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COVID crash: one year on

 

It's now been one year since the COVID-19 outbreak sent global markets into freefall. How have investors fared since the 2020 crash and what are the lessons learned?

 

       

Hungarian-born illusionist Harry Houdini was famous for his great escapes. So was American actor Steve McQueen, at least in his onscreen role in the 1963 film classic The Great Escape.

And it's somewhat fitting that both men were born on March 24, because that's also the date in 2020 when global share markets began what could arguably be described as one of the greatest escapes in history.

The scene had been set over the previous few weeks as the rapid spread of COVID-19 fuelled panic on international share markets. Like they usually do, markets moved very quickly.

In the space of just a few weeks, after having hit an all-time record high in late February 2020, markets went into freefall.

The Australian share market, caught up in the maelstrom, dropped more than 35 per cent over about 20 trading sessions to reach its lowest level in more than a decade on March 23.

But, almost as quickly as it all started, markets suddenly began to rebound.

The turning point was March 24 last year with the endorsement of a US$2.2 trillion coronavirus economic rescue package announced by the former Trump government – the largest in U.S. history.

Share markets have been steadily moving higher ever since and, one year later, the Australian share market is more than 50 per cent above its 2020 low point. The U.S. market is also trading at new record highs.

The accelerating rollout of COVID-19 vaccines, the huge monetary stimulus programs launched by many countries to offset the economic impacts of the virus, and record low interest rates, have acted as a safety net for financial markets.

Markets remain unpredictable

If there's one key investment lesson to be learned from the events of the last year, it's that financial markets are unpredictable.

Few would have seen last year's sudden share market downturn coming, let alone the start of the market's rebound just a few weeks later.

Picking the 4,359.60 S&P/ASX 300 Index low point of the Australian market on March 23 last year would have been pure luck.

Even more unpredictable has been the market's growth trajectory, to a level where the Australian market is now very close to having recovered all of its losses from early last year. The U.S. market has already achieved that.

Record capital inflows into exchange traded funds (ETFs) and unlisted managed equity funds are a strong indicator that investor confidence in the prospects for equity markets is very strong.

In reality, trying to time markets is virtually impossible.

For long-term investors, the events of the last year have only reinforced the fact that market downturns, no matter how long they last, are invariably followed by market upturns.

Just being invested in the market, and making ongoing contributions, will ensure you never miss a beat.

Time in the markets is what counts

If we look back on investment returns over the past 30 years going back to 1990, what emerges is a very clear picture of growth across all major asset classes.

The volatility in markets over time is also clearly evident, with the period including major downturns such as the sharp market correction that led to the prolonged Global Financial Crisis between 2007 and 2009.

Vanguard 2020 Index Chart showing the long-term performance of Australian and United States share markets, international shares, Australian bonds, listed property and cash.

The chart above clearly illustrates the sharp downturn in global financial markets last year, but also the strong rebound from early 2020 through to the end of December.

Looking back over the past 30 years, it also shows that all asset classes have provided consistent growth over time, and some much more than others.

Taking the Australian share market, for example, up until the end of December it had delivered an average return of 8.9 per cent per annum over three decades, assuming all distributions had been fully reinvested.

Using a base amount of $10,000 invested back in 1990, a person holding Australian shares through an ETF or managed fund tracking the whole Australian market would have turned their initial holding into more than $141,000. That's a total return of well over 1,000 per cent, excluding any fees, expenses and taxes.

A $10,000 investment into U.S. shares over the same time frame would have returned 10.3 per cent per annum and be worth more than $200,000 using the same assumptions as above.

Even cash, the lowest-returning asset, would have delivered a total return of 5.2 per cent per annum and turned $10,000 into almost $50,000 with the benefit of compounding returns.

That's the ultimate power of being focused on time in the markets, instead of trying to time markets.

Having exposure to a range of asset classes to achieve broad diversification also reduces concentration risk and helps smooth out returns.

That's because the returns performances of different asset classes are constantly changing in line with market movements.

Markets will rise and fall, but it's all about staying the course, leveraging the combination of compounding returns and low investment costs, which together really add up over the long term.

After such a volatile investment year, it's abundantly clear that time in markets will always win out over trying to time markets.

 

 

By Tony Kaye
Senior Personal Finance Writer, Vanguard Australia

23 Mar, 2021
vanguard.com.au

 

 

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Retirement Planning

Retiring on your own terms is not always easy to achieve, however it is evident that those who plan for retirement are more likely to do so. Results also show that obtaining professional help during the pre-retirement years further improves the probability of attaining your retirement objectives.

The earlier you start implementing a plan the better the outcomes.

During one’s working life there is always an income to make ends meet when raising children, paying off a mortgage, etc.

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The first step is to create a plan. At Wybenga Financial we take great care in getting to know our clients and their future goals and objectives. We combine our knowledge of your personal goals together with an analysis of your current situation, to create a detailed, personalised plan that will help you meet your objectives. This plan will become your road map which outlines how we are going to meet your goals, whilst aligning all investment decisions to your specific risk tolerance.

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The final and most important phase of the relationship with Wybenga Financial is the ongoing management and monitoring of your wealth. This ensures you are sticking to your plan and that your portfolio is aligned to your needs and attitude toward risk. An ongoing relationship ensures that we know when your circumstances change and that these can be recognised and reflected in changes to your investment approach.

While we are monitoring your portfolio from the perspective of your personal goals and situation, we also take into account the wider economic landscape and changes to legislation. We continually review and analyse our preferred investments in a structured and objective way. The benefit to our clients is that we are unemotional. This can be significantly beneficial over the long term.

At Wybenga Financial we can provide the time and expertise that will help you invest intelligently and prudently.  Contact us today to discuss how we can work together: (02) 9300 3000 or .

Personal Insurance

Life insurance isn’t just a cost, though it often feels like it.  You buy peace-of-mind that should a serious issue effect you then the consequences won’t unduly affect your family.  Insurance provides you with the ability to manage the financial and emotional impact of some of the more drastic events, whether personally or in your small business.

Insurance can’t replace a loved one but it can help reduce the financial burden by providing the capital to ensure your family has choices.

Many Australians are underinsured and the consequences can be very serious for families should there be a death or serious injury. A yes to any of the following questions means you may have a need for insurance coverage:

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  5. Do you have dependents?
  6. Would your financial position be affected if you were to suffer from an illness or injury?
  7. Do you want to have enough capital to look after your dependents if you were unable to care for them for an extended period of time or perhaps indefinitely?

We understand that it can be difficult determining the type and level of cover you might need, let alone choosing an insurer. We can assist by helping you determine your needs and recommend an insurer that is right for you.

At Wybenga Financial we know how to protect your wealth and will recommend solutions that best suit your needs. Contact us today to discuss how we can work together: (02) 9300 3000 or .

Superannuation

Superannuation is mandatory but taking an early and active interest in your retirement planning is critical to ensuring your benefits are maximised by the time you retire.  Many will have a superannuation scheme through employment but increasing numbers are starting their own Self-Managed Super Fund (SMSF).

For many, simply relying on employer contributions may not be enough to provide the lifestyle you desire at retirement. We can assist in building strategies to ensure your retirement goals are met and your required lifestyle is maintained throughout retirement.

It is always best to start saving and planning for your retirement as early as you can. 

At Wybenga Financial we know our job is to help you meet your retirement needs and we have the skills and experience to do this for you.  Contact us today to discuss how we can work together: (02) 9300 3000 or .

Self Managed Super Funds

Self-Managed Superannuation Funds (SMSFs) offer a good strategy option for many individuals, families and small business owners to build tax effective wealth and to protect assets over time. SMSFs are becoming popular for those who are ready to take control of their own super investments as they give you ultimate control and flexibility to manage your retirement benefits.

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Estate Planning

Your estate is made up of everything you own. This includes your home, property, furniture, car, personal possessions, business, investments, superannuation and bank accounts.

Having an estate plan is extremely important.  Having a will is just the first step in your estate plan. It is critical to consider what outcomes you would like for your estate and to ensure a plan is in place to achieve those outcomes, both including and beyond the terms of your will.

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Strategic Planning

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Tess Uncle

B.Sc, M.Com, CA, DipFP

Tess has over 22-years experience in Chartered Accounting Firms and in this time has had a broad range of experience in superannuation, taxation, business services, and financial strategy.

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  • 2001 – Commenced employment with Wybenga & Partners and part-time accountancy studies
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  • 2005 – Admitted as an Associate Member of the Institute of Chartered Accountants Australia
  • 2007 – Promoted to Manager at Wybenga & Partners
  • 2012 – Appointed as Associate Director
  • 2015 – Awarded a Diploma of Financial Planning
  • 2016 – Appointed as Partner of Wybenga Group and Director of Wybenga Financial

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Adam Roberts

B.Bus, B.Sc, CA, DipFP

Adam has over 18-years experience in Chartered Accounting Firms and in this time has had a broad range of experience in superannuation, taxation, business services, and financial strategy.

Over the last seven-years, Adam has turned his attention to Financial Planning, earning a Diploma of Financial Planning in 2015 and leading the newly established financial division of the Wybenga Group as a director of Wybenga Financial.

Adam’s mission is to bring the ethics and integrity of his Chartered Accounting background to the area of wealth management.

Combining traditional accounting and financial services has been a welcome move for Adam, allowing him to operate and advise in the financial sector that has been a long time personal passion.

Using his depth of knowledge and experience in tax and accounting Adam is able to demonstrate a level of competence that is unique in the Financial Planning sector.

  • 2005 – Graduated Bachelor of Science from the University of Western Sydney
  • 2005 – Commenced employment with Wybenga & Partners and part-time accountancy studies
  • 2007 – Graduated Bachelor of Business from the University of Western Sydney
  • 2010 – Admitted as an Associate Member of the Institute of Chartered Accountants Australia
  • 2010 – Promoted to Manager at Wybenga & Partners
  • 2012 – Appointed as Associate Director
  • 2015 – Awarded a Diploma of Financial Planning
  • 2016 – Appointed as Partner of Wybenga Group and Director of Wybenga Financial

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Advisory Cadetships

What is an Advisory Cadetship?
An Advisory Cadetship enables you to commence your career whilst attaining the necessary university qualifications by studying part-time.

How does it work?
Generally, our cadets complete a relevant business or accounting degree at the University of New South Wales, the University of Technology Sydney, Macquarie University, or the University of Western Sydney.

The Firm provides 3-hours paid study leave per week to attend university. This can either be taken at the one time or broken between days depending on the individual’s requirements. In addition, the Firm provides paid study leave for both mid-semester and end-of-year exams.

We take the work life balance very seriously at Wybenga Financial and our cadets are encouraged to have a fulfilling life outside the office. A typical day will have you arriving at the office at around 8.30am with most days concluding at 5.30pm.

What are the benefits of an Advisory Cadetship with Wybenga Financial?
Our cadets benefit from the following:

  • Career path – on completion of their degree our cadets have significant practical experience which will assist them in advancing their careers
  • Work helps your studies – by working full-time our cadets are able to apply their practical knowledge in the university subjects
  • Camaraderie with other cadets – the Firm has a number of cadets at various stages of their career
  • Mentoring – cadets are paired with a senior staff member who oversees their progress and training both at work and with their studies
  • Communication and feedback – the Firm has an open door policy which enables all cadets to interact with all members of staff including Directors
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  • Modern environment – including ‘socialising’ areas such as pool table and break out area
  • Training – ongoing support and technical training. We also provide internal and external training on a monthly basis
  • Remuneration – working full-time provides a market salary and independence with salaries being reviewed every 6-months

What happens when I complete my degree?
The completion of your degree is the first step of what we hope to be a long and successful career with us. The next step is the commencement of a Diploma of Financial Planning followed by completing the requirements to become a Certified Financial Planner (CFP).

There are always progression opportunities for the right cadets and we are dedicated to the long term development of our staff.

Who should apply?
Current Year 12 students or first/second year University Students who:

  • want to commence their career in financial advisory;
  • are due to commence or are currently completing a part-time business or commerce degree at university with an advisory major;
  • want to gain valuable hands-on experience while completing their qualifications;
  • are looking for a friendly working environment;
  • are team players who display initiative;
  • have a commitment to self-development;
  • possess excellent personal presentation and communication skills; and
  • are motivated and mature minded.

How do I apply for an Advisory Cadetship?
To apply for a Cadetship position at Wybenga Financial send us your details. Please also include in your covering letter why you wish to do a cadetship, include relevant qualities you possess, main interests / achievements, and any previous employment.

Interested candidates should initially forward a resume/covering letter of no more than 3-pages. Please provide full details of contact information (telephone or e-mail).

What if I have more questions?
For further information about our Cadetship program, please send your enquiry to .