Interpreting Financial Babble
Thank you for reading this newsletter.
As many of you may know, the markets have had a volatile start to the year with high inflation around the globe and recent geopolitical concerns in Eastern Europe. It’s times like these where we see investment analysts and commentary getting more and more airtime on the news.
This can lead some to be concerned at a macro level regarding volatility in their portfolios, or at a more micro level with how might affect the cost of consumer goods in New Zealand.
If you are invested in a Synergy or Consilium portfolio with us, the only allocation of your portfolios involved with Russia or Ukraine/Belarus is through the Emerging Markets funds, in both Standard and Socially Responsible mandates. Across all these portfolios, exposure ranges from 0.0% to 0.3%.
The visual below illustrates the exposure to Russia in the standard 98/2 portfolio:
Historically, such events as we are witnessing in Europe do have an impact on portfolios but these have typically been temporary as evidenced below, which shows the impact of Market Shock Events over the past century.
From a New Zealand perspective, the extent of trade with both Russia and Ukraine is limited. Russian exports to New Zealand during 2020 were approximately US $252 million, overwhelmingly mineral fuels and oil. New Zealand exports to Russia consist primarily of dairy products and are of a similar order of magnitude in terms of value, while trade with Ukraine is insignificant (Select Wealth Management, 2022).
FoxPlan’s role is to help you to stay focused on your goals whilst listening to your financial concerns, especially external factors. The research done by our Investment Partners is historical and evidence-based, rather than predictive. This means that we evaluate and understand a lot of financial information that in the media can be considered hype and sensation.
Even fund managers are having a hard time sorting through the noise of the financial news. Imagine how confusing it must be for regular investors. Compounding the problem is that most don’t really read the full story. Nowadays people barely get past a quick glance at the headlines.
For those tempted by this ‘headline surfing’ approach, here is a crash course in how to interpret what you are really reading.
Some or all of these headlines might make you feel uncertain about your plan and the investment strategy designed to support it. As mentioned above, our role is to assist you to stay on track with your plan and remain confident that you have the correct strategy. Please get in contact with your adviser or contact us on 0800 NO STRESS (0800 667 873) if you have any questions or would like your adviser to talk through your current investment plan.
The above data were supplied by Consilium and Select Wealth Management in their monthly communication with FoxPlan, and Synergy Investments in their Investment Report for Quarter Ending 31st March 2018.
References
Select Wealth Management. (2022, February 25). Select Wealth. Retrieved from Portfolio Response to Russian Invasion of Ukraine: https://onetomany.cumulo9.com/v/63888/1172233/email.html?k=AGSOB6EGUJ05_Xel10UTPYbq4B7-SIdQ7D3WcU28bDs