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Friday, 13 March 2020

Not game to go back into the market just yet

After the overnight collapse in the US and European stock markets, the ASX200 was down by another 7% or so on the opening. So the All Ords is already down to about 5,000 pts (where I said I'd *think* about reinvesting about 25% of my previous $100K portfolio mix back into the market using my portfolio loan credit line), and the banks (NAB and WBC) that I have small (and getting smaller!) investments in are already down to the lows they reached at the nadir of the post-GFC crash!

BUT, with the market dropping so rapidly, and the Covid-19 situation surely going to get a *lot* worse (cases are growing at 4% each day, and the fatality rate is creeping up over 4% of reported cases - which suggests that there is both under-reporting of case numbers, and, therefore, a lot of undetected cases in the community to spread the disease...) before it can start to 'improve', I can't see any chance of the economy (global and Australian) not suffering a huge hit in the next 3-6 months. So, I suspect that there will be more significant market declines to come (interspersed with some 'bounces' and 'bargain hunting' on the way down).

Overall, I'm not willing to invest $25K of borrowed funds in the stock market at the moment, and putting in a smaller amount (say $10K) seems rather pointless. So, for the moment, I'll just continue to sit on my hands and what the disaster unfold...

** update **

In the end I decided to buy 100 WBC at $15.63 to increase my WBC holding by 20% to 600 shares in my Commsec ML account. A fairly trivial amount, but lets me feel like I'm buying some stocks when they are cheap (?). It also lets me enjoy the slight increase in share price this afternoon (ignoring the recent decrease in WBC and NAB share price). I would have also bought some NAB more shares, but they are held on my Leveraged Equities ML account and trading on that account has to be done via a third party (broker) so it isn't as easy to trade as on my Commsec ML account. I'll just let the NAB holding build up over time via the DRP (assuming the July dividend isn't slashed, I should end up getting 2 or 3 NAB shares via DRP rather than the normal 1 or 2, due to the decline in share price).

I also still have some Vanguard Index Fund investments on my St George ML account (I didn't bother doing a redemption in Feb as they wouldn't accept my phone redemption request and I couldn't be bothered filling in the paper form and mailing it in! Fortunately I did bother with our SMSF investments), and some Colonial First State Geared Global Share Fund units on my Commsec ML account. I haven't bothered calculating how much these holding have declined in value since Feb - they were worth about $150K in total, so I guess I'll be down by about $50K overall - I'll find out when I do my monthly NW calculations at the end of March. Ah well, at least I moved our SMSF investments out of Vanguard High Growth Fund (down about 16% based on yesterday's closing unit price compared with 6 Feb), and into a mix of Vanguard Conservative Fund (down 'only' 4.6%) and Vanguard Diversified Bond Fund (its actually up by 1.5% since 6 Feb). As we are invested about 30% in the Bond Fund and 70% in the Conservative Fund (excluding the 4% of SMSF assets sitting in a cash account), the overall SMSF investments are down by 2.6% since 6 Feb (to yesterday's closing unit price) - a lot better than if I'd left us invested in the 'High Growth' Fund.

Overall it seems (so far) that it was lucky that I decided to buy a $1MM 'off the plan' apartment last year, as that encouraged me to liquidate my share holdings in early Feb when it looked like the share markets could be adversely affected by Covid-19. It allowed me to clear off nearly all of my portfolio loan and margin loan debts, so I'll be in a better position to fund the $900K that will be due upon 'settlement' in 2023. I suspect that the share market decline/volatility will encourage a lot of investors to switch to investing in real estate - as was the case in 1988 after the 1987 stock market crash. We'll see how things develop.

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1 comment:

mOOm said...

It's OK to buy a bit. My big mistake in the GFC was getting in too big too soon. So, this time I'm waiting for when I think the US Fed is finished with cutting rates and the yield curve is more normal.