Should investors avoid global investments?
Developed countries with important economies like the US, UK, and Europe are in a mess health-wise, and economically, so the general answer is yes. While these developed countries are in recession avoid global investment funds or indexes that are exposed to all markets. However, there are some outstanding international companies that have already adjusted their business models and moved through the pandemic very well.
I can’t be specific here, but let’s just say that there are a seven standout technology companies in the world that have powerful balance sheets, and dominant market positions. They will almost certainly continue their extraordinary growth no matter what the macro environment. Their share prices haven’t fallen very far, and their earnings growth should quickly recover as they expand their product range.
I really feel that the best financial advice that I can provide at the moment is for our client’s to focus a key part of their global exposure on high quality, resilient companies within the technology sector, that is where I feel the risk/reward will be.
Superannuation funds and investors who take a diversified approach to investing globally may have 95% of their allocation in companies that just won’t grow over the next decade. It is definitely looking like a case of ‘di-worse-ifying’ by taking an index or ETF approach.
So investors shouldn’t di-worse-ify, but what else should they avoid?
There is a lot of risk that most investors wouldn’t be aware of. Airlines, tourism, banking, the list goes on. With a recession, other than property in Sydney’s east and other elite suburbs of Sydney and Melbourne, I can only be confident in a couple of other areas of investment.
The bond bull market of the last 30-years must come to an end at some point, commercial and retail property are likely to head in only in one direction … the list of what to avoid is getting longer.
BCom DipFP CPA CFP CFS JP
Authorised Representative (No. 224334)
Chief Executive/Financial Strategist
Lanham Financial Advice