COVID-19: What impact does this have on my Investment Goals?

At Pāua Wealth Management we are firm believers that global diversification is fundamental for all investors, particularly New Zealand investors, to protect capital in down market periods and minimise the risk of loss. Successful investing requires active, global experience within markets, through economic and business cycles – a long-term investment horizon more consistently outperforms short-term opportunistic investing. In this new COVID- 19 environment, the need for a long-term, diversified approach to investment is more important than ever.  

The events unfolding from the COVID- 19 pandemic are causing panic and investors are losing focus on their long-term investment goals. This is absolutely the wrong time to react to the volatile markets we are experiencing.

The global economy is likely to undergo a prolonged U-shaped recovery with bumps along the bottom of the U. This recovery will be more drawn out as most global economies, New Zealand excluded, are beginning this recession with elevated debt levels (a hangover from the Global Financial Crisis and the subsequent low-interest rates that have enabled the servicing of these larger debt piles) which are increasing with the government support packages currently in place. Such debt burden will likely dampen future economic growth as governments are forced to choose debt repayment over economic investments. Companies and businesses too are struggling to navigate this uncertainty, and those with leveraged balance sheets are going to be more cash strapped than those more conservatively positioned, placing further downward pressure on future growth.

We have only seen a glimpse of the financial results of listed entities which has, on any given day, caused both positive and negative movements in asset prices. Without a crystal ball it is impossible to predict the short-term movements of asset prices and with heightened volatility and so little certainty about the future macro and micro economic factors, the smart investor should stick with the key principles of global diversification through their strategic asset allocation.

Nonetheless, given this rather negative outlook, we are not proclaiming you sit there idly, quite the opposite! This is the time you should be feeling confident in the knowledge that your investments are being managed appropriately – your assets invested in a well-diversified, global portfolio; the active managers you have selected are sticking to their investment beliefs and using the market volatility as an opportunity to increase and decrease their exposures accordingly; and your adviser should be keeping you well informed with relevant information for achieving your investment goals.

The Investment Proposition at Pāua Wealth Management

A wealth management investment process requires providing a strategic asset allocation for a client based on their risk/return profile and the implementation of this asset allocation through an investment selection framework. This process should not be predetermined but appropriate to each client, independently assessed, without any investment selection bias.

At Pāua Wealth Management we have carefully selected strategic partners to augment our capability enabling us to deliver to our clients the most appropriate investment solutions and advice. Supported by a robust governance framework including oversight from our Investment Committee, we have significant experience managing clients’ assets through different cycles; combining this with the information and research from our partners uniquely positions us to bring you the best of our global and local market expertise.

What is the best investment solution? One that has relevant data, analytics and sound judgement to develop an appropriate risk/return strategic asset allocation for a client. A robust investment framework to select investments and managers to implement the strategy, a process that has responsible investing considerations embedded within, as we believe that this may reduce long-term risk and enhance portfolio performance. An investment solution that is not predetermined.

The material has been prepared for informational purposes only without regard to any persons investment objectives, financial situation, or means, and we are not soliciting any action based upon it. This material is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any particular trading strategy in any jurisdiction in which such an offer or solicitation, or trading strategy would be illegal. Please consult your independent financial adviser prior to taking any investment decision on the basis of any information contained herein and no information herein constitutes general or specific investment, legal, tax or accounting advice of any kind.

Whether you are considering financial advice, would like a second opinion or just interested to hear more, we’d love to hear from you.

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