As restrictions start to lift, many Australians are starting to think longer-term and there is growing optimism about the future. Many people are also thinking about their finances and how to approach investing as we emerge from the crisis.
As part of the Investment Team at Apt Wealth, we are constantly researching and collaborating with investment managers, asset consultants and research houses across the country to ensure Apt clients have current information on the economy, markets, and opportunities. Here are my top tips for investing post-COVID 19.
Your approach shouldn’t change
Your overall investment approach should remain the same; continue thinking long-term and looking for quality shares that you would have been happy to hold prior to COVID-19.
Diversification should remain a critical part of your approach. Diversification helps you to protect and grow your assets and ensures income is derived from a blend of assets, as there is still a lot of uncertainty about which industries will emerge from the crisis in a strong position.
This crisis has also reaffirmed the importance of financial advice in helping you stay the course and weather financial storms. The right adviser, supported by a strong investment team, will ensure you are in the best possible position to stay on track with your financial and life goals.
Reset your income expectations
During a downturn, there is an opportunity to grow your portfolio and purchase quality investments at reduced prices, but you will need to reset your income expectations in the short term. The 5-6% you may have previously expected may no longer be realistic in an environment where interest rates are near zero and companies are navigating through to the other side of this crisis.
Look at industry trends
COVID-19 has had an impact on all sectors and there is still a lot of uncertainty about what the future holds, but there are some trends starting to emerge.
Real Estate Investment Trusts (REITs)
As most companies shifted to remote working during COVID-19, many are asking commercial landlords for rent holidays or some form of relief. Over the long term, many companies are tipped to retain a percentage of their workforce working remotely, and this may change their ongoing commercial space requirements, all of which will impact REITs.
Pre-COVID-19, we were already seeing retailers facing headwinds with the growth of online shopping, and this will most certainly be accelerated now. Businesses in non-essential retail have seen falling revenues as many chose or were required to close storefronts. The retail market has been volatile, so investors are wise to be cautious and seek expert advice.
Banking and Finance
We are seeing some caution when it comes to investing in the banking and finance sector, as low interest rates, predicted increase in bad and doubtful debts, and the likelihood of reduced profits weigh on investor’s minds. Many of our major banks have also cut or suspended dividends.
However, Australian banks are heavily tied to our economy, and since the Global Financial Crisis (GFC), have built up their capital buffers to help them weather downturns. And while many are comparing COVID-19 to the GFC, it’s important to remember that the current volatility has been caused by a health crisis not a financial one, and the impact on our banking sector isn’t likely to be the same.
The move to remote working and the likelihood that it will stay in some form, has also seen growing interest in office technologies, with many predicting the next tech boom. But investing in the technology sector can be difficult if you don’t have the right knowledge, so it’s best to work with an adviser to help you navigate opportunities and mitigate risks.
A public health crisis has increased the interest in healthcare investments, and there are certainly some companies in this sector who are outperforming the market, particularly those who are working towards a cure or vaccine, or provide essential medical equipment, such as ventilators.
On the other hand, many private healthcare providers, such as those who run private hospitals, have seen a decline in revenues with the hold on elective surgeries. This can present an opportunity to buy quality companies in this space.
Before COVID-19, Australia was already making significant infrastructure investments and this is tipped to continue, if not increase, as we enter a recovery. It is difficult for retail investors to gain direct access to large infrastructure investment opportunities, however, there are some listed infrastructure investments that can be worth considering. Look for market-leading companies, who have stable cashflows, and provide an essential service, as these will be the most likely to emerge in a stronger position when the economy rebuilds.
Understand the impact on global markets
Just a few months ago, we lived in a highly interconnected world, but the pandemic has closed borders and cut-off global supply chains. We will see highly varied results from global markets as a result, and if you are investing in them, it’s important to understand their response to COVID-19 and long-term outlook.
If you are taking a long-term approach to your investments and aligning them with your financial and life goals, there are opportunities to grow your portfolio as we emerge from COVID-19. However, to make the most of the opportunity, it is critical to have experts in your corner who can help you navigate life’s uncertainties and protect and grow your wealth into the future.
General Advice warning
The information provided in this blog does not constitute ﬁnancial product advice. The information is of a general nature only and does not take into account your individual objectives, ﬁnancial situation or needs. It should not be used, relied upon, or treated as a substitute for speciﬁc professional advice. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) and Apt Wealth Home Loans (powered by Smartline ACL 385325) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.