As you are no doubt aware the Coronavirus or as it is now called Covid19, has seen a significant rise in infection rates outside China.
This has seen market lose come capital value over the last week of trading. Remember that investment involved two types of return. Income Return and Capital Return. The capital return is what we see nightly on the news reports about share markets while the income return is what is paid out as dividend.
We often talk about markets liking known factors. Markets are made up of human beings making decisions on a daily basis around how much they think something is worth and what risks are about at any point in time. With a possibility of a Global Pandemic and markets hitting high points over the last few months we are seeing a correction in Global and Local Share Markets.
The rising threat to the Australian economy from coronavirus is adding to the likelihood that the Reserve Bank of Australia will cut rates in March or April and the pressure for more stimulus in the May budget is increasing.
The key for most of us as investors is to recognise that share market falls are inevitable and hard to time and so it’s best to keep and take a long-term view to investing and stay the course.
Keep in mind that based on asset allocation in your investments (superannuation accounts or wealth portfolios) you will have a percentage to defensive assets like Cash and Fixed Income and the current market volatility is impacting the Australian and International Share components only.
These companies will continue to pay their dividends or income returns over the short term and while the impact plays out in the economy. Any commercial or residential property exposure in the growth sector should remain relatively stable during these times. This is the reason we diversify your portfolio approach and always say that you shouldn’t put all your assets into one basket.
In times like these is it often hard to keep the courage to stay the course but for long term investors this will be a blip in the overall returns of your investment framework.
Scott Malcolm has been awarded the internationally recognised Certified Financial Planner designation from the Financial Planning Association of Australia and is Director of Money Mechanics. Money Mechanics is a fee for service financial advice firm who partner with clients in Melbourne, Canberra, Newcastle and Sydney to achieve their life and wealth outcomes. Money Mechanics Pty Ltd (ABN 64 136 066 272) is a Corporate Authorised Representative (No. 336429) of Infocus Securities Australia Pty Ltd (ABN 47 097 797 049) AFSL and Australian Credit Licence No. 236523
The information provided on this article is of a general nature only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information you should consider its appropriateness having regard to your own objectives, financial situation and needs.