Was your risk management sufficient coming into Covid-19 Crisis?

This Coronavirus crisis, while a massive Black Swan event, has reinforced for me the importance of managing financial risk. You can't know things like this are around the corner but I know I try to be mindful of considering risk/exit strategy/diversification in all investment decisions I make without letting it paralyse me from taking action.

Obviously many people have been hit for 6 that would have been considered in quite a safe position only weeks ago ago. I'm just curious for others on the forum coming into this do you feel that you have made good financial decisions to help manage your downside risk?

Some general thoughts for me:

Pros:
- Jobs: I work for a multinational making consumer staples, my wife works for essential services, we have reserves of annual, sick and long service leave. We have transferable skills.
- Properties run the spectrum from low income to blue-chip. Multiple properties help vacancy risk.
- Share holdings invested in LICs and ETFs, reduced sector or single company risk, also 50% offshore which has helped with currency risk. 3 day clearing makes this a readily accessible source of emergency funds (compared to illiquid property)
- Cash $150k safety buffer, have always accessed equity whenever available.
- Super - last resort in severe financial hardship.
- Wife and I are quite modest in our needs and could rapidly trim further if needed. No consumer debt, expensive car loans, etc etc.
- Willing to work hard, if things hit the fan I would be the first to put up my hand to stack shelves at Woollies as the next guy.

Cons:
- Debt high, LVR at near 80%
- geographical risk - all properties are in greater Brisbane.
- borrowing capacity nearly maxed out and currently "fully invested" - minimal cash available to take advantage of current bargains.
- My job is private sector, government would be better I think at times like this.

Just the things that run through my head at a time like this. I think there are always unknowns, I could lose my job tomorrow, multiple tennants could stop paying, asset prices keep crashing etc but hopefully some of the decisions I have made to this point might help see us through.

How are others feeling?

 

Worse comes to worst, I’d look to sell the home. Roughly $2mill just sitting there! At a conservative 4% dividend rate, that would be 80k year income by doing nothing really.

 

My financial risk mitigation is good. I have adequate buffers in place, good cashflow a relatively low lvr.

The only change I would make right now is to switch my biggest loan from p&i to io to help build cash reserves.

I have been following VAS for a while and would like to pick up a decent amount once the market is not so crazy.

My biggest issue right now is sourcing toilet paper for the airbnb.

 

Cut it too fine I think. Too much debt

 

Sitting pretty good. In a full time job in the social sector and will not be out of work regardless of what happens ( work in youth homelessness and kids need someone to look after them).

Have a ppor with very low monthly repayments and am positioned to pick up bargains as they present themselves. ( I live in cairns so the lack of tourisim will impact here quickly)

 

I was planning to purchase a land to start a development project but stopped this idea due to the current situation . I need to make sure the cashflow is okay for the next 12 months. The commercial properties should be fine, but if there are large amount of residential tenant can't pay rent then I and probably my family members will need to inject cash.

 

Dividends will definitely get hit and for specific companies maybe even deferred/cancelled. Has already started happening.

You would have to be extremely unlucky for all factors to hit at once.

 

I am comfortable with my position.
Cashed out a while ago to ensure I had cash buffers. Permanent employee in IT with 20 weeks leave in the bank.
Wife funnily enough also just started mat leave and receives parental payment which is well timed given she works in child care casually and her school shut down.

 

100% Cash

Cash is King in these uncertain times.

 

Yes, except for the part where it's losing value.

 

That is a great place to be at the moment, are you saying you are sitting 100% in cash right now? If so kudos!

If so how did you get there? Was it a deliberate decision before this crisis started, or did you cash out when things started to go pear shaped? Either way, it is an envious position to be in. The long term data shows that you should basically be "fully invested" property and equities, which is where I find myself coming into this. But we are at one of those rare points where the best short term returns will be for those who are sitting on cash and gold.

 

Goldman Sachs and Mohamed El-Erian have been sounding the alarm even before the markets crashed.

I will be drip-feeding my cash and probably take out a low-rate mortgage on my home in order to re-enter the markets when there's further clarity.

During the GFC I know someone who loaded up on CBA shares and made lots of money. Kind of my inspiration.

It would be difficult to find the bottom, but the idea is to cost-average drip-feed into the downturn with a longer-term view.

 

Nein.

Doubled business between Oct-Dec.
Left me with low cash reserves.

I'm in accomodation, so have taken a hit of about 25% of tenants vacating in about 3 days.

Had to take on a bail-out to keep cash-flow for the next 3-6 months.
Irony was my growth looked amazing until last week.

See you on the other side!

 

Buffers are enough. Low debt. Strong cash flow from here and abroad. It's probably why I still have a good sense of humor and feel very optimistic for opportunities.

But if this same crisis hit me 10,12 years ago, I'd probably be more stress tested.

 

Buffers in place
Fortunately, I work in an essential service
A significant amount of leave accrued
(Friends and colleagues doing it tough)