Investing Money: March 2020

Tuesday, March 31, 2020

[Smart Investing] Ride the market to recovery

Investments and personal finance insights from Vanguard Australia

01 April 2020

Hi everyone,

I hope you are staying safe and doing well as we all continue to adjust to social distancing and this new, different way of living.

In this week's edition of Smart Investing, we again discuss the benefits of staying the course and remaining patient even when markets experience significant downturns like the one we are currently in. Understandably, you might be feeling a little worried about the state of things, whether it be over the economy or your own investments. But perhaps comfort can be taken from the fact that with every downturn, there will come an upswing – and this recovery is predicted to be quite rapid.

Vanguard's Senior Financial Writer Tony Kaye also explores the "dividend yield trap" and cautions investors to be wary of dividend expectations in the medium term as companies come to terms with the economic fallout from COVID-19.

Lastly, you might have seen a few news articles discussing the liquidity of bond markets over the past week or two. As such, we have also included a video featuring Vanguard CEO Tim Buckley and Global Head of Rates Sara Devereux to provide you a deeper dive into how bond markets are responding to the current stress and stimulus.

As always, feel free to email us with your questions or feedback.

Regards,

Robin Bowerman
Head of Corporate Affairs
Vanguard Australia

Ride the market to recovery

By Robin Bowerman

Severe market downturns feel anything but fair. Uncertainty and the sense of loss of control are powerful emotions to grapple with. But what we know from past market events is that patience will be rewarded and recoveries can be just as sudden and strong.

Don't fall for dividend yield traps

By Tony Kaye

What may look like a good yield opportunity at the moment may not pan out that way over the medium term, particularly as the economic and financial fallout from COVID-19 on the 2020-21 earnings results of listed companies becomes much clearer.

How bond markets are responding to stress and stimulus

Get insights from Vanguard's CEO and Global Head of Rates about the current state of the bond markets.

Watch video

Vanguard in the news

Bond fund spreads widen

Financial Standard | Kanika Sood | 23 March 2020

Investors looking to redeem their fixed interest allocations face deep buy/sell spreads, as poor liquidity forces funds to push them up significantly during COVID-19 volatility. "We expect that spreads will continue to increase and decrease more often in the near future - for instance, just this morning we issued another unitholder notice detailing the decrease in spreads across a number of our funds," a Vanguard spokesperson said. "The change in spreads reflects the volatility in markets which makes it harder to price and increases some costs, such as hedging. The increased spread also ensures there is a fair sharing of costs between those trading and existing investors."

To read more, please visit the Financial Standard website.

Please note the link above will show a copy of the article (where freely available), or the publisher's website if a subscription is required.

In case you missed it

For a smoother path to investment success, diversify

By Robin Bowerman

Diversification protects against the risk that a share, bond or asset class will fall in value and generate losses that will prove difficult to recover from.

Why retirees want ETFs

By Robin Bowerman

Australian retirees have long favoured low-cost, easy-to-trade exchange traded funds (ETFs) to simplify their investing lives and to meet their investment goals, including retirement-income needs and risk control.

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Tuesday, March 24, 2020

[Smart Investing] A different form of distancing

Investments and personal finance insights from Vanguard Australia

25 March 2020

Hi everyone,

I hope you're staying safe and keeping well during this unprecedented period.

This week we discuss why you should never catch a falling knife, and suggest that perhaps extending your social distancing practices to include your portfolio balance could help temper some of the emotional impacts of watching the market's volatile swings. Vanguard's Senior Financial Writer Tony Kaye also examines what we're seeing in the Australian ETF market and busts the myths around ETF liquidity issues. Finally, we've included a video of Tim Buckley and Greg Davis, our global CEO and CIO respectively, discussing the protocols that we have in place across the globe to ensure that we can continue to manage your investments during these difficult times.

If you have been trying to reach us over the phones, we thank you for remaining patient with us. As you can imagine, coronavirus issues have kept the phone lines very busy. We are committed to serving you as promptly as possible so please try our call-back option (where available) or online services. More details here.

Until next week.

Regards,

Robin Bowerman
Head of Corporate Affairs
Vanguard Australia

A different form of distancing

By Robin Bowerman

Market timing – particularly at times of severe stress and uncertainty – is akin to trying to catch falling knives as markets whipsaw around. So perhaps there is another form of social distancing we can practice – keep a healthy distance from that account balance until markets have returned to something resembling normal service.

The pulling power of ETFs

By Tony Kaye

The sharp plunges on global equity markets over recent weeks, driven by the coronavirus pandemic, have triggered widespread investor concerns. Yet, in the midst of the strong volatility on markets, it seems many retail investors are taking a longer-term perspective and viewing the current events as an opportunity.

How Vanguard prepares for the unexpected

Vanguard's CEO and CIO discuss the protocols in place to ensure business continuity and strong service for clients.

Watch video

Vanguard in the news

Australian bond ETFs blow out on discounts

ETF Stream | David Tuckwell | 17 March 2020

As coronavirus panic has sent markets into turbulence, popular bond ETFs have started trading at prices below their fair value, known as discounts. According to a Vanguard spokesperson, these discounts tend to be short-lived and investors with a longer time horizon will be unaffected.

"ETF pricing during periods of extreme market volatility may involve…pricing dislocation as the valuations on [bonds] are changing rapidly…This is a short term influence…[and] there is no indication that this is a significant issue for investors with a sound investment strategy in place across a suitable time frame," they said.

To read more, please visit the ETF Stream website.

Please note the link above will show a copy of the article (where freely available), or the publisher's website if a subscription is required.