Portfolio Downturn

Should you be concerned about the continuing market volatility?

Heading into the Christmas period, markets have remained volatile. So what does this mean for your portfolio? Well lets consider the two key aspects of your portfolio; the price of your assets and how much income they produce.

The price of your assets

By their very nature growth assets are always going to fluctuate in value. No matter what growth asset you buy, it will be impacted by external economic factors. The key is to try and avoid assets with internal problems, where the value of the asset is impacted by an event specific to that asset and not the economy as a whole.

The price of the growth assets in your portfolio would have dropped over the last 4 months. This will mean that when you look at your portfolio, the value of your fund would have fallen. DON’T STRESS! This is normal market movements. We have to ride the down turns just as much as we have to appreciate the up swings.

None of the loss in your portfolio is due to asset specific events, it has just gone down a little bit in sympathy with the market and will go back up when the market strengthens again.

Our portfolios are very well positioned to handle these downturns. We have plenty of defensive assets in the portfolios which won’t be impacted by these economic events. This gives us a strategic position to be able to buy more growth assets when valuations are cheap.

The income produced by your assets

The second aspect to your investment return is the income produced by your portfolio. Now you will find that while stock markets may be down, income is rarely impacted (providing you hold good assets). This means that even though the price of your assets may have fallen a little bit, they will still be paying us healthy dividends.

Also, don’t forget about franking credits! With majority of your Australian share holdings, the income produced will come with franking credits. Although you don’t see this in your performance reports, franking credits work behind the scenes to reduce tax in your fund and add to the overall growth of your portfolio.

So what should you be doing?

Nothing! If you are invested in our Core + Satellite portfolios then we will do all the work for you. If you are not invested in our current portfolios, I strongly suggest you get in touch with me so we can review your situation to make the most of this market down turn.