Today the market is increasingly volatile on the back of the coronavirus crisis. Prices are down and people are talking about the losses they have made on their KiwiSaver schemes.
It is at times like these that I remember why I don’t like managed funds! I’ve been running investment portfolios for clients for many years and I’ve lived through both good and bad market cycles (yes, I deserve these wrinkles!). In 2008 we saw the world equity markets lose around 50% of their value and lots of investors had a tough year or two. In the past few years it seemed nothing could go wrong. That was until the coronavirus struck.
I like investors to know where their money is invested. Why? Because when things are tough, smart investors get out their cheque books and start buying companies from those who want out of the market. They are armed with knowledge and make the most of the timing to make the best of the circumstances.
Funnily enough, the sellers at these times are often the fund managers. In my opinion, this is because investors in managed funds (including KiwiSaver) are completely disjointed from where their money is actually invested. They don’t know if their fund manager is holding shares in great companies or if they are invested in the next get-rich-quick share. It’s not until after the event, who owns what becomes apparent.
For me, I want to invest in companies that have strong balance sheets, robust business models and conservative debts. As a by-product of this, these companies normally pay solid dividends.
A current example would be Contact Energy. Trading today at $6.02 and paying a gross dividend of 8.0%. This share is down from $7.66 on February 20.
My question is, has the Contact Energy business changed? Will the coronavirus impact on their business in the next twelve months? Will Contact Energy be around in 10 years’ time and making money?
My view is simple. As an investor, it’s your money and you should be in control. Don’t pass the responsibility and decision making to someone else. If you do, don’t be surprised if the outcome is average at best.
If you want to come and talk to me about my approach to investing for me and my clients, contact me now. I’m always happy to be helping people reach their investing goals. And your initial chat is always free of charge.
Disclaimer: The market is volatile and share prices can and do change. This is not a recommendation to buy or sell any asset as each individual should get personalised advice suitable for their circumstances.
John Barber
WealthDesign – a life well planned