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A reassuring financial update amidst the COVID-19 chaos.
Nathan Lear
Partner/Private Client Adviser
17 Mar 2020
The Coronavirus (Covid-19) is continuing to wreak havoc on investment markets. On the 16th March 2020, the S&P/ASX 200 fell by 9.7. Its worst day since 1987. The Australian market has now fallen by around 30% from recent highs and is back to the same level it was in early 2016. In fact, at around 5,000 points, our market is also at the same level as it was 14 years ago in 2006.
We acknowledge that times like this can be difficult for investors to hold their nerve and stay calm.
Some questions our clients have asked are:
- How bad is this market going to get?
- When will we see the bottom?
- Is now the right time to buy/rebalance my portfolio?
Our clients at Hewison Private Wealth have been able to accept some uncertainty and stay calm for the following reasons:
- Although the sharemarket has fallen 30%, Hewison client portfolios are diversified, and therefore have not suffered the full falls of the sharemarket, providing downside protection.
- Client portfolios hold cash and other liquid fixed interest investments that can be called on to buy quality equities at depressed prices, otherwise known as rebalancing.
- Portfolio income remains strong. While there might be a capital reduction, the income our clients’ portfolio’s generate has remained unchanged.
- Client portfolios have been diligently rebalanced over the past few years in a rising market where we have effectively been locking in profits. This ensured portfolios were not overexposed to equities.
Making predictions and timing the market is fraught with danger. In times like these we rely on each client’s strategic asset allocation to rebalance portfolios. This takes away the emotion when making investment decisions.
While the circumstances that have resulted in the current market falls are very different to the Global Financial Crisis (GFC) of 2007-2009, our messaging is very similar . We look back now on the decisions to rebalance portfolios during the GFC and see the value that those changes added to portfolios in difficult times.
While the economy may be in for some pain, the sharemarket and the economy do not always move in perfect synchronisation. Sharemarkets are often forward looking and can bounce quickly.
In times like these, the following Warren Buffet quote is a good reminder. “Be fearful when others are greedy and greedy when others are fearful.”
For over 100 years the market has been increasing with a positive long-term upward trend. Over these years, markets have overcome a lot from global financial crises to world wars. I don’t expect this time to be any different.
Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email [email protected] or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.