I hope you are all keeping healthy and positive during these very extraordinary times. Easier said than done, but try not to listen to all the media reports and the hype around the current economic climate. I acknowledge it is concerning and that we have reached levels we did not in any way, shape or form expect.
Let’s have a look at the ASX 200 (the top 200 Australian Companies) over the last 5 years:
We can see quite clearly that the market has fallen to levels not seen since the first half of the year in 2016. What is astounding is the speed of how quickly the market has fallen. There are numerous reason for this correction and it really can be described as a ‘perfect storm’ of events:
- Markets before the fall were highly overvalued – remember this is, at heart, a correction.
- The COVID-19 effect has had a major disruption on trade and business
- Russia and The Emirates are having a huge stoush over oil production and pricing
- Fear has gripped the public at large like we may not have seen before (think panic buying and irrational toilet paper ‘stockpiling’)
So what do we do now?
For those requiring access to their retirement savings now or in the next few years
- Selling assets in a down market will crystalise losses. Do not make wholesale changes to your portfolios.
- At this stage, you own basically the same number of units and shares that you did before the market correction, and it is only the price of these units and shares that have fallen.
- Portfolios should have an allocation to defensive assets and cash to allow you to ‘ride-out’ this downturn without having to sell assets.
- Cold comfort for you, but, controlling your expenses and any lump sum withdrawals is the best way for YOU to have a positive impact on your portfolio right now.
- Talk to us. Sharing your concerns and speaking to your financial planner is a great way of understanding what is happening and what you should be doing.
For those NOT requiring access to their retirement savings now or in the next few years
- Opportunities abound! We have not seen buying conditions like this in the last 30 years!
- Review your asset allocation in your investments and retirement savings and consider allocating any excess cash or defensive assets to equities and other growth assets. Discuss this with your financial planner first!
- Sit tight, relax and know that your funds will recover before you will need to access them.
- If your debt interest rates have fallen, make extra payments where possible to accelerate the capital debt reduction. At the very least, review your debt position with a qualified mortgage broker
- Consider allocating any excess savings and cash flow to a dedicated investment savings structure to capitalise on the opportunities that currently exist.
- Have a Plan B – make sure your income is protected and your insurances are adequate. Discuss this with your financial planner.
As always, we are here for you and happy to chat about any concerns you may have.