Investments in uncertain times; how to manage your wealth

Our top tips for safe investments

It’s been over a year since the world as we know it changed. We seemed to go from a fairly carefree lifestyle to one with restrictions placed on us at every turn.

And it was something we couldn’t escape from.

It seemed every time we turned on the TV, listened to the radio, or scrolled our socials that the ‘perils of the pandemic’ were being pushed in our faces.

So, it made sense that many of our clients, our investors, were feeling a little uneasy during this time.

The great news about the bigger financial picture for Australia   

Australia is known as ‘the lucky country’. And perhaps we are right now. Not only have we fast-tracked ways to stop the spread of a virus, but our economy is bouncing back quickly.

Our Australian Government has released a $17.6 billion stimulus package to help our economy recover. And the Reserve Bank of Australia has cut interest rates to 0.5% and injected a further $8.8 billion into the market.

So, our economy is resilient and is looking like it will cope with the effects of COVID-19.

Our top 8 tips for investing in funds (shares, bonds, etc.) during and after the pandemic 

  1. The market can be volatile, and if you’re not experienced, you may be shocked by how fast your fund can rise or fall. Be prepared and say strong in your financial decision-making.
  2. Partner with a team or put your faith in wealth managers who can keep an eye on your fund and help you make quick decisions.
  3. Take the emotion out of it and buy stocks on their value, not on your values.
  4. Diversify your investments and spread them across a range of stocks, bonds, metals etc., so it softens the blow if one crashes.
  5. To see a considerable boost on your returns, reinvest your dividends. This takes some patience and dedication.
  6. Remain persistent and be in it for the long haul. If your investment takes a hit momentarily after performing so well for so long, it’s likely to return to its former glory. Focus on your long-term goals.
  7. Invest in high-quality, cash-generating companies that haven’t been affected by the pandemic as much as others.
  8. Don’t make reactive decisions during this time. Markets tend to rise and fall over years, so bailing out too early may lead to you missing out on potential returns when everything stabilises.

Our top 5 tips for investing in property during and after the pandemic 

  1. If you used mortgage deferments or Government relief during the pandemic, start to plan to come out the other side before the support disappears. Talk to tenants about paying rent again (if they ceased) or look for new tenants to occupy your investment property.
  2. Listen to the facts only from your trusted advisors, and don’t believe the media hype around the doom of an uncertain market. Look at the current vacancy and sales rates and what you can control right now.
  3. Don’t overcommit yourself or take risks. Landlords (investors) who appear calm don’t overcapitalise and have enough funds to survive a downturn for a little while (knowing it will bounce back, of course).
  4. If you’re looking to take advantage of investing in property, snap up the record-low interest rates. Remember, this may go up in the future, so remain comfortable in your budget.
  5. Look at the trends of where people are buying. With more people working from home, many took on ‘sea’ or ‘country’ changes and moved out of the city.

Economic markets and investments will recover during 2021

2020 became all about the battle. Battling the disease. Battling money. Battling uncertainty. 2021 is the year we’ll rebound.

If you’ve got any questions at all about investing, please contact us. Here’s a sample of FAQs our clients tend to ask before they work with us to secure their financial future:

  • How do I make sure I’m financially secure for the future?
  • How do I decide on an investment property and what type (residential, commercial)?
  • How can I build my wealth in case this ever happens again?
  • How do I decide what to invest in – funds or property?
  • And much more.

What questions do you have? Feel free to contact our team at 1300 346 782 or at info@windsorcapital.com.au

 

How self-funded retirees can offset the effect of interest rate cuts

Life became even more difficult for self-funded retirees when the Reserve Bank of Australia (RBA) cut the cash rate by 15 basis points to a record low of 0.10%.

With inflation running at 1.6% the cut will effectively result in a negative yield for all forms of cash deposits, including term deposits.

CanStar found the best Term Deposits ranged from 1.1% to 1.23% (Nov 2, 2020) creating a major income issues for hundreds of thousands of self-funded retirees.  

This was confirmed by a recent survey of over 1,000 Australians aged 40+ that showed 65% of retirees said they were concerned about their income in retirement and almost half (49%) of retirees say they don’t feel confident about their financial security over the next five years.

Add to this COVID-19’s effect on the share market that has seen blue chip dividends slashed and the search for high yielding investments becomes far more important. 

A secure alternative is to invest in mortgage funds that offer the types of yields to generate a living income.

Mortgage funds provide investors with first mortgage security and familiarity and everybody understands the principles of a mortgage and the multi-billion dollar sector is booming as the major banks withdraw from the commercial property sector.

The Windsor Capital Core Fund (WCCF)* is offering a forecast yield of 7% based on investments in the commercial mortgage sector.Investor’ funds provide mortgages in the retail, office, industrial and large scale residential sectors with terms ranging from 6-24 months.

The WCCF is a Pooled fund that minimises investor risk by spreading investor funds across a range of mortgages and offers returns paid monthly.

For further information on the WCCF go to www.windsorcapital.com.au/WCCFLP

* The WCCF is only available to sophisticated investors with a minimum investment of $50,000

The COVID-19 impact on Mortgage Trusts

The Australian property sector is facing uncertain times following the COVID-19 pandemic that has seen dramatic changes to our residential and commercial markets. 

The question is whether the changes will be short term, and snap back to pre-COVID, or result in a fundamental reshaping of one of the major drivers of the Australian economy? 

Concerns about the pandemic effect on office, residential and retail markets in particular are yet to wash through the market.  Will cities be left with empty office buildings as corporations rationalise office space through the use of working at home and hot desking? 

Will we have vacant shopping centres for years, as the huge uptake of online shopping is putting further pressure on bricks and mortar retailing? 

In addition, the fall in migration will have a long-term effect on the residential market as housing starts slow or will the billions in stimulus keep it active? 

Will these changes affect the Australian mortgage trust market and reduce the attractive yields that have been attracting billions of dollars in the past 12-24 months? 

At this stage it appears this uncertainty will not be an issue.  One of the key factors underpinning the mortgage sector is the withdrawal of the major banks creating an $80 billion funding gap for quality property projects into 2021. 

It is the established real estate investment trusts (REITs), with major pre-COVID holdings with high gearing that face the major challenges. 

Mortgage trusts are generally forward looking.  They finance new development (or refinance existing quality property) underpinned by mortgage security and have the ability to pick the sectors that are expected to perform the best.  

In addition, mortgages trusts are short term and nimble with mortgage periods typically from 6-36 months. 

Boutique mortgage funds, such as the Windsor Capital Core Fund (WCCF), manage investment risk in a number of ways. 

WCCF is a pooled fund that invests in a spread of quality mortgages to minimise volatility across a variety of property sectors. We take a conservative approach and follow strict in Due diligence guidelines. 

At present we are seeing an increase in deal flows and it is an excellent time to explore the opportunities of investing in mortgage trusts and diversify your current portfolio.  

Should you have any further questions or want more information on the Windsor Capital Core Fund please do not hesitate to contact us on 1300 346 782. 

Mezzanine Financing Pros

If you’re raising capital to fund your project development, you may want to consider using mezzanine loan as part of your financing solution.

Mezzanine financing is a useful tool to fund developments, expansions or property acquisitions or completing a construction project. You can use it in combination with equity financing, line of credit, term loans, or as a substitute for bank loans. In a capital structure, it sits above equity financing.

Here are the benefits of using mezzanine finance:

  • It is cash-flow based. While banks look into your collateral, mezzanine investors look into your cash flow.  Traditional lenders focus their evaluation on your assets and financial documents when evaluating your loan application, so when borrowers lack tangible collateral and proof of higher income, banks won’t approve their application. On the other hand, mezzanine financing lenders often lend money to businesses with sufficient cash flow available to pay the interest and principal payments when they fall due.
  • Interest only capital. Mezzanine loans are flexible. It requires no immediate principal payments. Its interest-only capital feature with balloon payment upon maturity, allows you to use the money that would have gone to making the payments and use it to complete your project.
  • It has a longer maturity than bridge loan and other short term loans. Developers looking for long-term with a maturity of five years or morecan enjoy this long term financing option. You don’t have to worry about paying this loan back in the short term.
  • It is a reliable alternative funding source for borrowers seeking to finance property development, especially those that do not qualify for traditional bank loans with tougher capital regulatory requirements.

Windsor Capital assists lenders facing lending problems, as bank lenders increase regulation on development loans. We help fill the void for developers looking for funds to start and complete their projects in Melbourne.