Investors may have heard of the failure of US bank called Silicon Valley Bank (SVB). This article is about what I’m doing with my ASX share portfolio.
Banks do occasionally run into trouble and need assistance from investors by raising capital.
However, when economic conditions become extreme, it can mean some banks can’t handle the situation. The GFC was a good example of how things can go wrong in the banking sector. If some borrowers stop paying their loan and/or a large number of customers pull out their savings, then it can mean the bank doesn’t have enough capital/cash to keep running.
That’s what happened with SVB recently. Investors and depositors became worried about the bank, so depositors withdrew many billions, and then the bank wasn’t able to keep operating, so US regulators took over.
Depositors will get their money, but investors have been burned. There has been more volatility in the US banking system, with investors unsure if owning shares in some smaller US banks is a good idea.
What I’m doing with my ASX shares
A potential bank contagion doesn’t sound good. No wonder investors are fearful.
But, I’m not changing my portfolio at all. I haven’t made a single sale during 2023 and that’s not about to change.
A big part of that zen mindset is only owning shares that I’d feel comfortable owning during a crisis, and that those ASX shares are unlikely to go through much of a crisis in the first place. Share market ups and downs are common, so I want the names in my portfolio to be ones that I’d want to buy more of if prices went lower.
Businesses like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Hearts and Minds Investments Ltd (ASX: HM1) and Future Generation Investment Company Ltd (ASX: FGX) are ones that I feel can make excellent long-term investments, particularly if we re-invest our dividends back into buying more shares.
