About Uniting Financial Services

3 common mistakes investors make when markets are down   By Edwin Lo Chief Investment Officer

When share markets are falling it can be difficult to ignore the headlines and stick to a long-term investment strategy. Here UFS Chief Investment Officer, Edwin Lo, discusses three common investing mistakes and how to avoid them.      1. Panic selling According to behavioural finance, investors experience a range of emotions throughout the market cycle. When markets are at their peak, many investors feel excitement or even euphoria. This can lead to overpaying for assets when prices are due for a correction. Conversely, falling markets can lead to panic and despondency, which may lead investors to sell assets at the worst time, turning a paper loss into a genuine loss. This cycle of emotions is shown in the graph below. Source: Russell Investments   There is often a lot of ‘noise’ from the media and other investors when markets are falling (think the dot-com crash, the global financial crisis and the Covid-19 pandemic). However, having a long-term investment strategy in place and remembering that markets recover over time can help investors to stay the course and avoid making emotional investment decisions when the economy is in recession or asset prices are down. Building a well-researched, diversified portfolio is crucial because market history shows that rebounds can return many portfolios to the black in just a few years. 2. Trying to time markets When investing, it is natural to want to avoid losing money, particularly for more conservative investors, who are often highly focused on preserving their capital base. It can be tempting to shift a portfolio away from growth assets such as shares and property and into more defensive assets such as bonds or cash when share markets are falling. However, trying to pick the top or the bottom of the market at any given time is something that even the most skilled fund managers struggle to do. History shows that the biggest one-day rallies on the market occur soon after a crash has occurred. The biggest one-day gain for the ASX 200 since 1992 was 7% in March 2020 during the Covid crash. There were also significant one-day gains made during the global financial crisis of 2007 and 2008 and the Asian financial crisis of 1992. Investors sitting on the sidelines during these periods would likely have experienced lower returns over the long term. Source: Bloomberg, Uniting Financial Services. Past performance is not a reliable indicator of future performance. The chart above shows the growth of $10,000 between May 1992 and February 2023 for three investors who invested in the ASX 200. The investor at the top stayed fully invested throughout the period and, as a result, their investment has grown to over $150,000. The second investor missed five of the best days on the market and has a much lower $100,000. The third investor missed 20 of the top days and has just $37,000 – less than a quarter of the return of the first investor.   3. Forgetting to rebalance During a major market selloff, a portfolio’s asset allocation to equities tends to decrease as stocks sell off and bond prices rally. At times like these investors may forget to rebalance their portfolios back into growth assets such as equities, missing out on buying opportunities and increasing the amount of time it takes to recover. Deciding whether to rebalance and how often to do it is an important part of an investment strategy. Rebalancing enforces a buy low, sell high discipline which is the basis for sound investing. Investing in a diversified portfolio may assist in this regard, as professional investment managers regularly rebalance portfolios back to their target ranges in order to manage risk. In conclusion, investment losses can be painful but taking the emotion out of investing, sticking to a long-term plan and rebalancing at regular intervals can help investors to ride out the highs and lows of the market while avoiding expensive mistakes along the way.   Important information: The Uniting Financial Services (UFS) unregistered managed investment schemes are available for investment only to wholesale investors. Prospective wholesale investors who wish to invest via our unregistered managed investment schemes can access the Information Memoranda for these any of these funds on the UFS website. While the information in this email has been prepared with all reasonable care, UFS accepts no responsibility or liability for any errors, omissions or misstatements however caused. No action has been taken to register or qualify these products or otherwise permit a public offering of these products in any jurisdiction outside Australia. Past performance is not indicative of future performance.

  CallInvestments and Lending: 1300 133 673Other enquiries: 02 8267 4300

  Emailcontactus@unitingfinancial.com.auWe are here to help.

  Post P.O. Box A2178, Sydney South NSW 1235  

  AddressLevel 10, 222 Pitt Street, Sydney NSW 2000

  Important for you to know Financial services are provided by The Uniting Church (NSW) Trust Association Limited ACN 000 022 480, ABN 89 725 654 978, AFSL 292186 (“UCTAL”) and by The Uniting Church in Australia Property Trust (NSW) ABN 77 005 284 605 (“UCAPT”) (together and separately “Uniting Financial Services”), for The Uniting Church in Australia, Synod of NSW and the ACT (“Synod”), under a s.911A Corporations Act 2001 (Cth.) authorisation and pursuant to APRA Banking Exemption No. 1 of 2021 and ASIC Regulatory Guide 87 and ASIC Corporations (Charitable Investment Fundraising) Instrument 2016/813 exemptions. Uniting Financial Services® is a registered trademark of UCTAL used with permission of UCAPT. None of The Uniting Church in Australia, UCAPT and UCTAL is prudentially supervised by APRA. Therefore, investments with or contributions to these Uniting Church organisations will not receive the benefit of the Financial Claims Scheme or the depositor protection provisions in the Banking Act 1959 (Cth.). All financial services and products are designed for investors who wish to promote the religious and charitable purposes of Uniting Financial Services and The Uniting Church in Australia and for whom profit considerations are not of primary importance in their decision to invest. The information on this page has been prepared without considering your objectives, financial situation or needs. You should, before acting on it, consider its appropriateness to your circumstances or refer to the relevant disclosure document. Loan applications are subject to credit approval. Interest rates are subject to change. Fees and charges may apply. 

Kindly note that the information on this webpage is only intended for wholesale, professional or sophisticated investors (as defined in the Corporations Act). Please do not refer to this webpage if you are not one of these investors. Uniting Financial Services is not providing any personal advice or recommendation regarding any financial products described or referred to on this webpage. Prospective investors should make their own enquiries and should seek all necessary financial, legal, tax and investment advice. Past performance is not indicative of future performance, all information contained on this wepbage is current at the date of publication, however may be subjected to change without notice.