Over the past few weeks the world has reeled from the far-reaching implications of the global pandemic. Following losses across worldwide financial markets, investors have been riding a rollercoaster of doubt and disaster, and at times sporadic relief. Without exception, everyone is unsure about the future prospects of their investments and retirement savings. If you have questions or concerns about your current financial strategy, Orbis Wealth can help.
Explains Simon Dundas-Smith, Managing Director, "When we founded Orbis Wealth over five years ago, our vision was to create an innovative company that continues to evolve with the changing needs of clients and the changing legislative, economic and technological landscape within which we operate. Expecting the best but planning for the worst has stood our clients in good stead."
To realise their vision, Orbis Wealth has developed a unique financial planning process designed specifically to develop, achieve and manage our clients’ financial goals and lifestyle aspirations. "At Orbis Wealth we work with families and businesses that are motivated to achieve great things. So whether you are planning for your family, for your retirement or building a business, we have a range of solutions and service packages specifically designed and tailored to help you achieve what you believe is truly important."
In a recent blog, Orbis Wealth looked at the global share market, the fall in oil prices and the ripples of coronavirus shockwaves:
Global share markets have fallen - driven by a collapsed oil deal and coronavirus impacts. The Australian share market fell 19.6% from its peak on 20 February to 9 March 2020. This means the gains of 2019 have been lost with the index back at December-18 levels.
Source: Bloomberg, IOOF
Why have share markets fallen this much? A case of two shocks:
1. Coronavirus fears for global economic growth
Share markets have fallen following growing concerns over a global Covid-19 (a.k.a. coronavirus outbreak). This virus is related to the SARS outbreak that affected Asia, notably China in 2003. It has proven to be difficult to control and sparked outbreaks outside of China, across much of the world with Italy, Iran and South Korea the most notable cases. As the outbreaks outside of China escalated, investors retreated from shares and fled to safe assets such as bonds as they priced in a weaker economic scenario with expectations of ongoing business struggles.
2. Oil price collapse
Over the previous weekend we saw a new economic shock appear. Oil producers were expected to agree to cut production to support oil prices. However, Russia chose not to participate with the deal failing. This triggered a response by major producer Saudi Arabia to cut prices and hint at increasing production. The threat of lower prices and increased supply saw oil prices fall with WTI Crude oil down 9.7% in one day. These moves sparked fears of
collapse in the US shale gas industry (which needs higher prices to remain profitable), economic weakness in oil producing countries, and a greater likelihood of global recession in a very short space of time.
3. Staying the course
Client portfolios are set with risk in mind. They have gone through a detailed strategic asset allocation process to maximise the expected return subject to the ability to tolerate risk. This involves modelling different scenarios including times when the share market falls. Importantly it is expected to deliver, even after this week’s sell off, a long-term return that will meet financial objectives. There are often reasons to sell out of shares. The chart below shows a few different reasons over the last 11 years. The important message to hold onto is that over time the market has recovered and allows you to earn strong long-term returns. Since the global financial crisis, even after the start to this year, investors have more than doubled their money. If you panicked and went to cash however, you would have only earned 36.5% over the last 11 years versus a potential 159.7% in Australian shares.
Source: Bloomberg, IOOF
Potential market weakness has been factored into the expectations that underpin client portfolios. Over the long term, being invested in line with the long-term strategic settings is the answer to achieving your objectives. If you prefer a more active approach, we suggest speaking with your adviser on what additional options are available to you.
A chat with Orbis Wealth may be just what you need right now.
1. Strategic financial advice (a personalised plan to assist you in achieving your financial and lifestyle goals).
2. Wealth creation (building financial security now so you can focus on enjoying your lifestyle in the future).
3. Retirement planning (one of life's most important financial considerations - the actions you take today will determine your lifestyle in the future).
4. Risk insurance (a critical part of the financial planning process that provides you with protection against the financial implications of an event such as death, disablement, serious illness or injury).
5. Life Insurance (helps to alleviate the financial burden your family may be left with after your death. This is paid as a lump sum to your nominated beneficiaries to assist with medical costs, funeral expenses and help maintain your family’s lifestyle).
6. Total and permanent disability (provides a lump sum in the event of a total and permanent disability that prevents you from ever returning to work).
7. Trauma (paid as a lump sum upon diagnosis of an eligible condition (eg cancer, heart disease).
8. Self-managed super funds (gives you control of how your superannuation benefits are invested, operated and managed.
Explains Simon, "When we first meet with many of our clients, they feel a real sense of loss and confusion about how, and importantly, when they should retire. With the right financial advice, this fear and doubt is replaced by a financial confidence that gives our clients peace of mind and helps them to sleep better at night - especially through times to uncertainty."