9 Mar 2020
Global Market Correction
As you will be aware global markets have been correcting. The message I wish to pass on is not to panic and sell. If you sell any unrealised loss will be crystallised. At the moment, if you have a loss then it is a “paper loss”.
In reviewing your portfolio I observe your overall returns have significantly decreased as your unrealised profits have been reduced. Most of you have bonds (a capital protection product) in your portfolio and these are a hedge against equities.
The next point I wish to make is that now that the market has come back when you are buying you are doing so at lower prices. This is called dollar averaging down and is a normal element of a regular investment plan. It is important to continue to invest and receive the benefits of compounding and regular investing.
The coronavirus will have an economic impact and the Federal Government is preparing a stimulus package in an attempt to counter it. The RBA stepped in first reducing the cash rate to 0.50% this means term deposit and deposit account returns will be less than inflation (about 1.5%) which means your real returns will be negative (0.50%-1.50% = 1.00%). This means that holding large amounts of cash over the long term is not a sensible investment strategy
Finally, when the “herd is fearful it is the time to be fearless”.
If you wish to discuss, please feel free to call.