At Goodbody, we are seeing all types of investor activity right now as people take steps to safeguard their portfolios from the crisis we are experiencing. These range from deep concerns about the investment outlook to new money seeking opportunity.
In our communications with clients in recent weeks, we have been emphasising the value of having a plan and sticking to it, being diversified and remaining calm during bouts of volatility. Anyone who gets this right should be reasonably well-protected through the current market upheaval. That doesn’t mean this period will be easy or without losses, but rather that you’ll be giving yourself the best chance of making it through in relatively good shape.
Once you are confident that the basics are taken care of, you can start to look a little bit ahead of the present moment to what comes next. These next steps can help position you for when the crisis period begins to ebb:
1. Don’t think in binary terms
Market commentary right now is swinging between predictions of global depression to V-shaped recovery boom scenarios. In fact, a wide range of outcomes is possible, depending on a huge range of factors, including health statistics, social compliance with emergency measures, and fiscal and monetary policy reactions.
2. Be selective
Don’t rush to build up heavily cyclical equity exposure betting on imminent recovery. It will likely take time before markets begin to look more ‘normal’. In the meantime, we are likely to see more volatility. That’s why we are being selective in gradual equity accumulation, sticking initially to our selected ‘resilient quality’ names. In fixed income, we see adding corporate bonds - particularly shorter-dated investment grade bond funds - at these higher yield spreads as attractive.
3. Look for opportunities
While recent market conditions have been extremely challenging, keep in mind that there can be some asset transfer opportunities created by lower asset valuations. For example, it may be the right time to think about talking benefits from pensions which have dipped below or are close to the pension threshold limits, to look at transferring a defined benefit pension to your own balance sheet, or to consider a strategy for business succession such as passing to family members which may also result in a tax saving.