Your Investment Portfolio and the Coronavirus (Covid-19 Update #3)

27th February 2020

The ongoing spread of the Coronavirus has suddenly seen uncertainty and volatility erupt across the markets over the last few days. 

As value/eBiz investors, we have been waiting on this for what seems like a very long time; however, the real question is, how do you feel about it?

Time to act?

Thank you to those of you that have e-mailed in, inquiring about what opportunities might be available. 

I am responding individually and if you have not heard from me just yet, it is just because I am working through what the best options are for your portfolio.  Further, I actually do not see any need to rush in just yet. 

That said, I think there is some opportunity starting to present itself and I will be assessing your options as your investment portfolio comes up for review.  The idea here is to ‘nibble away’ now and continue to do so progressively in the future.

To be clear, it seems to me that the Coronavirus will continue to spread for several months yet.  That, I think, has a good degree of certainty around it; however, what is less certain is how the markets will react. 

As you know, for quite some time, the markets basically shrugged off the Coronavirus for a number of reasons; one of which would have been that the market was focused in other directions and did not see the Coronavirus as being an immediate threat. 

The ongoing spread has unsettled some investors and some fund managers.  It is worth bearing in mind though that there is a vast array of Investment Strategies and approaches across the market that have different goals, objectives and varying levels of tolerance for volatility.

For example, many fund managers may have a mandate that forces them to reduce their exposure to the markets because of the volatility.  That means that they will sell, sending that very same signal to the markets, causing others to consider taking the same action.

Amusingly, most players across the market see price as value, the same thing (!).

Where to next?

As I said, I believe the virus will continue to spread, and it is likely we will even see it here in New Zealand at some point, possibly over the southern hemisphere winter. 

I also see the economic impact of the virus unfolding more meaningfully over the next three to six months.  Therefore, there may be further volatility ahead. 

I am not suggesting that we attempt to time the markets (a bad idea).  I am, of course, confirming that as always, we will be looking to price for risk.

Price is what you pay, value is what you get.

You will know that old cliché, which comes from a comment made by Benjamin Graham many decades ago. 

You will also note that at WISEplanning, we do not play the share market, we invest in the underlying business. 

At this stage, prices have declined a bit; however, not significantly (approx. 12.0%).  Real value has yet to emerge, although there is some buying opportunity for those who prefer a more active approach and who are happy to take a long term view, tolerating volatility along the way.

Of course, I will be reviewing your investment portfolio as your review cycle rolls around; however, if you are not too sure when that cycle is but would like to think about what options might be available to you now, just e-mail invest@wiseplanning.co.nz or call 0800 11 90 80. 

There is no need to rush in though.  Markets are still not cheap but certainly, less expensive than they were even a few days ago.

TIP: Beware of FOMO (fear of missing out). 

Back to the question

 The question is, how do you feel about the volatility and the impact it is having on your investment portfolio right now? 

If volatility is ‘the same old’ and nothing new for you, then obviously you will not be giving it too much thought. 

If, by chance, watching the cash up value of your portfolio decline bothers you, then I suggest as a first option, you may want to go onto our website and review our material. 

You might also want to type the words ‘Investment Perspective’ into the search field in your inbox (on your computer) and read all of those (they are also on our website here). 

You have received one each month over the last few years and they may help you to feel a bit more at ease – if by chance you are feeling uneasy(?). 

If you are not sure where to find them, just e-mail us and we will give you a link.

Of course, if you are feeling very uneasy, I recommend you call me immediately on 0800 11 90 80. 

Popular media is for entertainment – not for facts

Channel one, CNN, Fox News, BBC etc are designed to generate interest, be appealing, sell advertising and generate revenue from those ads. 

That is a different and separate process to factual data and real investment research.  

Funny that … facts apparently are boring and not appealing to the masses.   That might go some way to explaining why there is little of it across popular media?

Anyway, even though there is a bit of action on the markets, which I am quite happy about (lower prices mean better buying which can enhance long term returns), it is not significant yet.  So long as you either understand volatility (see lower prices as opportunity) or can tolerate it, there is little to be concerned about.

I will keep you posted; however, feel free to get in touch.

“The trading price of a stock tells you exactly nothing about the company.”

Warren Buffett