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July 06 newsletter

Managing investments for clients is a significant part of our business. While the website has substantial resources for the DIY investor, we'd like to take this opportunity to let you know about the services the Shape of Money offers to those investors who prefer to take the advice of an adviser and leave the hassle of chasing rents from absconded tenants to others.

Why use the Shape of Money?

We aim to deliver a high level of service. This ranges from a personal style which is open, honest and ethical, through to a technical approach built on independence, conservatism and cost effectiveness for the client.

Investment Plan

The investment plan and recommendations are based on your financial position, investment horizon, investment goals and risk profile.

Risk Profile

the Shape of Money will undertake a risk profile analysis to consider both your tolerance for risk and your capacity for risk. Correct assessment of your risk profile is a very important component of the development of the investment plan.

Diversification

the Shape of Money has a philosophy of always developing a portfolio of investments which is diversified and which meets the risk profile of the client. A diversified portfolio will include investments across the various asset classes, including cash, fixed interest, property, Australasian shares, international shares and absolute funds.

Security

Risk comes in many forms, from inflation to credit risk. The two primary forms of risk we focus on, however, are volatility of returns, and loss of capital. the Shape of Money takes a conservative approach to developing investment plans. With age comes grey hair and experience. Markets and individual investments do go down from time to time. the Shape of Money does not forget this, and will structure an investment portfolio to minimise the loss of capital. For example, we would recommend that a client forgoes an extra 2% return on an uncertain investment in order to protect 100% of their capital.

Fees

the Shape of Money charges an up front fee for the development of an investment plan. The cost typically starts at around $900 (including GST). This enables us to develop an investment plan which is completely independent. All up front commissions are rebated.

the Shape of Money charges an ongoing monitoring fee which usually comprises 1% (including GST) of the funds under management. Again, by charging a fee for service, we are not dependent on recommending only those investments that pay a commission. Nor will you therefore be railroaded into the investment which is paying the highest commission. The ongoing monitoring fee includes portfolio custodial services and their associated reporting and flexibility.

Managed Funds

the Shape of Money currently uses managed funds for its recommended investments. There is no hard and fast rule about using managed funds. Of the hundreds of funds that make up the universe of managed funds, the Shape of Money recommends just a small number.

Managed funds have been heavily criticised in the past. While the impending changes to tax legislation will remove some of the concerns around their tax effectiveness, issues around their cost structures and overall returns continue. We only use third-party recommended funds with above average risk-adjusted returns.

We use managed funds because the fund managers are the experts. For example, if we were to put together a fixed income investment portfolio, we would need to manage the duration of the portfolio and assess the credit risk of each investment. the Shape of Money draws on the skill and resources of the experts to do that, and that's how they earn a management fee.

Returns

While we aim to deliver a high level of service at a cost effective price, we also strive to provide the best possible return for the level of risk undertaken. As an example, our medium growth (or balanced) investors earned in excess of 20% for the year ending 31 March 2006. Of course, we don't expect results like that every year. Using the same funds and strategies, the clients would have received an average of 6% (after tax and fees) over each of the previous eight years.

Expert Third Party Advice and Research

the Shape of Money buys third party research through FundSource, which provides the initial starting point for recommending any managed fund. the Shape of Money will also engage other professionals, such as an accountant, to provide expert advice when required.

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If you don't have the Shape of Money on your side, then look before you leap.