Weathering Financial Storms

Life's good. You've just landed a great new client account at work, little Johnny picked up a leadership award at his Primary School and your investment portfolio seems to be tracking along nicely. Then BAM! A crisis hits. Philip Ryan explains how to best weather financial storms.

Weathering Financial Storms
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Life’s good. You’ve just landed a great new client account at work, little Johnny picked up a leadership award at his Primary School and your investment portfolio seems to be tracking along nicely. Even that gruelling exercise regime is finally starting to pay off – down three kilos for the month – Woohoo!

Then BAM! A crisis hits.

You wake up bleary-eyed to breakfast show anchors and talking heads on current affairs segments babbling about an unforeseen event that’s sent global markets into a tailspin. “Bloodbath on Wall Street!” the headlines cry. “Local markets plummet!”

Your stomach churns, there’s tightening in your chest and you can literally feel the perspiration beginning to bead on your forehead. Are you and your investment portfolio ready for a ride on a financial rollercoaster?

The problem with unforeseen circumstances it that they are just that… unforeseen. Markets can be volatile and all manner of global events can cause disruption. It’s unsettling, but we can be smart and prepare ourselves to weather the harshest financial storms.

Firstly, don’t panic!

When investors see tens billions of dollars being wiped from the local bourse as equity prices plummet or feel like the bottom is falling out of the housing market, the natural response for many is to push the panic button and sell. This emotional reaction is driven by fear of loss and often the opposite of what needs to be done. If you’ve been selective in your portfolio, sought good advice and taken some protective measures, it’s likely you’ll be better placed to absorb a market correction and any short-term losses will be recovered in time. In fact, “crash” scenarios can create new opportunities to invest at cheaper prices.

As an example, between 5 and 6 February 2018, the ASX 200 followed a catastrophic lead from Wall Street that resulted in the local stock market losing over $90 billion in value in two days, with no sector spared from the carnage. However, fast forward several months and we now see the All Ordinaries back at its pre-crash level of 6121 points. All markets are cyclical. Sometimes it could be best to just hold on tight, keep a cool head and remain confident that you can handle whatever the twists and turns the listed market takes.

Grandma was onto something. When that rainy day arrives…

We’ve all heard the expression “Save it for a rainy day.” It’s usually scrawled inside a birthday card from Grandma with a well-worn $20 note lovingly stuffed in it. It turns out Grandma was onto something. Removing it from this innocent context, the ‘rainy day’ reference is a shrewd call-to-action to keep a sum of money aside to negotiate the stormy seas of a personal financial crisis should the dark clouds ever gather.

A downturn in the markets, sudden illness, or loss of employment are all possible reasons why you might need to call on your emergency funds. To ward off financial catastrophe, it’s important to have savings at your disposal to sustain you and your family. If you don’t have much of a safety net at the moment, it’s never too late to start planning ahead. In any financial crisis, cash is king, so it can be worthwhile making sure there is something in your cookie jar for your time of need.

Diversify your investments

Diversification is an important element to any investment portfolio. Of course, as with all investments, there is no guarantee against loss. More financial services professionals could argue that by diversifying your portfolio, you can reduce your exposure should the economy take a turn and start heading south. By spreading your investment dollar across a number of different financial instruments and asset classes that react differently to an economic or financial event, you could minimise risks and offset the impact a financial storm could have on your portfolio as a collective. Investing is one area you may not want to have all your eggs in one basket.

There are many different products and investment vehicles out there to choose from. Cash, property, shares, bonds, commodities and managed funds can all form part of an investment portfolio. For those who have an appropriate risk appetite, a mortgage trust may be appealing.

A mortgage trust, such as the Trilogy Monthly Income Trust, allows investors to pool together money to loan to developers for residential, commercial or industrial property developments. These loans are secured by first mortgages and the interest collected on these loans is distributed to investors each month.

While there is no guarantee to the consistency of returns to our investors and there are certainly risks involved in investing, historically, irrespective of the economic storms brewing away in the background, the Trilogy Monthly Income Trust has returned 7.85%p.a. (over the last five years) net of management fees and costs. By delivering investors an income distribution each month since inception in 2007, the Trust has withstood both the test of time and various market conditions.

When it comes to weathering financial storms or making an investment decision, be sure to do your research and consider engaging a Financial Adviser to help you along your financial journey.

If you’re considering an investment in a mortgage trust and you’d like to find out more, speak to Trilogy, an experienced fund manager with a high performing pooled mortgage trust offering. Call 1800 230 099 or email A friendly investor relations team member will be able to assist with any questions you may have.

This article has been prepared by Trilogy Funds Management Limited (Trilogy) ABN 59 080 383 679 AFSL 261425 and provides general advice only that does not consider your objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances and we recommend that you seek personal financial product advice on your objectives, financial situation or needs and obtain and read the relevant product disclosure statement before making any investment decision.

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