Managing your Money through this Crisis!

The most likely outcome of the efforts to contain the current health emergency is a near total shutdown of the world’s economy over the coming months. This is likely to lead to a near total collapse of many businesses, particularly those that have high financial leverage or high fixed costs. Only governments can prevent these businesses from failing. The potential financial and social consequences are very concerning.

We at YML understand and appreciate that being an investor is distressing at these times as we see large changes to our portfolio values every day. Our message is to remain calm, to not get sucked into this emotional roller-coaster and to remember that we are investing for the longer term. Although very harsh this time round, pull-backs in the markets are normal and anticipated.

We remain of the view that selling shares and crystallising losses is often very costly as timing the movements of values is almost impossible. Selling should only occur to meet urgent cash needs or required pension payments. Although we don’t know how far the markets will fall, what we are sure of is that when sentiment and fear about the virus and state of the world change, stock prices are likely to rebound sharply, and we would not want to miss those gains.

Important in these times is that we at YML remain focused on the uninterrupted management of your funds, also that we be available to talk with you if you wish and take what action is required swiftly. Our investment philosophy and approach to portfolio design has always been:

• To be mindful of the investor’s risk profile and invest accordingly.
• To understand our client’s financial objectives and the relevance of their portfolio.
• To diversify across different asset classes including international funds, to reduce risk.
• To invest in larger cap and quality companies with low debt and sound fundamentals.
• To hold high levels of fixed income and dividend-paying securities, particularly for clients in pension or requiring regular income.

We are pleased to report that following these investment principles has meant our client portfolios are performing better than the market overall. It is important to note that:

• We are holding onto what cash there is to take advantage of future buying opportunities.
• Our investment in to international ETFs and managed funds are unhedged and therefore have benefitted from the weakening Australian dollar.
• We do not directly hold any airline or hospitality shares.
• Portfolios generally hold listed Hybrid securities which on average have fallen in capital value of between 5% and 9% while equities have fallen over 25%.
• Because of the exposure to income generating securities, portfolios are receiving between 3% and 6% yields, cushioning falls.

Although each portfolio is tailored to each client’s needs, and differs in exact holdings, overall, the portfolios have dropped approximately 10% less than the ASX All-Ordinaries over the past three weeks.

This last week Warren Buffet said… “I can’t predict what interest rates, businesses or the stock market will do in the future, however that doesn’t mean I can’t do well investing over time”.

We appreciate the opportunity of managing your money and look forward to working closely with you and your investment needs as we navigate what lies ahead.

Please do not hesitate to contact me, Mark Raymond, on (02) 8383 4400, should you have any queries.

How can YML help?

Talk to our YML Financial Planning Team today to see how YML Group can assist you with managing your portfolios. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.