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.
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?