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COVID-19: Managing your money during a crisis



Article
9 April 2020

The COVID-19 pandemic is continuing to have significant impacts on global financial markets causing uncertainty for investors. 

Brad Fensom, Principal Financial Adviser at Australian Unity and Charles Adams, Director and Financial Adviser at WrightAdams Advisory have shared practical tips for managing your money during this crisis.

Cash flow

“With many Australians facing the loss of income and decreased job security, being pro-active about managing your current cash flow is incredibly important,” says Brad. 

“This means talking to your bank about potentially having your mortgage repayments paused for six months and, for renters this could mean asking for a rent reduction, cancelling subscription services and contacting energy and gas providers to ask for discounts.

“I’ve also been encouraging clients to investigate the government benefits for people who are facing hardship.”

Focus on long-term financial goals

Brad also emphasised the importance of thinking long-term and focusing on wealth creation during this crisis. 

“People need to remember their long-term financial objectives, not listen to all the noise and make sound financial decisions,” he said. 

“A good example of this is during the Global Financial Crisis (GFC) people who moved their assets to cash were worse off in the long-term than those who held on to their assets.”

The graph below shows the dip in Australian share prices during the 2008/09 GFC and the eventual recovery of the market. For investors who sold when the market was low, they crystallised their losses and were unable to benefit when the market recovered. 


Source: Bloomberg, AMP Capital, July 2019

Avoid making large financial decisions

Brad also recommends people avoid making significant financial decisions during this uncertain time.

 “This could include selling equities, buying or selling property, moving their super to more conservative options or even drawing down on their super as these are all last resort options during an economic crisis.”

Making investment decisions during times of volatility can be challenging. Learn more about how you can keep focused on the long-term here.

Portfolio adjustment

Charles has also been speaking with his clients about focusing on their long-term financial objectives and rebalancing their investment portfolios to meet these goals. 

“I have been speaking with lots of clients recently about rebalancing their portfolios,” said Charles.  “Following the recent falls on domestic and global equity markets their asset allocation is no longer in line with our long-term ideals.”

“By redistributing money from conservative assets such as cash and fixed interest and moving it into growth assets including equities, the portfolio weights are realigned which puts it in a better position for when markets recover.”

Maintain your super

As part of the Government’s COVID-19 economic support packages, eligible Australians will be able to access $10,000 from their super in 2019/20 and a further $10,000 in 2020/21.

“It’s a case-by-case basis but my advice for clients who are considering this option is to try to avoid accessing their super if possible,” said Charles. “Withdrawing money from super when the market is low has a long-term detrimental impact on your super’s recovery when the market picks up.  It can also negatively impact the effect of compounding returns.”

Rather than drawing on super, Charles suggests seeking alternative employment, using savings as well as exploring the range of government support options which have recently been announced.

You can find out more about the government support measures at the Treasury Department’s COVID-19 webpage

Opportunities

Charles also shared that for those who are in stable jobs and have financial security there are opportunities to invest while share prices are lower.

“If you’ve been sitting on the sidelines thinking about investing now could be a good time to dip your toes into the market,” he said. 

Would you like financial advice? 

Contact us to speak with a professional, licensed financial adviser. 


Important information

© April 2020. Any advice in this document is general advice only and does not take into account the objectives, financial situation or needs of any particular person. You should obtain financial and legal advice relevant to your circumstances before making investment decisions. Where a particular financial product is mentioned you should consider the Product Disclosure Statement before making any decisions in relation to the product. Whilst every reasonable care has been taken in distributing this article, Australian Unity Personal Financial Services Ltd does not guarantee the accuracy or completeness of the information contained within it. Any views expressed are those of the contributor(s) and do not represent the views of Australian Unity Personal Financial Services Ltd. Australian Unity Personal Financial Services Ltd does not guarantee any particular outcome or future performance. Taxation Information in this document should not be relied upon without seeking specialist advice from a tax professional. Australian Unity Personal Financial Services Ltd ABN 26 098 725 145, AFSL & Australian Credit Licence No. 234459. This document produced in April 2020

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