BY MICHAEL FAZZINI
Heightened noise surrounding uncertainty and risk in the investment market can be overwhelming and often leads to inaction.
While doing nothing might seem like the right thing to do when uncertainty dominates, the cost of lost opportunities might end up being very high.
The big worry for markets is global inflation and the risk that interest rate increases might go too far and tip the global economy into recession.
It is important to recognise that irrespective of policy measures implemented by the Reserve Bank of Australia, a global recession would still impact Australia’s economy due to the flow-on effects of reduced export demand and low confidence in businesses and consumers.
Investors are therefore watching for changes in global monetary policies as well as local interest rate changes. However, confusion and uncertainty as to how far interest rates will rise are the barriers blocking investor confidence.
Other risks such as financial crises triggered by bank failures, geopolitical risks (the Ukraine and Russia conflict and ongoing China and USA tensions), and uncertainty surrounding future house prices in Australia, further complicate matters.
While many Australian investors might believe making investment decisions should be put on hold, oddly, bad news can quickly turn into good news if it’s seen as helping manage other risks.
The fear of a global financial crisis could put a hold on central banks raising interest rates. Investors then have to decide whether any pause in interest rate rises is just that, or if it could be the end of rate hikes entirely.
Inflation and investing
The author of this article believes that inflation pressures will ease, interest rate rises are close to an end, economic growth will be slow, but stronger than initially feared, and house prices still have further to fall.
But this is only one opinion and unfortunately, many investors often wait until such an opinion becomes fact before they decide to participate. By the time many investors decide to act, investment markets have rallied, meaning many investors get left behind, with assets they are buying having already increased in price.
This is not meant to be a harsh criticism of investors but rather a recognition that while investing during uncertain times is challenging, seeking professional advice is always best.
Looking at options
This is where Capital Prudential might be able to assist. Our Secured Income Notes program allows investors to benefit from the attractive returns of property development as a known, regular income stream, without the burden and concern of carrying substantial risk.
Many of the risks with property development, such as what to pay for a site, getting the appropriate development applications, and either pre-selling or leasing the finished development, are mitigated prior to investors becoming involved in the development.
With Capital Prudential managing the risks, investors’ capital remains unchanged during the term of the investment, with regular income payments of between eight and 10 per cent per annum^ being paid quarterly. Which, with all the current noise surrounding the investment market, is a welcome sight.