Bearing with a Bear Market

We are in the midst of a particularly challenging time in the investment world, with volatility since the start of the year inspiring endless headlines about an uncertain future. If you have seen many of these eye-catching captions, you will have noticed one phrase has become particularly common the last couple of weeks: bear market. A bear market refers to a 20% decline from a high which we are currently seeing in many market indices around the world, such as the S&P 500 (500 of the largest companies listed on the US stock exchange) which is currently down 21.5% year-to-date (as at 22nd June).

This raises the question: how long will we be in bear market territory? The S&P peaked around 3rd January 2022 and since then the market has been volatile whilst sloping downward. Last Three Bear Markets

As shown in the table above, if you look at the last three bear markets: the Dotcom crisis from March 2000, the Global Financial Crisis from October 2007, and the February 2020 market downturn which was triggered by the start of the Covid pandemic, the longest one we have seen was around 2 and 1/2 years long. The current bear market is being caused by many factors such as, high inflation, rising interest rates, the war in Ukraine, the pandemic, lockdowns in China, supply chain issues, etc. Unfortunately, no one can predetermine the bottom of the market and we will only know the market has completed its dip once it has passed. The current 21.5% reduction has occurred over about 5.3 months, so far. Bear markets are characterised by low investor’ confidence and pessimism. During a bear market, investors often seem to ignore any good news and continue selling quickly, pushing prices even lower. While the journey to the bear has been accompanied by stomach-churning volatility, investors can take some consolation from the fact that the S&P 500 typically rebounds quickly after major drops. Three-year forward returns from the date when a bear market became official averaged 30% since 1957, with the U.S. S&P 500 sporting a positive return in all but one such occasion.

Whilst all the news about bear markets may seem doom and gloom, a bear market presents plenty of opportunity for investors which will be beneficial for long-term investment strategies. Trilogy’s Investment Specialist, Chiti, recently sat down with Booster’s Head of Growth, Dave Copson, to discuss the current market and how investors can take advantage of it. This interview can be found here and on our website, along with all our recent market updates:

https://www.trilogyfs.co.nz/news-updates

Some tips on how to invest during a bear market

1. Diversify your investments

2. Stick to your goals

3. Focus on long term

4. Dollar cost average

5. Seek qualified financial advice

If you have any questions, please don’t hesitate to contact us on:

09 553 8928

or

info@trilogyfs.co.nz

Kind Regards,

The Trilogy Financial Solutions Team

Investment Update with Booster Investment Management - June 2022

Right now, investors are being bombarded with headlines and opinions about the current market challenges and what it might mean for them.

With over 100 years’ combined experience, Trilogy Advisers have seen these challenges time and time again and we pride ourselves in being able to help our clients make sense of the noise and stay the course. We do this by drawing on our own knowledge and that of reputable, industry professionals.

In today’s update, Trilogy is pleased to present one such professional: Dave Copson of Booster Investment Management.

Dave is Head of Growth at Booster and has over 30 years’ experience in the financial services industry. Dave’s role at Booster is to ensure that their clients have access to the necessary tools and advice to understand their financial situation now, and how it is positioning them for the future.

Dave discusses with Chiti, Trilogy’s Investment Specialist, the factors contributing to 2022s’ volatility to date, how to manage your concerns around seeing your balance decrease and how to take advantage of the opportunity presented by short-term market declines.

Disclaimer: This video is for information purposes only and should not be treated as financial advice. To the extent permitted by law, Booster Investment Management Limited, and Trilogy Financial Solutions NZ Limited, do not accept any responsibility or liability arising from your use of this information.

Good advice in Volatile Times

You may be reading the news about the pandemic, increasing prices of goods and services (inflation), rising interest rates, the war in Ukraine and the lockdown in China. Our team at Trilogy Financial Solutions has experienced previous economic cycles of volatility and for us it is important to provide regular communication with our clients during these times. Over the next few months, we will be publishing some relevant material relating to investment principles, concepts, and the potential outlook on our website. In this update, we cover the importance of staying in the market, for example, not exiting to a more conservative fund after the market has dropped. Market Days You Don’t Want To Miss

• The stock market can be a wild ride at times.

• Swings of 10% in value during short but volatile periods can happen and are generally in response to headline, global events such as the Covid-19 pandemic recovery, and the war in Ukraine, high inflation and rising interest rates.

• Trying to time the market, i.e., getting out and then back in, is an impossible task and you may end up missing out on the few days with the biggest positive changes.

Here’s what Fidelity, a global fund manager found when they crunched the numbers on what would happen to a hypothetical $10,000 investment into the S&P 500 index fund (USA) from 1980 to 2018 if you missed the best 5, 10, 30 or 50 days.

The above chart tracks a 38-year period, or roughly 10,000 days of share investing. This illustrates that if you think you can time the market, you’re betting that you can get in and out without missing the best five of those 10,000 days — which could happen at any time. Key points

• Missing the five best days when you’re otherwise fully invested drops your overall return by 35% and the results only get worse the more “good” market days you miss.

• Missing the best 10 days will more than halve your long-term returns.

• Once you miss out on the 50 best-performing days, you have completely missed the upside.

Our views In our view the key things for investors to bear in mind are as follows:

• During volatile times, it’s not prudent to cash in or convert growth investments to conservative investments as you will be converting paper losses to actual losses.

• When shares fall, they are cheaper and offer higher long-term return prospects. So, the key is to look for opportunities to buy investments at cheaper prices.

• It's impossible to time the bottom but one way to do it is to average in over time.

• Shares and other related assets bottom at the point of maximum bearishness, i.e., just when you feel most negative towards them.

• The best way to react in a downturn is to stick to an appropriate medium to long-term investment strategy, which should have already been in place and that is commensurate with your goals and priorities.

• For regular savers (e.g. KiwiSaver investors), remember dollar cost averaging. Dollar-cost averaging is an investment strategy wherein you invest a set amount of money at regular intervals, which allows you to reduce the overall cost of your investments, as you “smooth” your purchase price over time and ensure that you are not investing all your money at once at a high price point.

• This reflects an old adage:

‘Time in the market is far better than trying to time the market’

Finally, the best recommendation we can give you during times of uncertainty is to seek professional financial advice – please contact us if you require any advice or information, before making changes to your financial affairs.