by Abraham Aguilan, Director | Senior Financial Adviser
HOW DOES THE RECENT MARKET DOWNTURN AFFECT MY INVESTMENTS AND SUPERANNUATION?
Your investments and superannuation will be affected by the recent market downturn, the extent depends on the asset allocation of your portfolios which is constructed based on your Risk Profile (i.e. Conservative, Balanced, Growth, Aggressive) informed by your tolerance to investment risks that were assessed by your Adviser.
Photo: Drone Footage in the COVID-19 epicentre, City of Wuhan, China. (Source EuroNews)
WHAT IS THE CURRENT MARKET OUTLOOK?
Historically, when markets suffer from corrections like these, the rebounds have been strong. Right now is the opportune time to buy good quality companies at a lower price. We remember the worst economic downturn in recent memory (2008/09 Global Financial Crisis illustrated below) but we forget the tremendous recovery story from 2009 all the way through to 2020.
Chart: S&P 500 – 10 Year Daily Chart Excerpt from Macrotrends
I have always emphasised to investors in adopting a long-term view whether you are invested in real estate or the share markets. You are not investing today for a quick buck tomorrow but to have an asset that can produce solid returns in the future.
For example, one stock in our portfolios that will fare well through this affair is Ramsay Health Care (RHC.AX). Ramsay is Australia’s largest private hospital operator. It owns a strong portfolio of hospitals and clinics globally, but its share price is down 30% from its highs. In the near future, there will be a decline in elective surgeries (partially offset by a pick-up in patients transferred from public hospitals) but in the long-run little has changed—they own high performing hospitals that will benefit from an ageing Australian population who needs quality healthcare.
Looking forward, interest rates will be low. Globally, fiscal stimuli will be strong and the peak fears surrounding COVID-19 may well be behind us. Equity markets have survived world wars, terrorist attacks, and a Global Financial Crisis. A global pandemic, while no doubt a serious issue, will also pass in time.
Without a doubt, the pro-active management of your funds is key to navigating through these uncertain times. In a long-term framework, those who capitalise on this buying opportunity will own great businesses at attractive long-term valuations.
WHAT IS INFUSION360 DOING TO MANAGE THE CURRENT MARKET ENVIRONMENT?
Our portfolios are actively managed by both the INFUSION360 Investment Committee and the fund managers selected. Our Investment Committee reviews the asset allocations of our portfolios for each Risk Profile (i.e. Conservative, Balanced, Growth, Aggressive) and selects the fund managers that we believe are best positioned to navigate through the current market employing asset selection. In volatile circumstances like these, our Investment Committee seeks to employ managers that have a focus on capital preservation by investing in defensive sectors such as Health Care and Utilities.
SHOULD I SELL MY INVESTMENTS?
Selling investments during a market downturn should only be done as a last resort if capital is required to fund or supplement income needs.
SHOULD I SELL MY INVESTMENTS AND WAIT UNTIL THE MARKET BOTTOMS OUT?
If you were perfectly honest, you probably would not be able to do so, every time. Markets are unpredictable, so it would be wise to spread your risk through diversification in a longer-term investment strategy. The greatest returns are made by investing over the long-term. As we invest in good quality companies, the price at which you bought a share is not important. How long you hold it was what truly matters.
WHAT TO DO WITH MY MONEY? IS NOW A GOOD TIME TO BUY MORE SHARES?
You should first determine whether you are going need access to your money in the short term. You should have a long-term view and active management strategy during volatile times to make the most of your investment.
1. Invest for the long-term — Make sure you have three-to-six months’ salary saved in cash or your Home Loan Offset Account for a rainy day because any money you invest in the markets should be locked away for long-term goals.
2. Contribute regularly — Invest a fixed sum regularly into the same asset over a long-term period. This allows you to buy more units when the price is low, and fewer units when the price is high. It’s a strategy known as Dollar-Cost Averaging.
3. Take advantage of compound interest — Time in the market is more important than timing the market. Earn interest on the interest you receive by sticking to a disciplined investment plan.
4. Diversify, diversify, diversify — We should aim to give your portfolio exposure to a broad range of assets from bonds, stocks to property assets. What’s that saying about putting all your goose eggs in one basket?
GREAT, WHAT CAN I DO ABOUT IT NOW?
First Step – Assess your portfolio’s asset allocation over the long term. Complete a Risk Tolerance Questionnaire.
Second Step (Accumulators) – Determine how much capital or surplus cashflow you can invest to take advantage of the current market, if any.
Second Step (Retirees) – Complete a budget to determine how much income you need from your portfolios.
Third Step – Schedule in a call with your Relationship Manager to review your portfolio and investment strategy.
Register here for our “INFUSION360 Webinar – COVID-19 Update” if you would like an invitation on this topic. Those who registered but miss attending it will be emailed a link to watch it in their own convenience.
For more insights on how this affects your personal circumstances, speak to Bryan Tan | Relationship Manager at 0417 949 429 or email him directly at email@example.com.
This article is for general information purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient’s personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs.
This information is not to be regarded as a securities recommendation. The information in this document may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information in this document is complete and correct, to the maximum extent permitted by law neither INFUSION360 accepts any responsibility or liability for the accuracy or completeness of this information.