10 Nov April 2022
At Forrest Private Wealth, our investment philosophy underpins our financial planning advice, which ensures our client’s wealth benefits from long-term exposure to equity markets. We believe holding a well-diversified portfolio of predominantly dividend-paying businesses over a long-term period is essential in financial planning for wealth accumulation and, ultimately, retirement planning.
By following our retirement planning process, a Forrest Private Wealth financial planner stays true to their investment advice, ignoring the noise and pressures of the market to provide their clients with a stress-free retirement. At Forrest Private Wealth, our financial planners capitalise on an investment philosophy that provides predictable income streams from equity markets, setting clients up for their desired retirement.
Long Term Portfolio
Despite a defensive portfolio with weighting to infrastructure and private equity, the Long account was down in May. A direct result of the negative sentiment that has grabbed hold of sellers happy to sell at any price because of their current end of days outlook on inflation and interest rates. In markets such as we’re currently experiencing, it’s easy for investors to lose focus.
So how do we remain positive? Time and time again we have witnessed indiscriminate selling that we ultimately survived. Why? Resilience. Every time the world is coming to an end, it has not. Think Dot Com Meltdown, Great Recession, Greek Debt Crisis, China Slowdown, 2018 Christmas Bear market and Covid just to name a few. In time the current grey clouds will give way to blue skies and market participants will start thinking of the future rather than current events.
In our view the portfolio continues to remain robust and is positioned for cash flow in the form of distribution as well as growth over extended periods of time. Importantly our client’s overall exposure does not put them in a position to draw down from the equity side of the portfolio at it’s worst time.
Is the interest rate / inflation factor real? Absolutely. However, the market is factoring a worst-case scenario. History tells us we continue to move forward, resilient.
Short Term Portfolio
Investment markets have continued to be driven primarily by how central bankers manage rising inflation. Our portfolios are designed to generate sustainable income, meaning we look through the noise of short term volatility, and focus instead on the underlying earnings generation of companies that are best placed to survive and prosper through a variety of conditions in the future, rather than making speculative bets for short term gains.
As always, we remain vigilant and willing to make further adjustments to capitalise on opportunities where warranted. Ongoing and stability of distributions are key for portfolio construction. The recent addition of the MA Secured Real Estate Income Fund improves the stability of distributions aligned to a rising interest rate backdrop.
Micro Cap Portfolio
Market volatility persisted throughout May as investors weigh up the risk of the impact of an economic slowdown as central banks throughout the developed world continued to tighten monetary policy to combat 40-year high inflation.
Economists appear to be concerned that the Fed are too far behind the curve to successfully engineer a soft landing. This is creating fear around the potential of a recession in the US. Early signs of a slowdown have emerged with several large US retailers warning that cost of living pressure is starting to impact discretionary consumption.
Domestically, the Reserve Bank of Australia kicked off its tightening cycle with a 25 basis-point hike in the cash rate to 35 basis points on 4 May,
their first hike since 2010. Australia also voted in a new Federal Government at the 21 May election with the stock market taking a relatively benign view of the change given the lack of any radical policy settings.
Forrest Private Wealth’s discipline in providing financial planning, retirement planning, and wealth management services to its clients allows our clients to benefit from years of experience providing financial advice through major impacts to equity markets where staying the course has helped them.
Forrest Private Wealth has a dedicated team of financial planners and support staff providing clients with peace of mind in working towards and achieving their life goals.