sells assets to pay investors rather than defaulting, though some property funds bankrupt in the 1980s when they couldn't sell properties. It then asks the reader to arrange investments on a risk scale from lower average returns but less uncertainty of returns to higher average returns but more uncertainty of returns. Finally, it asks which portfolio would be most appropriate for a graduate willing to accept moderate risk and not touch funds for 7 years.

1. GENC3003Personal Financial PlanningAndrew Hingstonandrew.hingston@unsw.edu.auUnit 14: Managed funds and risk

2. 2DiscussionAMP 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. 3Understanding riskManaged 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. 4Game - Arrange the following investments along the risk scale:Lower average returns over 10 years, but less uncertainty of returns in any given yearHigher average returns over 10 years, but more uncertainty of returns in any given year

5. 5DiscussionWhich 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% PropertyB) 70% Australian Shares, 30% Fixed Interest and CashC) 40% Australian Shares, 20% International Shares10% Property, 30% Fixed Interest and CashD) 30% Australian Shares, 70% Fixed Interest and CashE) 70% Fixed Interest, 30% Cash