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Investors warned to heed global risks in financial planning
The Executive Chairman of PrimaryMarkets, a trading platform for unlisted companies, Jamie Green, issued a caution to Australian domestic investors about the dangers of overlooking global risks and crises, and their potential significant impacts on local investments.
Investors warned to heed global risks in financial planning
The Executive Chairman of PrimaryMarkets, a trading platform for unlisted companies, Jamie Green, issued a caution to Australian domestic investors about the dangers of overlooking global risks and crises, and their potential significant impacts on local investments.
Global risks, according to Green, including economic downturns, geopolitical tensions and conflicts, and exchange rate fluctuations, possess a "very real potential to adversely impact various aspects of individual businesses, the local economy, financial markets and, in fact, the entire economy more broadly."
Green illustrated how geopolitical tensions and political instability among trading partners could disrupt global supply chains, adversely affecting local businesses dependent on international trade or imports for inputs. Similarly, he referred to the Covid pandemic to show how a global health crisis could affect seemingly unrelated sectors like the new vehicle supply, due to shortages in semi-conductors.
Highlighting the importance of considering global risks in investment decisions, Green emphasized, "It is vital that investors consider global risks, alongside other risks, when putting together their investment portfolios." He advised on the necessity of diversification to shield investments from global uncertainties. "Diversification is key if investors want to insulate themselves from global risks as much as possible. This includes diversification across asset classes, geographies, industries and even company sizes," he added.
Furthermore, Green recommended investing in companies of varying sizes as a prudent measure, since different-sized companies can respond differently to economic and market conditions. He also stressed the importance of investors conducting their own research and staying informed about global economic developments and trends in various industries, regardless of seeking professional advice.
Green suggested several risk management strategies, such as currency hedging to reduce exposure to currency fluctuations and dollar cost averaging, which involves investing a fixed amount regularly, irrespective of the market conditions. He concluded by emphasizing the essence of risk management in investment planning, "Remember that risk management is not about eliminating all risks but rather about managing them in a way that aligns with your investment objectives and risk tolerance. It's essential to have a well-thought-out investment plan and to periodically review and adjust your plan and portfolio as your financial circumstances and market conditions change."
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