The investing lessons we have learnt from the coronavirus crisis


Until this week, South Australia was confident it was safe from the COVID-19 virus, yet now it finds itself in a strict lockdown.

If there is one thing that 2020 and the virus have taught us is that we cannot be complacent, as the world is at a point where our health and security can be challenged at a moment's notice.

There is an old saying that ignorance is bliss but it would be to your detriment if you applied this philosophy to building wealth for your retirement. The statement that ignorance is expensive is more appropriate, given that research highlights that Australians prefer to save for a holiday or spend money on other lifestyle choices rather than prepare for retirement.

what covid19 taught us about investing

Yet 2020 has taught us, is that everything can be taken away in a heartbeat, and ignoring this fact can be a costly mistake.

Unfortunately, too many people move towards retirement without much thought or planning, as they believe their superannuation or the pension will suffice, yet the evidence strongly indicates otherwise.

This year we have learned that our job can be taken away or put on hold indefinitely, which has the ability to affect your lifestyle in retirement. For this reason, it is even more important than ever to plan for that inevitable rainy day.

The Government cannot continue to borrow heavily and shell out money indefinitely to support every Australian should another COVID-19 like event happen. Therefore, it is up to each of us to be prudent with our money, which means investing wisely so that you have sufficient income to retire comfortably.

Best and worst-performing sectors this week

What an interesting week it has been with the ASX systems shutting down on Monday and halting all trading. Despite this, our market performed well with the Financial Services sector up more than 5% followed by Energy up almost 5% while Consumer Discretionary was up nearly 2%.

The worst performers include Information Technology down nearly 2% followed by Utilities down nearly 1%, while Communications Services is just in the red.

Looking at the ASX/S&P500 top 100 shares, the best performers include Unibail-Rodamco-Westfield, which jumped up strongly again by more than 30% with retail investors attempting to profit from a stock that has performed very poorly more than the past few years.

Next is Bendigo Adelaide Bank, which is up more than 14% followed by Whitehaven Coal up more than 13%. The worst performers include Evolution Mining down more than 7% followed by Northern Star Resources and Ausnet Services, which are both down more than 6%.

What to expect from the market

The Australian market continues to rise on the back of good news around a COVID vaccine with the market rising for 12 of the last 13 trading days achieving a gain of nearly 10%.

While it is possible the market may move down for a few days in the coming week, everything looks good for the All Ordinaries to rise strongly until late January and possibly into February.

Given this, my expectation is that All Ordinaries Index will continue to move up to break above the previous all-time high set in February of this year at 7289 points. While I don't expect the technology sector to be a big mover during this period, I do believe that stocks in the Energy, Materials, and Financial sector will perform well.

Given the volatility in the market right now, it is not a good time to be taking risks to bottom pick stocks, nor is it the time to be buying penny dreadfuls, rather you should be focusing on quality blue-chip stocks.

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Dale Gillham is chief investment analyst at Wealth Within Limited (AFSL 226347). He also serves as the head trainer at the Wealth Within Institute (RTO 21917). He has more than three decades of experience in the investment industry, and is the author of How to Beat the Managed Funds by 20%, Dale's qualifications include an Advanced Diploma and a Diploma of Share Trading and Investment. He co-hosts the Talking Wealth Podcast, and his work has appeared in The Australian Financial Review, New York Business Journal, Wall Street Select and more.