For at least the next 12 months, it seems that investment markets will continue to be volatile. It is important to remember that in this climate, the investments you avoid are just as important as those you choose.
Despite the challenging conditions, there are still plenty of good investment opportunities, however the best investment tip for anyone at the moment is to get some good financial advice. Review your portfolio with an expert and ensure you’re invested in a range of quality products and assets.
To help you understand some of your options, Chief Investment Officer David Bryant provides some insight into some of the key opportunities in the market at the moment.
Australian and international shares
“High volatility in equity markets should be expected to continue over the coming year,” says David. “Investors can take comfort that valuation support should limit the downside in the market at near or current levels.”
“In this climate, Australian equities are our preferred choice over international equities,” David recommends.“With international equities, the impact of currency movements is uncertain and is proving to be a bit of a wild card. There is enough uncertainty going around without adding a currency element to it.
“However, there are definitely opportunities in international equities for patient investors who are willing to ride out high highs and low lows for at least the next five years. The secret is buying quality companies and of course understanding exactly what you are buying.” Warren Buffett (one of the world’s most successful investors) says he only ever buys something that he’d be perfectly happy to hold if the market shut down for ten years. At the moment, this seems like a sensible approach.
Fixed interest
“This is the time when investors should be battening down the hatches and making sure the defensive part of their portfolio is actually doing its job,” says David.
“High quality fixed interest products (such as Commonwealth government bonds) shine in times like these, as many investors are steering clear of anything with more credit risk than these good old-fashioned forms of investment.”
Property
“Many investors have switched to unlisted property trusts to counter the extreme levels of volatility experienced in the listed property trust sector.
“These ‘purer’ unlisted property investments are not exposed to the volatility of the share market and provide transparency and more predictability in uncertain times. Unlisted property investments with low levels of gearing help capital stability, which is also a positive,” says David.
Mortgage funds
David believes that there are some excellent opportunities in the mortgage sector. “With term deposit returns declining significantly as interest rates decrease, mortgage funds that only invest in quality first mortgages will become more competitive. And as a result of the credit crisis, strong mortgage managers will be writing loans with lower risk and higher margins than they have been in recent memory. This is good news for investors.”
JANUARY 2009