Many business owners have been so focused on keeping their businesses afloat during the last 18 months that they have neglected their personal finance. When you look at your personal wealth situation are you happy with the plan that you have for your future retirement? What things could you change today to affect your desired retirement?

Accumulating wealth is the goal of any good investor, but is all wealth created equal? And how you rate the investments you currently have?

In terms of being able to fund your retirement lifestyle and becoming financially independent, a rough guide is to have an amount that can support withdrawals of 5 per cent a year. For example, those who wish to spend $100,000 a year would need at least $2 million invested.

And don’t forget tax. People would need more than $2 million invested to fund $100,000 a year after tax, also assuming their investments are of a quality that can maintain at least 5 per cent earnings.

Here are 10 key things to weigh up when analysing the quality of your investment portfolio.

1. Goals and objectives – how much do you want for your retirement and when do you plan on retiring? If your goal is to have cash to fund a certain lifestyle, then the 5 per cent rule of thumb above is the best approach. But if the goal is instead capital accumulation, the types of investments required are different.

2. The structure for holding investments is important, too. It affects accessibility and also tax. A 65-year-old having all their investments in superannuation is great for minimising tax and optimising accessibility. But the same can’t be said for a 50-year-old who cannot access their superannuation until they retire.

3. Understanding your liquidity – can you access the funds when you need them? If you need to access funds to cover living and over expenses, having investments tied up in areas such as property is not ideal – managed funds or shares are much easier to access.

4. Diversity – how are your investments spread across the broad asset classes? Australian shares, international shares, property/infrastructure, fixed interest and cash? Within each class, how well have you diversified? An Australian equity portfolio containing just the big four banks does not represent diversification. Managed funds can be useful to improve your diversification.

5. What level of risk are you prepared to accept? A cautious investor may prefer less risky assets, like cash or bonds, but these won’t deliver a 5 per cent return in the current environment. The traditional 70/30 asset allocation split that was providing returns of 7-8 per cent is now predicted to return closer to 4-5 per cent over the next 10 years. Lifting the riskier part of a portfolio to 80 per cent, with the remainder in fixed interest and cash, could boost the average annual compound return by about half a percentage point, to between 4.5 and 5.5 per cent.

6. Quality of investments – Make sure you seek out the ratings and reports of researchers to find out the true quality of investments.

7. Expected returns - Different investments have different return profiles over different periods of time. They also have different tax outcomes. Capital growth tends to be more tax effective, for example, than the yield on income-producing investments.

8. Timeframe – The duration of your portfolio is key, are you investing for the long term (potentially even for the next generation) or are you investing to create funds to buy property in the next five years?

9. Don’t forget wealth protection. The use of superannuation and trusts can be effective in protecting investments from creditors. Insurance products such as income protection can help protect accumulated wealth if you can no longer work.

10. And finally, is the wealth administered and structured in a manner that will be easy to bequeath to beneficiaries upon death? This includes keeping reliable records and making sure beneficiaries know where these records are kept.

If you feel you have considered all of these factors appropriately, congratulations! If not, use this opportunity to improve your wealth rating in as many areas as possible.

HLB Mann Judd have specialists in different areas of personal wealth management to help you achieve your financial goals. These include superannuation, insurance, debt and estate planning experts as well as personal wealth advisers.

If you would like to speak to an adviser about your personal situation, please contact Kim Kelloway at HLB Mann Judd on 02 9020 4285 or email kkelloway@hlbnsw.com.au.

Author – Michael Hutton, Partner, Personal Wealth Management, HLB Mann Judd