Covid Markets: One Year On
A busy few weeks here at Metric Wealth with a few new clients coming across and plenty of follow up work from my recent trips to clients in Brisbane and Melbourne.
Looking back on some of my first email musings 12 months ago - I wrote about the world being ‘on sale.’
As Nick Murray, one of the great teachers of Financial Planners says, "I don't know exactly how things will turn out all right, I just know that they will turn out all right."
However, optimism does not sell newspapers. Even the relatively sensible Sydney Morning Herald was using words like Bloodbath early in March last year.
Panicked investors who were advised to sell out of portfolios to "wait for things to settle" have potentially lost years of retirement income and independence if they did.
I think I have mentioned to some of you, that of the many clients I was looking after at my previous firm, whilst several rang to discuss what was going on, ultimately only one of them moved to cash. When I last spoke to that client before I left the firm, he was still waiting for the perfect moment to ‘go back in.’
The short term pain relief he’d felt from moving to cash (and subsequently realising he’d made a mistake) was paralysing his ability to make a corrective decision.
Many Australians did the same, a recent study estimated 20% of Australians moved their portfolios to more cautious options. The scary thing is that many of these people were advised to do so. Any Adviser that did so should probably look for another career, but many will have talked their way out of it by reinvesting in the last half of 2020 (with their poor clients unknowingly missing out on a large portion of the markets recovery.) The compounding effect of jumping in and out of investments, will lose many years of their ability to support you.
Sometimes ‘doing nothing’ is the right thing to do. Your wealth will build through a well diversified portfolio and you'll maintain this wealth through good behaviour, it's that simple. Never underestimate human ingenuity, and the market's ability to be forward-looking.
Right now, the dread we felt at the opening of each market day has been forgotten by most. This is unfortunate, as future corrections will happen again and maybe the recovery won’t be as rapid as this has been. The way you’ll get through it again is by exhibiting the same good financial behaviour.
The 27th March 2020 was the lowest point of the ASX300. I would suggest you all take a moment to log into your investments on Monday and set the returns chart to ‘Last 12 months.’ It’ll be a nice start to the week.
