The MoneyBrilliant Save and Invest tool uses a number of model portfolios constructed by BetaShares to illustrate possible investment returns and risk with saving and investing.
We also use an example portfolio constructed entirely of cash. The expected returns of this portfolio are based on the Bloomberg Bank Bill Index and are consistent with the long run “neutral” RBA cash rate.
The BetaShares Strategic Asset Allocation portfolios are constructed using Exchange Traded Funds (ETFs). ETFs are typically a very cost effective investment product and they can be used to provide exposure to a variety of different asset classes and investments.
The BetaShares Strategic Asset Allocation model portfolios are based on the following long-term asset class assumptions. These assumptions are reviewed on an annual basis at the start of each calendar year.
Long term asset class assumptions
| Asset Class | Benchmark | Yield | Capital | Total Return | Comment |
|---|---|---|---|---|---|
| Cash | Bloomberg Bank Bill Index | 2.75% | – | 2.75% | Assumes a gradual lift in official interest rates towards the ‘new neutral’ rate of 3% p.a. |
| Australian Bonds | Bloomberg Australian Composite Bond Index | 2.75% | – | 2.75% | Assumes a gradual rise in yields from low levels will constrain overall fixed-rate bond returns to broadly equal cash returns over the forecast horizon. |
| International Bonds | Bloomberg Global Aggregate Bond Index | 2.50% | – | 2.50% | Assumes a gradual rise in yields from low levels will constrain bond returns over the forecast horizon. |
| Australian Property | S&P/ASX200 Listed Property Index | 5.00% | 2.00% | 7.00% | Assumes income of around 5% p.a. plus earnings growth close to inflation will be partly offset for a small valuation detraction as bond yields rise. |
| Australia Equities | S&P/ASX200 Index | 4.50% | 5.00% | 9.50% | Assumes income of around 4.5% p.a. plus earnings growth close to nominal GDP will be partly offset by a modest valuation detraction as bond yields rise. |
| International Equities | MSCI All World Equity Index | 2.50% | 5.00% | 7.50% | Assumes income of around 2.5% p.a. plus earnings close to nominal GDP. A narrowing in the still relatively high equity-to bond yield gap will allow valuations to withstand a modest increase in bond yields. |
| Gold | Gold bullion spot price in $US | – | 2.50% | 2.50% | Gold is expected to grow at close to global expected inflation of around 2.5% p.a. |
Annual Return Standard Deviation and Correlation Matrix
| Asset Class | Standard Deviation | Cash | Australian Bonds | International Bonds | Australian Property | Australian Equities | International Equities | Commodities |
|---|---|---|---|---|---|---|---|---|
| Cash | 1.5% | 1 | ||||||
| Australian Bonds | 3.5% | 0.5 | 1 | |||||
| International Bonds | 3.0% | 0.5 | 0.75 | 1 | ||||
| Australian Property | 15.0% | -0.25 | 0.25 | 0.25 | 1 | |||
| Australia Equities | 15.0% | -0.25 | -0.5 | -0.25 | 0.5 | 1 | ||
| International Equities | 15.0% | -0.5 | -0.5 | -0.5 | 0.25 | 0.75 | 1 | |
| Gold | 15.0% | 0.5 | 0.25 | 0.5 | -0.25 | -0.25 | -0.75 | 1 |
APRA/FSC/ASFA Standard Risk Measure
| Risk Band | Risk Label | Est # negative returns every 20 years |
|---|---|---|
| 2 | Conservative | 0.5 – 1 |
| 3 | Moderate | 1 – 2 |
| 4 | Balanced | 2 – 3 |
| 5 | Growth | 3 – 4 |
| 6 | High Growth | 4 – 6 |
Strategic Asset Allocation Model Portfolio
| Asset Class | Conservative | Moderate | Balanced | Growth | High growth |
|---|---|---|---|---|---|
| Cash | 25% | 15% | 10% | 5% | 2.5% |
| Australian Bonds | 35% | 32.5% | 25% | 17.5% | 7.5% |
| International Bonds | 20% | 17.5% | 15% | 7.5% | 0% |
| Australian Property | 0% | 0% | 2.5% | 3.5% | 4.5% |
| Australia Equities | 10% | 17.5% | 22.5% | 31.5% | 40.5% |
| International Equities | 10% | 17.5% | 25% | 35% | 45% |
| Gold | 0% | 0% | 0% | 0% | 0% |
| Defensive | 80% | 65% | 50% | 30% | 10% |
| Growth | 20% | 35% | 50% | 70% | 90% |
| Income | 2.75% | 3.00% | 3.00% | 3.25% | 3.50% |
| Total Return | 3.75% | 4.75% | 5.50% | 6.75% | 7.75% |
| Std Dev | 2.50% | 4.00% | 6.00% | 8.50% | 11.50% |
| # negative years in 20 years | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 |
| Probability of negative returns | 5% | 10% | 15% | 20% | 25% |
