A memo for MB Fund investors

As you may be aware, there have been significant falls in share markets over the last few days on the back of COVID-19 concerns.

We have had concerned messages and calls from investors, and I wanted to give you more information.

In our tactical portfolios, we manage the asset allocation for you. About a month ago we took a very conservative stance on the back of: (a) expensive markets (b) heightened uncertainty and (c) COVID-19 flow-on effects.

We are of the view that these will last for some time and we are not yet looking to buy in.

As at the morning of 27th Feb, stock markets have fallen sharply. All of our tactical portfolios have increased in value. So far, we are on the right side of this trade. Not to say we will always get it right, but in this case, at least we believe we have positioned portfolios correctly.

Notwithstanding this, we have seen a number of clients changing from growth to income to reduce their own risk exposure (you can do this yourself on our portal).

We welcome your changes. I want you to feel that you have control over your investments both through customising your ethical constraints, your income needs and your risk tolerance.

However, I want to highlight that you may be trying to second-guess our weights and by being overly conservative, you may miss the eventual upside. Studies tend to show that many non-professional investors sell after the market falls and buy after the market rises. i.e. buy high and sell low.

I do want you to be comfortable with the risk levels in your portfolio. But, if you are scaling back your risk now, I urge you to do it because you have had a genuine and long term change in the level of risk you are willing to tolerate.

If you would like to control the risk levels in your portfolios more actively, we do have other products where you can always control the risk. These are for experienced investors who understand not only markets, but their own psychology and behavioural biases. Please contact us if you would like to discuss.

I note that you have full access to see every stock and every bond in your portfolio, their performance and why you own them. While this transparency is core to our offering, it has a downside. Not every stock we own has gone up, and so this can be concerning. We urge you to look at the overall performance – diversification means not every asset we buy will go up. In fact, some stocks are specifically held in our portfolio in case we are wrong.

More information:

We have frequently been writing and podcasting about this topic. Yesterday I appeared on ABC’s The Business talking about the risks: