Watching the news on Covid-19 has a very sobering effect on us all. Our hearts go out to everyone effected by the virus in these challenging times. We hope you and your loved ones are keeping safe, secure and well.
Maintaining perspective, understanding risk tolerances and getting advice
Have a balanced portfolio
Don’t try to pick winners - it’s not a time to gamble
Let’s revisit the risk profile of your investment portfolio – does it match the times
Be ready, be patient, and go with the flow (safety in numbers)
Having a balanced portfolio is about mitigating risk through diversification, diversification, and diversification! Across industries and within industry sectors. Low risk dependable sectors will continue to perform in these uncertain times. Returns may be modest, but at least dependable. Some industry sectors may not rebound quickly and some not at all. Having investments spread across industries is a proven strategy to mitigating risk.
Many investors will have seen a decline in the value of their equity value in comparison to their cash and bond assets. It might seem counter intuitive, but now could be a great opportunity to consider rebalancing such investment portfolios, to consider if they could move back into equity opportunities that are undervalued at this time.
Rebalancing has proven itself as an effective way to capture the upside of every market cycle. Investing when lower entry prices are available on under valuations present opportunity for higher returns over the longer term.
Note of warning, it’s natural to look for opportunity in these times. The current specific set of market circumstances have certainly created favourable situations for some companies’ products and services. Their fortunes may be medium or short lived it’s hard to say. Circumstances on the ground and Government actions are currently changing rapidly.
It is prudent to be looking for companies and products that are well positioned, but also well-funded and resourced to be winners in the long-term. We’ve been identifying pockets of value where several businesses and assets are now trading at prices that are substantially below their assessed long-term value. Basing decisions on what we know, and what we can control.
Your previous risk profile and appetite was more recently set against a very different market backdrop. Maxim have a Risk Profile questionnaire that may help you establish if your approach at this time to achieve your investment objectives should be defensive, conservative, balanced, growth, performance orientated or aggressive. Your previous strategy for the recently ended bull market may have had you invest in very different securities than what is appropriate for the right risk profile for this current situation. Contact a Maxim Financial Advisor if you would like to revisit your Risk Profile.
Investors often act emotively. Given the under valuing of many businesses and assets we can appreciate that the market has potentially priced in overt negativity against a backdrop of interest rates that will likely remain lower for longer. There will eventually be a sustained recovery. Share prices might not rebound immediately and not to the levels previously seen in the recent bull market. There may also still be further periods of volatility to come.
Now is not a time to act hastily, staying the course remains general good advice, but equally it isn’t a time to put our heads in the sand, under pillows and just hope for the best. Being ready and able to take advantage of market opportunities is key to equity investment.
If you would like to discuss how your investment portfolio is positioned please contact your Maxim Financial Advisor.
This article reflects general views and opinions of Maxim Financial Markets Limited at the time of publication. Nothing within the article should be relied upon as a basis for making any investment decision. Please contact us to seek specific investment advice before making any investment decision. A Financial Advisor disclosure statement is available upon request.