Ask an Adviser - Where Should I Invest In The Covid-19 Pandemic Recovery

Top answer provided by:

Jonathan Sims

View

Hi Nick,

I understand your confusion as a lot of people are trying to predict the likely outcome and road back to recovery and the way out of this pandemic, as such there are a lot of opinions and views currently. When investing at any stage you should really go back to the basis, a few of the key considerations are diversification, minimum investment timeframe and what is the purpose of your investment.

Minimum investment time frame, this is very important because each investment asset class has its own set of risks, so before considering investing you should really consider what your investment timeframe is and if that investment is it suitable your time frame. Cash and fixed interest are normally considered short term investments, they carry low risk and generally provide low returns. Shares and property are considered long term investments due to theie regular changes in capital value (volatility levels). As such they are considered high risk, high return because they may have the capacity to generate higher returns over time. The reason your need to invest with minimum investment time frames in mind is to allow for each investment type to be able to complete a full investment cycle and hopefully overtime the investment can achieve the desired result.

Diversification, just like each asset class has its own investment timeframe, each individual asset class responds differently at different stages within a market cycle. So, by spreading your investments over many different asset classes it would normally provide a smother return. It’s a bit like the old proverb “don’t put all your eggs in one basket”because all you will do it get the same result. History can be a good indictor on how markets have reacted for different type of events in the past and long-term averaged returns however, history is not a reliable indicator of future performance. So, because of this we need to spread the investment portfolio over may different investments and asset types so that over time we can try and get the outcome you are hoping to achieve.

Purpose of investing, when investing you really need to consider why your investing and what are you wanting you invests to do for you. Are you needing these funds for a specific purpose in X time? Are your wanting to focus on income generation? Or are you investing for long term growth? Each of these goals will have a different investment approach and assets allocation that is suitable for your need. It is very important to establish these goals before considering and type of investment. Another factor that an adviser will also consider is your comfort zone or risk tolerance level because even if your investment timeframe is suitable you may not feel comfortable with the associated risks with that type of investment or allocation.

If you are unsure about where to invest or how the market is likely to perform over the mid to long term, I would encourage that you speak to an adviser that could help assist you identifying your goals and investment purpose. The Adviser would be able to direct you and provided recommendations suitable for your long-term plan that caters for your retirement objectives.

I hope this helps provide you a bit of guidance on what things you should consider before you start investing or changing your investments direction. Best of luck with your investing endeavours.

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.

Article by:

Jonathan Sims

Was this helpful content?Let others know - share and vote-up