Coronavirus investment opportunities – what to look for in share markets

While share markets have experienced some of the sharpest falls in history, amid the Coronavirus pandemic, savvy investors have been looking out for opportunities created by recent events.

Travel, tourism, retail and universities are among some of the hardest hit sectors in Australia, due to Coronavirus.1 On the flip side, pharmaceuticals, video conferencing, entertainment streaming and e-commerce marketplaces have been coming out on top.2

So, if you’re looking for investment opportunities for long-term returns, here are five principles that may help you get started. But keep in mind, share markets are unpredictable, even when things seem to be improving they can turn very quickly.

1. Keep a long-term perspective

When making changes to your investment portfolio, it’s important to have a long-term view and plan to have your money invested for a while.

Just as we’ve seen a decline in share markets recently, historically it has recovered. From the 1987 Stock Market Crash to the bursting of the Tech Bubble in 2000, each trigger is different and the time it takes to recover varies too. It could take months or even years.

As such, if you do decide to make changes to your investments during the current volatile markets, it’s important to remember that the future is uncertain. Markets are constantly revaluing company prices with new information so this volatility is likely to remain until there’s certainty around the containment of Coronavirus.

2. Do your research

There’s a lot of ‘noise’ about the current state of the market, so keeping informed and getting an in-depth understanding about where you’re investing, is key.

Here are just a few of the things you could consider when looking at listed companies in the share market.

  • Does the company have a good track record?
  • Where does it get its earnings from, domestically or internationally?
  • How much debt does it have and when is it up for renewal?
  • How are the company’s earnings going to be affected by Coronavirus?
  • Does the business have a strong competitive advantage?
  • Does it have stable revenue and income?
  • What are its risks in different economic environments?
  • What price would you be prepared to pay for shares in the company?
  • What are the risks specific to this company, its industry, and share market more generally?

If you decide to purchase shares in a company, consider monitoring it and any share market announcements, including financial updates or results, issues affecting the industry and any competitors.

You may also want to keep an eye out for any news coverage and interviews about the business to get a feel for their current and long-term viability.

And that’s just the beginning. You need to consider how you’ll reduce your exposure to the risks of investing in that company. Most people manage that risk by investing in many companies and asset classes because their performance is influenced by different factors.

3. Look for the red flags

It’s important to distinguish between companies who have seen their share price fall as a result of market panic, caused by events like Coronavirus, and those that have fallen because they were already unstable and their weaknesses have been revealed by the economic downturn.

When identifying these undervalued shares, consider how much Coronavirus will impact the company now and in the future. It’s also important to look at the company’s balance sheet and business model to see if it can withstand this pandemic, or if it’s prospects are substantially compromised by a further drop in share markets.

Other red flags to look out for include companies with a significant amount of debt or those that may be highly affected by economic conditions.

You may also want to check the company’s position regarding ethical and sustainable investing and whether it aligns to your own values.

4. Consider contributing regularly

One of the ways to take advantage of a market downturn is to contribute a fixed amount to your investment portfolio on a regular basis.

The main benefit of this, as opposed to making a lump sum payment, is that it can help to reduce the impact of market volatility.

If you’re contributing the same amount of money as you were when markets were performing well, then when markets fall, you’re effectively purchasing at lower prices. For long-term investors, this is a great way of taking the guess work out of timing when to invest. Reality is, no one knows the best time to invest.

5. Seek support from professionals

Investment manager

You may not have the time or resources to do the analysis required to identify quality long-term investments so investing with a professional investment manager is an alternative option.

These companies have teams of experienced investment professionals doing the hard work for you and you pay them a fee for it. It’s important to consider if you’re comfortable with their investment approach and how they manage risk versus return.

Financial adviser

Obtaining independent advice from a financial adviser, before making any decisions, can help you design a plan to achieve your own financial goals. It may also provide you with a better understanding about the risks and rewards of investing and appropriate investments for you.

Bottom line: share markets are unpredictable so remember keep a long-term perspective. Given the complexities of investment decisions, it’s important to stay informed and seek support from professionals.

1https://www.businessinsider.com.au/coroanvirus-australian-industries-businesses-affected-impact-2020-3

2https://theconversation.com/coronavirus-your-guide-to-winners-and-losers-in-the-business-world-134205

 

Source: https://www.mlc.com.au/personal/blog/2020/05/coronavirus_investme

Economic and market update video – May 2020

Economic and market update video – May 2020

The coronavirus has had a significant impact on investment markets.

Bob Cunneen, Senior Economist at MLC, discusses what to expect over the coming months in this 5 minutes video.

Source: https://www.mlc.com.au/personal/blog/2020/05/economic_and_market

 

 

The purpose of good financial advice in a crisis

The purpose of good financial advice in a crisis

In this 3 minute video, MLC’s Brendan Johnson discusses the role of good financial advice during COVID-19 and how clients want to build confidence and a sense of control in this extraordinary time.

We are here to help, contact Dev Sarker at 1300 7171 136 today.

 

Source: https://www.mlc.com.au/personal/blog/2020/04/the_purpose_of_good

Economic and market update video – April 2020

Economic and market update video – April 2020

The coronavirus has had a significant impact on investment markets.

Bob Cunneen, Senior Economist at MLC, discusses what to expect over the coming months in this 5 minutes video.

Source: https://www.mlc.com.au/personal/blog/2020/04/economic_and_market

Global Financial Crisis in 2008 again?

Are current market events a repeat of the Global Financial Crisis in 2008?

Current market volatility is distinctly different to the GFC. For one, banks will be part of the solution this time, not the problem. Portfolio Manager, Myooran Mahalingam discusses in this video.

 

 

 

 

 

Managing your super in a market downturn

We’re here to help you understand what happens in a share market downturn,

If you’ve seen a decrease to your super balance as a result of the coronavirus, it’s understandably cause for concern.

When your balance goes down (or up), it’s as a result of changes in the value of investments in your super fund — this could be a mix of cash, shares, fixed income, property, and more—and, of course, your balance will change when you or your employer adds money each month, or when you withdraw money in retirement or through insurance premiums, fees and taxes.

Severe as they can feel, events like this aren’t permanent. In fact, based on history, markets have bounced back from other global shocks including epidemics like SARS and Swine Flu.

In this article, we’ll address five key areas to consider when it comes to thinking about your super in a market downturn and when there’s increased volatility.

1. Maintain a long-term perspective

Super is like any type of investment, there will be times of highs and lows. For the majority of Australians, super may be our longest-term investment given we start investing in super when we get our first job and don’t access the money until retirement.

It’s also the nature of investment markets to change rapidly, particularly shares, property or fixed income investments. The share market for example, is a public market so when the share market rises or falls, changes in share prices may impact the value of your super if it’s invested in shares.

Markets recover with time

But from what we’ve seen in the past with events that disrupt investment markets, markets do eventually recover, it just takes time.

From the 1987 Stock Market Crash to the bursting of the Tech Bubble in 2000, each trigger is different and the time it takes to recover varies too — it can take months, weeks or even years. While disruptions to markets occur fairly regularly, they are impossible to accurately predict.

So, if you do decide to make changes to your investments during falling markets—like switching to a different type of portfolio—it’s important to also consider what impact that will have on your returns when markets recover.

The value of $10,000 invested for 70 years

The dollar value 70 years later is shown at the end of the graph (at 31 December 2019) with the average annual return in brackets.

2. Review your investment strategy

While these events may make you want to take action, it’s important to take a moment to consider your investment strategy including why you invested that way in the first place.

Understanding the investments that make up your strategy and how they are expected to perform over long periods of time, can help you think about your strategy objectively, instead of reactively. Particularly short-term market volatility which can influence your investment decisions.

If your strategy is intended to be a long-term plan, which may be the case for those with a long way to go before they retire, making decisions based on short-term market fluctuations may greatly affect whether you achieve your long-term goals.

If you’re approaching or are in retirement, it’s still important to stay focused on your investment strategy. Carefully consider all of your options, and their impact on your retirement goals, before making any significant changes. Speaking to a financial adviser may help with this.

3. Be aware of your risk tolerance

It’s always important to consider how you feel about risk and market volatility.

By understanding your risk tolerance, you’ll be better able to make decisions about the structure of your investment portfolio in a way that aligns to you personally. Risk tolerance depends on how you feel about taking risk and your ability to do so, such as whether you are financially able to bear the risk.

Asset classes like shares and property, have higher return potential and experience greater fluctuations in value, than cash or fixed income investments. How much exposure you choose to have in each of these asset classes, may change depending on your level of comfort, especially during periods of investment market instability.

4. Consider diversification

One of the most effective ways of reducing the impacts of investment fluctuations is to diversify. Multi-asset or diversified funds invest across multiple asset classes to assist in reducing volatility.

Diversification essentially follows the concept of not putting all your eggs in one basket by spreading your money across many asset classes, countries, industries, companies, and even investment managers.
When one area of your portfolio is weak and falling, another may be rising strongly. If you have money invested across many areas, changes in their values tend to balance each other out.

Diversification doesn’t mean you can avoid negative returns altogether, but it helps reduce the size and frequency of fluctuations in your portfolio. Particularly compared to if you’d only invested in shares, for instance.

5. Seek support from a professional

Super funds have lots of information available online to help you understand your savings.
Working with a financial adviser can help you design a plan to achieve your financial goals. They may also provide you with a better understanding about the risks and rewards of investing and how you can manage risk.

While the impact of market volatility can affect your super, it’s important to remember it won’t last forever. The investment strategy you adopt should take into account factors including—your financial goals and the savings required to get there, the number of years you have to invest, the return you can expect from your investments, and how comfortable you are with volatility.

We are help to help. Contact Dev Sarker at 1300 717 136 today.

Article source https://www.mlc.com.au/personal/blog/2020/04/managing_your_super