Australian Investors and Markets “It’s Brutal Out There”
Australian investors may be cushioned from many of the direct blows that have been rocking markets, but being cushioned doesn’t mean you won’t get hit hard during times of market volatility says Thomas Mousa of TLK Partners. “It’s brutal out there right now,” he says, “and how you approach that investment environment depends on your personal financial situation.”
Know the Risks
In a volatile market environment, there are going to be some unexpected outcomes. Solid portfolio standbys can tumble. What was a relatively conservative investment yesterday becomes a cliff-hanger today.
“That’s why we always recommend hedging your bets with investment that targets sectors across a number of leading companies and spreads capital,” says Thomas. Currently, he says that keeping a higher percentage of your assets than usual in cash could be advisable – and investments should be relatively conservative and well-diversified.
But Thomas admits that to some, it’s the thrill of the risk and the promise of high rewards that makes investment exciting in the first place.
“There is the chance of scoring big during a time like this. You could also lose big. If you can accept the latter, some educated risk-taking could prove profitable. However, I advise clients to limit high-risk investments to amounts they can afford to lose. Investment is always a risk. There are no exceptions. But some opportunities have a higher risk profile than others. Always consider the worst-case scenario.”
When’s the Best Time to Take Risks?
Thomas says it’s your personal circumstances rather than the markets that determine the best times to structure more or less risk – and the potential for higher rewards – into and out of portfolios. “When you’re young, you can risk more. There’s time to recover if you need it. And if your investments prosper, you’ll set yourself up for a secure future.”
Later on, Thomas suggests reducing risk, and later yet, structuring investments around secure income production rather than value growth. “For most people, that’s the financial lifecycle. But we work one on one with our clients to determine their needs and from there to determine the best investment strategies.”
How Bad is It for Australian Investors?
Thomas laughs. “It’s an interesting market. And it’s crazy right now. But in my opinion, there’s opportunity in this. Things have been almost too rosy for too long. The US has been in strong recovery, China has been flourishing but with warning signs during the last couple of years – the EU has been less exciting, but nonetheless solid and relatively predictable.”
“Politically and economically, the environment has changed. Economies buoyed up by low interest rates need to start covering costs and reducing indebtedness. Add a few extra variables and a trade war we hope will be reconsidered and we have the current situation. Globally, we’re slowing down, but I hope we’re only slowing down to catch our breath.”
“I say it’s brutal,” he says, but you should have seen 2008. “We’re talking about the loss of over $10 trillion in wealth for the US alone. But guess what happened? The market recovered. I don’t think anything nearly as dramatic as that is about to happen. So, hold on tight! It’s going to be an interesting ride, but I’m making it my business to make sure we’re going to be OK!”
If you’d like to talk to TLK about your investments and your plans for the future, they’ll be happy to help you tailor your capital investments to suit your needs. Visit TLK Partners, Chartered Accountants and Wealth Management Company website, or call (02) 8090 4324.
This material is of a general nature only, it does not take into consideration your financial circumstances, needs or objectives. Before making any decision based on this content, you should assess your own circumstances, seek professional advice or contact our office to be directed to the appropriate professional. Whilst all care has been taken in presenting the material neither TLK Partners or its associated entities guarantee that the material is free of error and, the information may have changed since being published.
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Also published on Medium.