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Crystal clear water, skies of the deepest blue, air so fresh you want to bottle it. Places like this are usually only found in a tropical paradise but during the lockdown with the global population restricted to working from home, we have allowed the world's eco-systems to 'breathe' again. Amazing what can be done to help the environment, even if it was so tragically forced upon us.
Even before COVID-19, global warming, the environment, and the policies of ethically run companies, had become topics of hot debate among many people the world over. So much so that companies now realize they need to display a strong awareness of, and have a coherent policy for 'ESG' to attract and retain employees and stakeholders alike.
ESG means 'environmental, social and governance'. Companies with strong and clear policies surrounding these issues are set to get ahead, and many people believe, stay ahead.
But what does this mean for the individual investor? More and more clients are asking us for ways in which they can invest in the ESG sector, be that for capital growth and/or they simply believe in ESG and wish to be a part of it for moral reasons.
So which sectors could be hotspots for ESG investing in the future? One of the most obvious is water and with global warming, it is becoming an increasingly scarce commodity. Companies involved in good water management and clean water processing could be set for strong growth. Also, companies committed to clean and renewable energies and de-carbonization may attract more stakeholders in the future and alongside them, companies involved in the evolution of electric vehicles and the batteries that power them.
Of course, purchasing individual shares in companies is always a risky strategy, even more so in specific sectors. Should you wish to do so, we would recommend no more than 10-15% exposure to ESG in any investment portfolio. Alternatively, due to the rising demand for ESG-related investments, more and more collective investment schemes like mutual funds and ETF's with a specific focus on investing in stocks of companies with a strong ESG identity, are coming to the market and a number of them offered by some of the world's largest fund houses. Collective investment schemes typically invest in a basket of 30-40 stocks which diversifies your risk.
This article is not a solicitation to invest in the ESG sector, it is simply for your general information. Oh and while we are on the subject, AP Advisers Ltd is committed to the highest levels of ethical corporate governance, and its staff regularly contribute time and effort to the good of the local community whenever it is able.
Senior Investment Adviser
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The tragic death toll incurred by COVID19 has raised awareness for the need of succession planning. We have seen a rise in enquiries recently relating to making a Will and protecting assets. Many think that making a Will is the reserve of the elderly, the wealthy, or those with a complicated asset base but in truth, most of us should have one. Leaving this mortal coil without a Will can give rise to huge complications for heirs in terms of time and expense, and language barriers, and the decisions as to the distribution of your estate will likely be made by state law. Those laws may not reflect your wishes.
What is a Will?
It is a legally binding document which details your desired distribution of wealth upon your death, and if you have dependent children, who will take care of them. It is always safer to have the Will witnessed by at least one person which helps to protect your estate from challenges made by for example, estranged family members, business associates or creditors.
Why Make One?
1. You decide who gets what and how much.
2. You prevent undesirable people (maybe relatives) from making a claim on your estate.
3. You decide who is the guardian of your children. Very few parents would want a court to decide on this matter.
4. The Executor of your estate can act much faster to ensure your wealth gets to the right people as soon as possible. This is especially important if the beneficiaries are financially dependent of you.
5. A Will may help in mitigating inheritance tax liability on your heirs.
6. The bequeathing of charitable donations are often exempt from estate duties.
Many of our expatriate clients own assets in more than one country. In that case, it may be prudent to write a Will in the jurisdictions in which those assets are held.
AP Advisers Ltd is not a legal firm. The above is for general information purposes only and does not constitute legal advice. Our suggestion is to seek qualified legal advice from a professional in the respective jurisdictions in order to help you write a Will. There are Will writers in Japan who can assist with both domestic and overseas assets.
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Many clients are understandably concerned about their investments at this time. Not just whether they made need to fall back on them to support themselves, but also whether they should pull their money out of risk-based assets and into safer havens like cash. There are other investors who currently see this market correction as an opportunity. Here we offer some perspective and what it may mean for your long-term investments.
Coronavirus will pass, whereas fiscal stimulus has longer term effects: Bank interest rates are now at historic lows and we are seeing extensive central bank quantitative easing on a global basis. While it is hoped COVID19 is short-lived, these stimulus measures should support global economies for years, while reducing the risks of corporate defaults and supporting higher valuations for equity markets.
The best returns tend to come from desperate times: The best rolling ten-year equity market returns on the US Dow Jones Index were born from seemingly desperate times. Investors buying equities at the end of the two World Wars, during the 1932 and 2009 market crashes, and after 1987's Black Monday, enjoyed 10-year returns of 10-15%p.a.
Markets should recover before the economic and humanitarian crisis is over: Financial markets tend to move well ahead of economic fundamentals. Declines in global growth and corporate earnings may already be ‘priced in’ to a certain extent. Markets are already discounting much of the news and they will almost likely begin to recover well before the worst of the economic impact. The Chinese equity market is a good example. The market bottomed in early February when the virus peaked and began to slow down. The Chinese equity market subsequently fell further in recent weeks due to the weaker outlook for growth outside of China, but it is still one of the better performing major markets year to date.
Market falls may provide opportunities: As painful as large market declines can feel, the effect on valuations are only temporary, as long as investors don’t crystallise losses. For those making regular savings, or with additional reserves to invest, lower valuations mean more shares can be acquired. This ‘dollar cost averaging’ effect creates greater value over the long run. For lump sum investors with new money, our advice might be to phase it in over a number of months to reduce the risk of poor market timing. We expect Q2 corporate earnings and economic data to be dire and if worse than expected, may cause further volatility so we prefer a phased approach.
The message is not to panic and stay invested. Markets will always have corrective periods but what history tell us at least, is markets overcome every event that has been thrown at them and move forward. Keep the long-term vision!