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Ignore short-term reporting season woes

A mid-tier chartered accounting firm has warned investors not to allow negative noise stemming from the latest company reporting season to disrupt their long-term wealth-building strategies.

“It can be tempting for investors influenced by company reports to tweak their portfolios at this time of the year, but it is important that they ignore the short-term impact and maintain their long-term strategy,” HLB Mann Judd Sydney head of wealth management Michael Hutton said.

“There have been some ‘doom and gloom’ headlines lately, but investors shouldn’t take them at face value, and should be more influenced by whether the company will continue to provide the returns that they found attractive in the first place.

“In many cases, companies that generate some negative news will still deliver good results to investors and it is a costly mistake to panic and sell out on the basis of some bad headlines.”

Hutton cited Commonwealth Bank of Australia (CBA) as a prime example of a company that investors should not look to jettison from their portfolios simply because it is experiencing some difficulties in the immediate term. Reasons to continue holding CBA shares are the organisation declared a robust profit result and the dividend yield generated from the bank’s stocks is still strong.

Hutton pointed out a regular review of portfolio holdings was prudent, and while it was important for investors to stay informed about the latest market developments, changes should not be made on the back of reporting season noise. “While it’s essential to review investment strategies regularly, making changes on the back of the hype of a reporting season is not a good approach and usually an overreaction as the company problems were possibly already factored in before the results were announced,” he said.

He recommended the best approach to investing is still to have a sound long-term strategy comprising a well-diversified portfolio and the discipline to stick to the chosen line of action.

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