Level 3, 18 Dequetteville Terrace, Kent Town SA 5067

(08) 8362 0060

(08) 8362 0061

info@owlfinancial.com.au

Hold on… bumpy markets ahead

Hold on… bumpy markets ahead

After period of optimism, global investment markets have hit the panic button on fears about the possible economic impact of the coronavirus (COVID-19).

At times like these, it’s good to get some perspective.

Australian shares rose 24 per cent last year, touching record highs, and 10 per cent a year over the past seven years. Global shares rose 28 per cent last year and 17 per cent over the past seven years.i After such a good run, many observers have been saying shares were looking fully valued and that a correction was likely.

The thing with market corrections is that it is impossible to predict what will trigger them or how long and severe they will be.

Avoid knee-jerk reactions

At this point, markets are responding to uncertainty. Nobody knows what the extent of the economic fallout will be, so the temptation is to bail out of shares and put your cash in the bank. Or jump ship and switch to a ‘safer’, more conservative option in your superannuation fund.

While the urge to act and protect your savings is understandable, knee-jerk reactions can be a mistake.

It’s near impossible to time the markets. Not only do you risk selling when prices are near rock-bottom, but you also risk sitting on the sidelines during as the market recovers. As history tells us it always does.

In an ever-changing world, the basics of investing stay the same. By sticking to some timeless rules it’s much easier to avoid emotionally driven reactions and focus on your investment horizon.

Have a plan

Investing is a lifelong journey and like all journeys you are more likely to reach your destination if you plan your route. Without a plan, it’s easy to be distracted by the latest market worries and short-term price fluctuations.

Think about your personal and financial goals and what you want to achieve in 1,5,10, 20 years’ time. Be specific, put a dollar figure on your goals and plan how to reach them.

Low risk comes with lower returns

Many people are wary of investing in shares because of the perceived risks. Growth assets such as shares and property do entail higher risk than cash in the bank, but they also deliver higher returns in the long run.

Perhaps the biggest risk of all is not earning the returns you need to achieve your goals. While domestic and international shares produced stellar returns last year, cash returned just 1.5 per cent which was below the level inflation. Cash returns were not much better over the past seven years, averaging 2.2 per cent a year.

Spread your risk

Shares, property, bonds and cash all have good years and bad. While shares and property tend to provide the highest growth over time, there will be years when prices fall or go sideways. In some years, bonds and even cash produce the best returns.

A good way to reduce volatility and enjoy smoother returns over time is to diversify your investments across and within asset classes. That way, one bad investment or difficult year won’t sink your ship.

The most appropriate mix will depend on your age, the timing of your goals and your risk tolerance. You will need cash for emergencies and short-term goals, with enough money in growth assets to last you through your retirement.

Let your savings grow

The effect of compound interest is often referred to as magic, but there’s no trickery involved. Better still, it requires no work on your part, just the willpower to reinvest the income you earn on your investments, so you earn interest on your interest.

Rather than sell shares in quality companies in a panic, you could continue to collect your share dividends and reinvest them in more shares or other quality assets. This way, you avoid crystallising short-term paper losses and benefit from the inevitable market recovery.

That’s the simple but powerful concept behind superannuation which locks away your savings and all investment earnings until you retire.

When fear is driving markets, it’s important to get back to basics and think long term. If you would like to discuss your overall investment strategy, don’t hesitate to get in touch.

https://www.chantwest.com.au/resources/2019-a-standout-year-for-super-funds

Contact us on 0883620060 to discuss your existing financial plan

Owl Financial Management (OwlFM) is an Adelaide based Financial Adviser that has clients all over Australia.



Financial Advisor Adelaide

We are an award winning practice that has been providing financial advice to South Australians since 1969. We really enjoy getting to know our clients and building a relationship with them that lasts over many years. We have a diverse range of clients from mum and dad to AFL players to ASX CEOs. All of which have a diverse range of financial advice needs and very different relationships to maintain. Our clients describe a 'breath of fresh air', personable, expert and people with high integrity. Clients have also mentioned that they are not treated as a number and the advice is specific to them. Working with clients for clients.

Financial Planner Adelaide

The one most rewarding thing about being a financial planner in Adelaide is when you have been working collaboratively with a client in developing and building their goals and objectives and the come to fruition. This give both the clients and myself a real sense of achievement and to use the famous quote 'are we there yet?' and together we can say YES! There has never been a better time to look towards what you want to achieve and start a financial plan so you can get there too.

Financial Planning Adelaide

A person's financial story is like a jigsaw puzzle... "lots of pieces needing to be put into their correct places". A financial adviser can assist a client to put the pieces in the right places by having a series of simple conversations about where a they are currently situated, where they want to be and what strategies can assist them. Every client has a different financial story and goals. Each jigsaw puzzle will always be different. A good financial adviser is experienced at putting together a wide range of jigsaw puzzles. Helping a client put their own puzzle together and seeing their satisfaction is a wonderful feeling.


Barry Phillis, Chris Scriva and Owl Financial Management Pty Ltd are Authorised Representatives of GWM Adviser Services Limited Australian Financial Services Licensee Registered Office at 105-153 Miller Street North Sydney NSW 2060 and a member of the National Australia group of companies.

GENERAL ADVICE WARNING: The advice on this site may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.

Opinions constitute our judgment at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. View Terms & Conditions >