I am hearing a number of different opinions about where to put my money and that the recovery post Covid-19 pandemic will be a long, slow road. Should I move my investments to Gold, Stocks, Property, or elsewhere? Saving for retirement in around 10 years (hopefully!!).
Nick in Erskineville, NSW
Top answer provided by:
Great Question, with Coronavirus outbreak, a pure black swan event, no one has crystal ball what will happen from here. Whether it will be long and slow or V shape recovery, it all depends on how quick we could contain the virus and the availability of vaccine eventually.
Epidemiologist should know this better than any of us now. Not even Warren Buffet could predict the future, in fact his company Berkshire Hathaway just posted nearly US $50 billion loss for the first quarter and dumped all airline stocks in April!
How could anyone pick the winner, Gold, Australian Shares, US shares, Properties or Commodities? We will never be able to in the current environment.
Don’t let the newspaper headline or so-called investment expert neighbour dictate your investment strategy as you can see in the illustration below about 2008 Global Financial Crisis triggered by subprime mortgages in US, you will never be able to pick the bottom and time the recovery.
Hypothetical $1 million investment made pre-crisis and tracking the Standard & Poor's 500 Index, shown from market bottom in 2009 to pre-crisis breakeven (Source: Vanguard.)
Diversification is the Key! John. C. Bogle, the founder of The Vanguard Group, used to say “If you can't find the needle, buy the haystack”
Diversification works best when you buy into multiple industries and different sectors and include companies of all different sizes because this variety helps even out the ups and downs of the market.
The questions are how you diversify, and which sector should you allocate more fund to. It really depends on your investment time horizon, risk appetite and your personal circumstance.
As I do not know too much about your personal circumstance, 10 years away from retirement, which is still a quite long time, you should consider the following:
- Growth driven investment portfolio for your retirement savings. It is generally 70/30 split between growth assets and conservative assets,
- Review your super fund and gain better understanding where their pre-mixed investment options are invested. It could surprise you how overexposed you are in growth asset with some the industry super fund and how illiquid their investment could be.
- Cost of your investment portfolio is also important, as high cost could erode your retirement savings faster in the down market. Exchanged Traded Fund (ETF) strategy could be a low cost well diversified option
If you need more personalize advice, you should speak to qualified financial adviser, so you could make informed decision.
While the Adviser Ratings Website facilitates the question and answer functionality, all such communications are between users and authorised financial advisers, of which Adviser Ratings has no affiliation. Adviser Ratings is not the advice provider and does not provide financial product advice and only provides information that is general in nature.