3 financial principles to help you weather the storm

How the world has changed in just 5 weeks (since the ASX high on 19 February). In many ways it seems surreal.

Firstly, we acknowledge that for some, those severely affected either medically or financially, life may never be the same. Our hearts go out to these people.

However, for the majority, we are seeing resilience, support and adaptation, essential characteristics that will see us survive this crisis. From unprecedented Government support packages for businesses and individuals, to medical research into testing, cure and vaccination, to flexible lending practices and greater adoption of video conferencing for work and social engagement. The issue is when, not if we get back to a new normality.

What we also know is that by sticking to our research driven, tried and tested Investment Principles our clients are well placed to weather the financial volatility. We construct portfolio’s with time’s like this in mind, focussing on THREE KEY PRINCIPLES:

• LIQUIDITY - so you don’t have to sell assets at their lows to fund expenses
• DIVERSIFICATION – so you benefit from both Defensive and Growth Assets, and
• STAYING THE COURSE – so that you fully participate in the recovery when it comes 

Whilst we acknowledge that it is never nice to see the value of your portfolio fall, properly constructed diversified portfolios are suffering far less than the headlines grabbing swings in equity Markets (for example, the Australian Share Market is down 31.5% from its February peak and the US market is down 25%) and will recover over time as markets return to normal. For example:

• a typical balanced portfolio (50% Defensive and 50% Growth Assets) has fallen approx. 13% from 1 January to 27 March after rising 16% in calendar 2019
• a typical growth portfolio (30% Defensive and 70% Growth Assets) has fallen approx. 18% from 1 January to 27 March after rising 19% in calendar 2019

If you'd like some help to steer your financial ship through the Covid 19 storm, then please reach out. The team at Absolute Wealth Advisers are all on deck!