Important not to panic during sharemarket downs
The markets will be on a rollercoaster ride for the duration of coronavirus, it is important to keep a cool head and not rush into a decision which could undermine future returns on your investment.
It is all down to your risk tolerance. Those who have invested in more conservative funds may be less affected by the falls in the markets but in the long term lack of exposure to risk will prove costly.
Companies connected to tourism will be most affected by the coronavirus outbreak and these include hotels, airlines, and airports.
Of these I think airport stocks when they bottom out will be a good buy with Auckland Airport being worth a punt. The airport is not going anywhere anytime.
Some of the markets were down by 3% this week; this sounds a lot but it all depends on how much you have in your retirement fund, (Kiwisaver in NZ).
Here is a table;
INVESTMENT 3%+ 3%-
$1000 $1030 $970
$5000 $5150 $4850
$10,000 $10,300 $9,700
$20,000 $20,600 $19,400
$30,000 $30,900 $29,100
$40,000 $41,200 $38,800
$50,000 $51,500 $48,500
The ups and downs of the sharemarket become more noticeable as your retirement fund balance grows. In New Zealand, the government’s contribution of $520 per annum to your kiwisaver will help offset losses as will your employer’s contributions which are 3% of your gross income.
When your balance drops by say 3% then your balance needs to grow by more than 3% to regain those losses.
On the news this week, financial expert Sam Stubbs made the point that in 1918, I think it was, the sharemarket dropped by 11% yet was up by 13% a year later, and it was the same with Sars and 9/11.
If you are investing in individual companies in the market then it will pay to invest in companies least likely to be affected by Coronavirus such as power companies such as Genesis, Mighty River Power, and Meridian Energy. Everyone uses power so they are worth investing in.
Companies to avoid are those connected with the tourist industry but I think Auckland Airport when they bottom out are worth a punt.
Most people do not have the means to invest in individual companies but there is an option for doing just that and it is with sharesies where you are able to dripfeed money into the sharemarket. You can start with just $20 and invest $10 at a time. With Sharesies you can invest in managed funds or individual companies.
Sharesies is an excellent way for youngsters and the not so young to get some practical knowledge of the markets. There is no substitute for hands on experience when investing.
You can join Sharesies here; https://sharesies.nz/r/377DFM
And my God shall supply all your needs according to his riches in Christ Jesus. Philippians 4:19
This article is the sole opinion of the writer and is not intended as financial advice.