The interest rate pain has only just begun
Many of us believe we’re long-term investors. When we say long-term, we’re suggesting 5+ years at least.
And I use the word believe deliberately, as for those not nearing retirement, investments in superannuation count as a long-term.
However, with daily online access to your account and regular finance updates, some investors may feel that going even a day without checking their balance or performance is a long time!
While I encourage people to be conscious of their investments, the 2021-22 financial year will report losses across the board. In fact, my early research suggests the average growth fund will be down around 11% for the year.
Why has this happened?
High inflation means interest rates go up. When interest rates go up, investors sell riskier assets (eg. tech shares) and move to cash or fixed interest. The result is share markets and certain sectors become volatile.
Add to that geopolitical tensions with China globally, and the Ukraine-Russia war, and you have even more uncertainty for all markets.
From an individual investor perspective, the key to managing this is to revisit your investment or superannuation goals and objectives and to make sure your risk profile has not changed. Being comfortable with your risk profile at volatile times like this is the key to ensuring you stay the course on your long-term investment strategy.
I call this the “sleep test”. If you’re losing sleep at night thinking about your investments, it’s time to have a good look at your risk profile and make changes accordingly. If you need help with this, even if you’re not due for a formal review, we are available to revisit this with you.