No doubt we are currently in a challenging environment for investing in equities. Yet, turbulence and volatility could bring investment opportunities – including in equities. Ms Dickson characterised the situation as being confronted with a valley: “In a time of volatility, investors should not just look down, but keep their mind focused on what’s on the other side of the valley, and what the landscape might look like there.”
She explained that equity investing has shown its worth over decades, through good and bad economic times. “As part of equity investing, dividends can positively contribute to total returns over the long term,” she said.
In the podcast Ms Dickson explained why this is, noting that investments should be considered while taking a particular view of company’s track record. Some sectors (particularly the technology sector) have done well during the recent period of low interest rates, as it was relatively easy to borrow money to fund growth. However, it was those companies that were able to pay or even grow dividends relying on their fundamentals, which might particularly catch investors’ eyes now, she said – and those may not be tech companies.
She highlighted some of the sectors in this latter category that investors might potentially consider. However, even so, Ms Dickson points to the advantages of adding a broad range of companies to portfolios, as there is validity in many business-growth models.
Investors should expect somewhat rough waters over the coming months, and they should plan their investment strategies accordingly. “Rebalancing may continue as investors shift from focusing on growth companies, to renewed interest in companies that have been overlooked for a long time,” she explained. “This will continue to be a transitional environment, given that volatility is likely to continue.”
This is the second episode of the second 10-part podcast series Investing For The Long Term featuring Capital Group. These monthly podcasts, produced and hosted by Delano and Paperjam, explain some of the key challenges investors are facing and the investment opportunities related to those challenges. The first series can be accessed here.
To listen to Capital Group’s podcasts, click here.