Reports from several businesses that they have had a flood of new activity on the back of Covid 19 stimulus, indicates that Government stimulus initiatives have had some effect but it is industry specific.

This is also reflected in the growth in the value of some listed shares, where demand for specific products and services has lifted, the obvious being health services related companies.

A friend who specialises in Website design, IT systems and digital marketing, told me that her business is booming with contracts from Government  and the private sector, highlighting the way business is being further transformed with increased online trade services in employer-employee interactions. 

Opportunities for MidCoast Region

If ever there is a need for our elected members of all three levels of government to engage with business and the community, to share ideas and position this area for growth, it is now.

As a consequence of isolation from Covid 19, both the private and public sector have witnessed efficiency and cost savings when employees worked from home.

In our region, affordable housing, Internet speed via NBN while not perfect, is reasonably comparable to metropolitan areas. 

The effectiveness of working from home in this area, is little different to a person working from home in the metropolitan area.

Relocating businesses could certainly set up shop in our region at a lower cost than the cost of property or rent in the city. 

While there is a long way to go, having a well resourced public hospital is an important element in attracting new residents to our area.

This area has plenty to offer and we all have a role to play in presenting a positive message that we are open for business.

The more we support our local businesses, then the better off this community will be and the sooner struggling businesses will recover.

Investment Portfolios

Growth through opportunity has been reflected in share price rises for certain businesses.

Stock selection and positioning have seen differences in performance from various fund managers who got it right standing out amongst the pack.

In the Your Heritage fund manager blends, a core International Fund Manager produced a return for the past 12 months of 19.5% 

Yet amongst the menu of managers, one International Fund had a negative 9.5% return and another a positive 9.5% 

There have been similar stories in the performance of Australian Shares and Real Estate.

There have been massive differences in performance of superannuation funds for those same reasons, with concern flagged where some Industry funds with excessive exposure to direct property drawing the attention of regulators.

Return expectations and risk

When defining risk, I relate risk to consequences of not meeting a goal or income target, rather than the chance of loss verses gain on an investment.

Where an income needed or return target is 6%pa and the money is invested in a bank deposit earning 1% per annum, a 6% return is needed to meet income needs, then it is a given that there will be a 5% reduction in the value of the investment at year end.

This is effectively a draw down of capital which means that either life style has to change dramatically or money might not last a person’s lifetime.

The term volatility is also thrown around when risk is discussed. My definition is that it is a measure or description of the frequency of market movements either up or down over a defined period of time. 

Low risk becomes high risk 

Conservative portfolios tend to have a higher concentration of their portfolio in defensive assets rather than growth assets.

This can be problematic if an investor doesn’t accept that their portfolio is at the mercy of low yielding fixed interest securities and other defensive assets.

That is why, the longevity risk or expected remaining life has to be considered, and that a conservative portfolio becomes risky when capital lasting the expected life of the investor is the issue.

We are living longer which means that a 65 year old retiree is not old in terms of life expectancy, so a longer investment horizon and portfolio structure needs to consider this.

Conversely, an 80 year old, who has enough capital to last them 20 years simply by parking it in a bank account, could have a portfolio that is much different.

There is no one size fits all when it comes to investing so the role of an adviser needs to be about educating and informing their client of the reality of their current investment course and consequences.

An adviser relationship means they are there for the client’s journey with the client’s confidence and trust. The implicit obligation is for the adviser to act in good faith, where the client’s best interest and needs are always placed ahead of their own.

That is the essential standard for advisers that has now been enshrined into legislation.

Alan Tickle

Your Heritage Financial Planning Pty Ltd(330480) Authorised representatives of Alliance Wealth ABN 493161647006 AFSL 449221 

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