Stress Test your investments – Prof John Price

Professor Price also taught us to stress-test investments.

In engineering, such as building a bridge, the structure is tested before put into full use. An example was the Sydney harbour bridge – 80 locomotives were driven onto the bridge, to ensure it could take the weight. The load was in excess of the usual expected load, because the structure needs to be able to withstand weight and use well beyond it anticipated use.

With investments, the same can apply, but is rarely taught.

We find a company that has strong financials superior management key indicators. Not one or two is enough, we need about a dozen indicators.

Then the potential investment needs to be tested if it will give a satisfactory return even if there are downward changes in

  1. growth of earnings
  2. market opinion of the company, or industry
  3. level of dividends

No one can know what change will occur and when, nor can anyone know the resultant effect, but as in the case of Wotif shares falling when Webjet announced a profit warning before Dec 2010, and industry can be affected by one major player. If changes are beginning to occur more slowly eg less use of telephone books over internet searches, camera film to digital, there is time to adjust investments if companies don’t adapt in a timely many that indicates they can change and keep viable.

For more information and examples of investing lessons, as well as whether  self managed super is for you, come to a free meeting – see the up-coming seminar listed above for more details. See .


About SuperBenefitnews

Self-Managed Superannuation Service Providers in Australia. SuperBenefit provides a wholistic SMSF assistance, education and administration service continuum - 1. “assistance” is help of whatsoever nature where our overall SMSF experience and knowledge enables us to provide assistance/help without any legal (or “license”) limitations. 2. “education” involves providing knowledge through teaching, coaching and mentoring about all matters SMSF, including (but not limited to) investment issues such as equities and property, 3. “administration” encompasses all admin aspects of legally required SMSF trustee and member record keeping including (but not limited to) audit and ATO matters. In keeping with our key point that SuperBenefit does not provide Financial Advice, where issues arise from 1, 2, and/or 3 above Indicate a need for a legally authorized provider (such as a Financial Adviser) and the client does not have their own service provider, the client can utilize SuperBenefit’s ‘Connect Assist’ … SuperBenefit, in itself, does not provide Financial Advice, but it does provide the wherewithal for great SMSF service. WE do not provide Financial Advice or any other service that requires a legally authorized provider. However, where such advice or service is required we have our ‘Connect Assist’, a SuperBenefit resource we use to connect clients to a Licensed Advisor or other legally authorised service provider. Call us 0407 361 596, no obligation FREE Connection call to see how we can help you!
This entry was posted in SMSF Investing, SMSF Seminars. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s