Should you hide under a bridge?
We understand your concerns about the market sell-off due to the spread of Coronavirus and the oil spat between Saudi Arabia and Russia.
But our long-term strategy remains firmly in place:
Make the most of the power of compounding. We invest primarily for income. Higher income means that our cash pool grows, so we can invest more into high dividend paying shares.
Then, we get more income, so we can buy more stock to keep boosting income – we get dividends on dividends, compounding the return.
Although we buy stocks, we are actually buying companies and businesses, with sound cashflows and dividend streams. We will still receive dividends, even though prices have been battered.
Is this just a short-term aberration? History tells us “Yes”, but only time will tell.
In the words of Warren Buffett “Trouble is always coming, buy stocks anyway… My reaction is that I like to buy stocks, so I don’t wish ill on anybody else. But if they want to sell them to me cheaper, I prefer it.”
Don’t get thrown off by scary events or market cycles. Falls in asset markets can throw investors out of a well thought out strategy at the wrong time – as some were at the end of 2018, then they missed out on the gains throughout 2019. Don’t get panicked into selling.
Sometimes markets are not pretty. We are at an extreme and we don’t know how long it will go on for – it’s normal to want to run from the threat, but eventually it will pass. Here’s a refresher of our take on market downturns.
Respected commentator Peter Switzer is of the view that this is a panic sell for no reason. The facts are that more people die of normal influenza each day than coronavirus.
The falls we have seen are similar to those in the GFC. The advice back then in 2008 and 2009 was also to not sell, but instead to hold onto quality shares (which most of our clients hold), and then to build on those holdings if and when cashflow is available.
These are difficult times, but they are not the first that we have encountered, and they won’t be the last – it is part of investment life. Just don’t let your emotions run away with the media – they won’t live happily ever after.
Please contact us if you would like further information or clarification via email at investments@austasiagroup.com or call us on (08) 9227 6300 and ask for the Investments Team.
Best regards,
Denise Locantro
Associate Director
Wealth Management and Protection
Important information and disclaimer
This publication has been prepared by AustAsia Group, including AustAsia Financial Planning Pty Ltd (AFSL 229454).
Any advice in this publication is general only and has not been tailored to your circumstances. Accordingly, reliance should not be placed on the information contained in this document as the basis for making any financial investment, insurance, or other decision. Please seek personal advice before acting on this information.
Information in this publication is accurate as at the date of writing, 11 March 2020. Some of the information has been provided to us by third parties. While it is believed the information is accurate and reliable, the accuracy of that information is not guaranteed in any way.
Opinions constitute our judgement at the time of issue and are subject to change. Neither the Licensee nor any member of AustAsia Group, nor their employees or directors give any warranty of accuracy, nor accept any responsibility, for any errors or omissions in this document.
Any general tax information provided in this publication is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent.
