More than 18 months after we first became aware of Covid-19, Susan O’Mara of Milestone Advisory discusses the lessons learned by financial advisers, in the latest Construction Magazine, and how you might apply them. As it happens, old wisdom remains true and those taking the long term approach will reap the rewards.
It seems like we may be finally coming toward the end of the “Covid-19 Crisis”. At the time of writing, Ireland had achieved a notable milestone of 2.5 million vaccinations and society is beginning to open up again, but what has been learned?
The pandemic impacted everyone, everywhere and over the last 18 months or so. We became inured to the restrictions to our personal liberties.
We witnessed sharp falls in world markets and steep declines in GDP globally. However, we also saw the majority of people adhering to these
new and difficult rules, with the view that their personal sacrifices would protect their families and communities.
We witnessed a race to develop a vaccine for this virus and saw this accomplishment achieved by several organisations. We saw the markets rebound and recover and in many areas, strong economic growth has been forecasted for 2021.
We have learned that collectively, we are more resilient than we could have imagined. As financial advisers, we learned nothing new as it turns out. Much of the wisdom of old still stands, but it bears repeating;
- Don’t put all your eggs in one basket: This quote has been attributed to Cervantes who wrote Don Quixote. While he was
unlikely to have been referring to diversifying his investment portfolio, the quote from the 1600’s still fits. A major lesson learned at the start of pandemic was the value of sector divergence in your portfolio. It is easy to explain when you consider the parts of the economy that thrived during lockdown and those that suffered. While professional services in Ireland had a great year, personal services did not. Companies trading on the stock market fared similarly, with pharma doing very well and airlines suffering. It is important to ensure that your pension and/or investments have a diverse asset allocation. The Equity content can be geographically diverse, but attention should also be paid to the sectors you are investing in.
- Its time in the market and not timing: This quote does not have the impressive origins as the previous one, but it certainly is a very important point. Investors who rushed to Cash or other safe haven assets back in March 2020, when the market was at its low point, will have either been lucky to get back into the market before it recovered, or will have missed that recovery. With a long-term investment, such as a pension, if you are not close to retiring, staying invested, even when it seems ill advised, is advised!
- Cash is King: This one is tricky. Cash certainly is the lifeblood of any company and having cash on the balance sheet over the last year and a half will have benefited many organisations allowing them to keep going especially when the restrictions significantly impaired their ability to do business. However, it is important not to let cash stagnate and investing enables your money to (at the very least) to keep up with inflation in the long term. Cash has, in a sense, fallen out of favour even further during the pandemic, due to the number of outlets refusing to accept cash as payment for goods and services due to the contagious nature of Covid-19. This change is likely here to stay, even when restrictions ease.
In summary, much of the financial lessons learned were already conventional wisdom. Whether it is your personal pension or savings or your company assets, invest in a wellmanaged and diverse fund and take a long term approach. This will reward you in the long run.
For further information contact Susan O’Mara in Milestone Advisory via email on firstname.lastname@example.org or phone +353 1 406 8020. If you are concerned about the performance of your fund or investment, you should contact your financial adviser.
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