How to navigate COVID-led changes to the investing landscape

If the post-COVID environment truly is an inflection point for the local and global economies, then one of the challenges for investors is looking beyond the 'bubble' that the once-in-a-lifetime pandemic has created. And, while this theme may throw up a cauldron of investing opportunities, it also throws up risks, making the need for diversification within the post-COVID environment an essential part of further investing.

By InvestSMART · 24 Sep 2020

By InvestSMART ·
24 Sep 2020

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Align your investments with sufficient diversification

It’s important not to over-expose yourself to a narrower basket of uncertain market opportunities that COVID may have put the spotlight on. As a savvy investor you’d be better served filling your portfolio with a mix of asset classes that will reap the benefits of a much broader economic recovery and reinvestment.

This is where ETFs come in.

ETFs work best at taking the risk of stock picking out of the equation while also providing the right amount of exposure that retail investors need. The other advantage of ETFs is their use in setting up diversification.

Diversification can reduce the risk of investors jumping in and out of markets because of event risk i.e. when the going gets tough they get out which is not only costly, but potentially sidelines them from the market at the very moment it’s going up.

InvestSMART has a suite of ETF investment portfolios that provide the diversification an investor needs while also complementing both your risk appetite and investment time horizon, no matter how much or little you have to invest.

InvestSMART’s ETF portfolios are not only low-cost, they provide a carefully balanced mix of investments across different asset classes – based on your risk profile – hence removing the temptation to let COVID-induced hype drive your investment decisions.

Smooth out market volatility

It’s the diversification among asset classes offered by InvestSMART’s capped fee portfolios that better positions you as an investor to smooth out the volatility associated with heightened post-COVID uncertainty and capture potential returns, while managing risks more effectively.

To better understand how diversification can de-risk your investment portfolio, take a look at how InvestSMART’s capped fees portfolios performed during the COVID-led downturn. As a case in point, the underperformance experienced by growth assets in 2020 was offset by better performing defensive assets classes.

As a result, the risk of negative returns, and capital loss was significantly reduced. For example, while the ASX lost around 8 per cent during financial year 2020, all of InvestSMART’s four key ETF solutions fared considerably better. InvestSMART’s Conservative and Balanced portfolios were down only -1.77 and -2.58 per cent respectively.

Unsure of which InvestSMART portfolio is right for you?

By clicking through to our invest with us page, you’ll be able to match your investment time frame with the recommended time horizon of InvestSMART’s four diversified portfolios, so which one suits you best?

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Frequently Asked Questions about this Article…

What is the importance of diversification in investing during COVID-19?

Diversification is crucial during COVID-19 as it helps reduce the risk of over-exposure to uncertain market opportunities. By spreading investments across various asset classes, investors can benefit from broader economic recovery and minimize the impact of market volatility.

How can ETFs help with investment diversification?

ETFs are an excellent tool for diversification as they take the risk out of stock picking and provide the right amount of exposure needed by retail investors. They offer a balanced mix of investments across different asset classes, aligning with your risk profile and investment time horizon.

Why should investors avoid making decisions based on COVID-induced market hype?

Making investment decisions based on COVID-induced market hype can lead to costly mistakes and potentially missing out on market gains. Diversified portfolios, like those offered by InvestSMART, help investors stay focused on long-term goals rather than short-term market fluctuations.

What are the benefits of InvestSMART's ETF portfolios?

InvestSMART's ETF portfolios offer low-cost, diversified investment options that align with your risk appetite and investment time frame. They help smooth out market volatility and capture potential returns while effectively managing risks.

How did InvestSMART's ETF portfolios perform during the COVID-led downturn?

During the COVID-led downturn, InvestSMART's ETF portfolios performed well compared to the broader market. For instance, while the ASX lost around 8% during the financial year 2020, InvestSMART's Conservative and Balanced portfolios were down only -1.77% and -2.58% respectively.

How can I choose the right InvestSMART portfolio for my needs?

To choose the right InvestSMART portfolio, consider your investment time frame and risk profile. By visiting InvestSMART's 'invest with us' page, you can match your investment goals with the recommended time horizon of their four diversified portfolios.

What role do defensive asset classes play in a diversified portfolio?

Defensive asset classes play a crucial role in offsetting the underperformance of growth assets during market downturns. They help reduce the risk of negative returns and capital loss, providing stability to a diversified portfolio.

Why are capped fee portfolios beneficial for investors?

Capped fee portfolios, like those offered by InvestSMART, are beneficial because they provide cost-effective diversification across asset classes. This approach helps investors manage risks more effectively and smooth out market volatility, especially during uncertain times like post-COVID.