How did we calculate past performance?

What are the general issues I need to understand?

  • This is an educational tool. As it provides only a rough assessment of a hypothetical scenario, it should not be relied upon, nor form the primary basis for your investment, financial, tax-planning or retirement decisions. The results of the tool may vary with each use and over time.
  • It is a financial projection model, not a prediction. The results from this tool are based on the initial investment amount, portfolio selection, time frame and any on-going contributions selected and assumptions made about the future. The amounts projected are estimates only and are not guaranteed. Investment earnings, tax and inflation can substantially alter these projections.
  • We have not considered your personal circumstances in providing this information. This tool is not intended to be your sole source of information when making a financial decision. There may be other factors to take into account. You should consider your own needs, financial situation and investment objectives before making an investment decisions. You may wish to get advice from a licensed financial adviser.
  • The tool combines simulated future economic scenarios with an assumed asset allocation (that mirrors the long-term target asset allocation for each portfolio) and the initial investment amount, portfolio selection, time frame and any on-going contributions selected to create a forecast. The tool runs multiple simulations of the selected model portfolio potential returns based on expected returns of an asset class. . While this tool cannot predict future investment performance, by simulating 500 hypothetical future economic scenarios, it can help you manage uncertainty and forecast the potential returns from an investment.
  • Moreover, updates to the tool may change the results over time as well as changes the information selected and market conditions. Accordingly, each time the tool is used, you should consider and compare the information with previous uses. The information used to form these assumptions has been obtained from sources that we believe to be reliable, but neither its accuracy, nor its completeness nor its timeliness is guaranteed. We make commercially reasonable efforts to update the information used in these assumptions and in the tool as soon as practicable after changes occur.
  • The tool considers the probabilities that certain asset classes might achieve certain results under different market conditions. The tool assumes a level of diversity within each asset class. There is a distinct possibility that market extremes may occur more frequently than the tool assumes and that the tool’s asset class forecasts may not reflect actual investment returns of the asset classes. Future results for all asset classes may materially differ from those assumed in the tool’s calculations.
  • The tool does not take into consideration all asset classes. For example, asset classes such as precious metals and currencies are excluded from consideration. Asset classes not considered may have characteristics similar or superior to those being analysed.
  • Forecast returns assume the reinvestment of investment returns, interest and dividends.

What are the core assumptions that impact this forecast?

  • All calculations and results from the tool are generated through simulations based on the forward looking capital market assumptions.
  • Our simulations are designed to give you a forecast of how the selected portfolio may perform by looking at a wide variety of potential market scenarios that take fluctuating market returns into account. Instead of basing our calculations on just one average rate of return, we generate a minimum of 500 computer simulations of what hypothetically may happen to an investment portfolio over a given time period. Each simulation includes up and down markets of various lengths, intensities and combinations.
  • The results of these simulations are then ranked from highest to lowest. A point on this spectrum is then selected to chart different scenarios. This is referred to as the scenario percentile. This engine uses the 25th and 75th percentile to form the upper and lower bounds of the projection. As such 50% of all simulated scenarios fall within the shaded portion of the chart. This forms the ‘Likely’ range of outcomes. For example, this means that out of 500 simulations of hypothetical economic scenarios, returns fall within the shaded range 250 times (50% of the time), below the expected range 125 times (25% of the time) and above the expected range 125 times (25% of the time).
  • All calculations are purely hypothetical and are not a prediction of your actual results.
  • It is important to note that the future could include any of the 500 market simulations as well as scenarios that could be better or worse than the 500 simulations represented.
  • The tool projects for personally held investments only.
  • All contributions are added to the account on the 31st December of each year.
  • Results are shown in today’s dollars, that is after inflation. We make the following assumptions about inflation:
  • 2.6% each year due to the rising cost of living (CPI inflation)
  • Results are shown as of 1 January each year

What impact do my contributions make?

  • This tool assumes contributions are consistent and are not indexed for inflation, that is if for example a contribution of $100 per month is selected this amount will be added for the entire investment forecast period.

Have you considered fees?

  • Yes, this tool accounts for significant fees in the product.
  • The following fees are included in the Wealth Forecasting Engine:
    • Administration fee of 0.30% plus $1.50 per month
    • Investment fee of 0.47%
    • Indirect cost ratio of 0.26%
    • Cash Holding Fee of 0.70% applying to the proportion held in cash (assuming 10% of the portfolio will be held in cash)
    • Expense recovery fee assumed to be $45
  • The following fees have not been included in the Wealth Forecasting Engine:
    • The in specie transfer fee (it is assumed no in specie fees are charged)
    • Other transactional or operational fees or charges that may be charged (it is assumed that no further fees are triggered or charged).
  • For more information about fees and costs, please see the Product Disclosure Statement.

Have you considered tax?

  • Yes, the forecast is calculated on an after-tax basis.
  • The tool assumes prevailing Australian tax legislation as at 1 July 2017. Any changes to tax laws will impact the calculations and results generated by the tool.
  • The tool does not take in account tax offsets including, but not limited to: Low Income Tax Offset (LITO), Senior and Pensioners Tax Offset (SAPTO), Spouse Contribution Tax Offset, Net Medical Expenses Tax Offset, Childcare Rebate.
  • All investments are assumed to be held for more than 12 months.
  • We assume that investors will provide a Tax File Number.
  • Investment earnings for investments held are assumed to be held in a personal name and taxed at the marginal tax rate for the assumed base level pre-tax personal income of $100,000. Any tax payable on these investments are paid the following year. Investment returns will differ if your marginal tax rate is different.